This small-cap solar stock engaged in providing solar energy solutions, including engineering, procurement, and construction (EPC) services, solar advisory, operations and maintenance, hit a 20 percent lower circuit after the ratings agency CARE Ratings downgraded its long-term and short-term bank facilities.
Stock Price Movement:
With a market capitalization of Rs. 1,573.11 crores, the shares of Gensol Engineering Limited hit a 20 percent lower circuit of Rs. 413.95 per share on Tuesday, down from its previous closing price of Rs. 517.40 per share.
What Happened:
Gensol Engineering has faced a downgrade in its credit ratings by CARE Ratings due to ongoing delays in servicing its term loan obligations. As per the reports, the agency downgraded the company’s long-term bank facilities worth Rs. 639.7 crore from CARE BB+ to CARE D, along with short-term bank facilities of Rs. 76.3 crore, which were lowered to CARE D and CARE A4+.
CARE highlighted that the downgrade reflects the company’s poor liquidity, as it continues to delay debt servicing, based on feedback from its lenders. This downgrade follows CARE’s policy on default recognition.
Company borrowing:
The company’s debt has significantly increased over the past few years. In FY22, borrowing was Rs. 82 crore, which rose to Rs. 598 crore in FY23. By FY24, the debt surged to Rs. 1,510 crore, with Rs. 1,372 crore in September 2024. This marks an increase of more than 2.5 times compared to the previous year, with the debt-to-equity ratio now at 2.33x.
Future Guidance:
The management anticipates a strong performance in the fourth quarter, expecting significant revenue recognition. Additionally, 80 percent of the order book consists of high-margin turnkey projects, which is expected to improve future profit margins.
Key Projects and Order book:
The company’s key projects include a 275 MW project worth Rs. 1,062 crores, a 245 MW project valued at Rs. 968 crores, and a 225 MW project from NTPC worth Rs. 898 crores. As of December 31, 2024, the total solar EPC order book stands at Rs. 7,000 crores. Additionally, the company has secured two energy storage orders from GUVNL, which are scheduled to be executed in FY26.
Recent quarter results:
Gensol Engineering Limited’s revenue has increased from Rs. 220 crore in Q3 FY24 to Rs. 345 crore in Q3 FY25, which has grown by 56.82 percent. The net profit has also grown by 50 percent from Rs. 12 crore in Q3 FY24 to Rs. 18 crore in Q3 FY25.
Written By – Nikhil Naik
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