The stock dropped 10% today, reaching its lower circuit limit at Rs 335.35 on the BSE.
ICRA has downgraded the credit ratings of various loan facilities amounting to Rs 2,050 crore. The long-term fund-based term loan of Rs 925 crore and fund-based cash credit of Rs 718.5 crore were both downgraded from [ICRA]BBB- (Stable) to [ICRA]D.
Similarly, long-term and short-term bank guarantee (BG) facilities totaling Rs 406.5 crore and a sub-limit BG of Rs 51.3 crore were downgraded from [ICRA]BBB- (Stable)/[ICRA]A3 to [ICRA]D.
The downgrades indicate increased credit risk and potential financial distress.
CARE Ratings has downgraded the credit ratings of bank facilities totaling Rs 716 crore to CARE D, indicating default or high credit risk. The long-term bank facilities of Rs 639.7 crore were downgraded from CARE BB+ (Stable) to CARE D, while the long-term/short-term bank facilities of Rs 76.3 crore were downgraded from CARE BB+ (Stable)/CARE A4+ to CARE D.Also read: Paint, aviation, OMC stocks jump up to 5% as Brent crude hits 3-year lowIn response to the concerns following the rating downgrade, Gensol Engineering has issued an investor release on the stock exchange websites addressing the same and outlining its strategic debt reduction plan.
“Gensol Engineering Limited (GEL) acknowledges the recent credit rating downgrades by CARE and ICRA. The rating downgrade happened due to short-term liquidity mismatch which is improving by way of customer payments. That said, we understand the concerns these downgrades have raised and are committed to addressing them responsibly to all our stakeholders,” the company said in the filing.
The company added that it denies any involvement in falsification claims and would be setting up a committee to comprehensively review the matter.
Gensol Engineering current debt:
1. In GEL standalone, the current fund-based capital limit for Solar EPC stands at Rs 249 crore.
2. In GEL standalone, the term loan for EV vehicles stands at Rs 645 crore.
3. In the EV leasing subsidiary company, the current term loan stands at Rs 252 crore.
4. The total current debt stands at Rs 1,146 crore against the reserves of Rs 589 crore. making it a debt-equity ratio of 1.95.
5. In the current financial year, we have reduced our debt obligation by Rs 230 crore.
Strategic Deleveraging: The company has initiated a series of asset divestments to significantly reduce its debt:
1. The sale of 2,997 electric vehicles worth Rs 315 crore.
2. The sale of a wholly owned Gensol subsidiary company for Rs 350 crore.
3. As a result of these two divestments, the company’s debt will significantly be reduced by Rs 665 crore, resulting in a debt-equity ratio of 0.8.
“While the company continues to pay its debt obligations, all proceeds from the above initiatives will be directly utilized toward repaying our existing debt and working capital obligations. Through these periodic interventions and upcoming planned initiatives, we are resolute in our goal of achieving a zero net-debt status,” the company added.
Also read: Sandeep Tandon sees signs of market bottoming out. Explains how dollar, crude, gold favor India
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