Gensol Engineering Promoters Sell Equity To Boost Liquidity, Reinforce Business Strategy
The promoters, who remain the majority shareholders, will use the funds raised to support the company's expansion initiatives.
Gensol Engineering Ltd. has announced a sale of approximately 2.37% of the company's total equity shares by its promoters. This equates to 9 lakh shares, aimed at unlocking liquidity and reinforcing the company's financial foundation, as per an exchange filing on Friday.
The proceeds from this sale will be reinvested into the business through an equity infusion, part of a broader effort to strengthen the company's balance sheet after the company's recent challenges.
The promoters, who remain the majority shareholders, will use the funds raised to support the company's expansion initiatives. They have also committed to infusing the same amount received from the sale, or even more, during a warrant subscription round scheduled for June 18, 2024.
Despite the sale, the promoters continue to hold a controlling 59.70% stake in Gensol.
Debt Reduction Strategy Amid Credit Rating Downgrades
Recently, Gensol Engineering faced significant challenges, including a credit rating downgrade by CARE Ratings. The agency lowered the company's long-term bank facilities from CARE BB+ to CARE D, while its short-term facilities were rated CARE A4+. The downgrades were attributed to concerns over the company's liquidity position and mounting debt.
In response, Gensol Engineering has implemented a strategy to reduce its debt load. As part of this effort, the company announced the sale of 2,997 electric vehicles, as well as the divestment of a wholly owned subsidiary. These moves are expected to reduce its debt by Rs 665 crore, improving the company's debt-equity ratio from 1.95 to a more manageable 0.8.
The company currently carries a total debt of Rs 1,146 crore against reserves of Rs 589 crore, highlighting the imbalance that has contributed to recent rating downgrades. Gensol has acknowledged these challenges but attributed the situation to a short-term liquidity mismatch rather than any fundamental issues with its business operations.
Gensol Engineering Share Price Movement
The company's stock has faced significant pressure recently. Shares of Gensol Engineering have hit lower circuit three times in the past week, with the stock dropping 37.5%. Over the past 12 months, the stock has plunged by 68.21%. On Friday, shares closed at Rs 334.80, a 2.33% decrease, as compared to a 0.03% rise in the benchmark NSE Nifty 50 index.
