Gensol Engineering shares crashed 57% in 14 sessions; here's what happened

Shares of Gensol Engineering Ltd took a fresh hit in Monday's trade, extending their losing run for the 14th consecutive session. The stock slumped another 5 per cent to hit a fresh 52-week low of Rs 248.65. At this price, it has cracked 57.09 per cent in 14 trading days.

Bourses BSE and NSE have put the securities of Gensol Engg under the long-term ASM (Additional Surveillance Measure) framework. Exchanges put stocks in short-term or long-term ASM frameworks to caution investors about high volatility in share prices.

The stock started tumbling after multiple credit downgrades by rating agencies CARE and ICRA. ICRA downgraded Gensol's loan facilities totalling Rs 2,050 crore. The long-term fund-based term loan of Rs 925 crore and the fund-based cash credit of Rs 718.5 crore were downgraded from [ICRA]BBB- (Stable) to [ICRA]D. Additionally, long-term and short-term bank guarantee (BG) facilities totalling Rs 406.5 crore, along with a sub-limit BG of Rs 51.3 crore, saw a downgrade from [ICRA]BBB- (Stable)/[ICRA]A3 to [ICRA]D.

CARE Ratings followed suit, downgrading the firm's bank facilities worth 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 also slashed from CARE BB+ (Stable)/CARE A4+ to CARE D.

For the unversed, a 'D' grade stands for default status, which implies that the company may not fulfil its loan obligations. ICRA also said it has now learnt that certain documents shared by Gensol, on its debt servicing track record, were apparently falsified, which raises concerns about its corporate governance practices, including its liquidity position. The agency mentioned that the company's unexecuted order book, which consists of 10-11 large projects, is at risk due to execution delays, regulatory approvals and potential cost overruns.

Adding to investors' worry, the company's Chief Financial Officer (CFO) Ankit Jain resigned, citing personal reasons. After this, Gensol appointed Jabirmahendi Mohammedraza Aga as the new CFO of the company, effective from March 7, 2025.

The company promoters recently sold a 2.3 per cent stake, or 9,00,000 equity shares. However, Gensol said its promoters have infused Rs 29 crore via the conversion of warrants into equity. The company said the warrants would be converted into 4,43,934 equity shares at a price of Rs 871 per share.

Separately, Gensol issued a clarification on the stock split over the weekend. "We would like to clarify that the issuance of promoter warrants is happening at Rs 56 per share of Re 1 face value, which is equivalent to Rs 560 per share of Rs 10 face value, considering the 10:1 stock split (For every one equity share, ten new equity shares will be issued) approved by the Board. At Rs 56 per Re 1 face value share, the pricing represents a 113 per cent premium over the current market price of Rs 262 per share (Rs 10 face value adjusted). This underscores the promoters' strong confidence in the company's future growth and value creation potential," it stated.

As per BSE, the stock has a price-to-equity (P/E) ratio of 7.35 against a price-to-book (P/B) value of 1.47. Earnings per share (EPS) stood at 33.85 with a return on equity (RoE) of 19.97.