Gensol Engineering Limited's share price took another hit, dropping 8.2% in early trade on March 7, 2025, to an all-time low of ₹307 per share. The slide comes right after the sudden resignation of its Chief Financial Officer (CFO), Ankit Jain, adding to growing worries about the company's financial health. However, the stock made a quick comeback, bouncing back by 15% to ₹352.95 per share before settling at ₹324.75 per share, reflecting a 3% decline.
CFO exit adds to debt worries
The company is already under pressure due to delays in loan repayments and allegations of falsifying debt servicing documents. These concerns have led to credit rating downgrades, making investors uneasy. To address the situation, Gensol has appointed Jabirmahendi Mohammedraza Aga as its new CFO, effective by March 7, 2025. While this leadership change could help stabilise operations, market sentiment remains cautious.
Debt burden and credit downgrades raise red flags
Gensol's financials are under scrutiny, with total debt standing at ₹1,146 crores, exceeding its reserves of ₹589 crores. This has pushed the company's debt-equity ratio to 1.95, a figure that raises concerns for investors. Acknowledging the downgrade by credit agencies, the company stated that short-term liquidity issues are being addressed through incoming customer payments.
To manage its debt, Gensol has planned asset sales worth ₹665 crores. This includes selling 2,997 electric vehicles for ₹315 crores and divesting a wholly owned subsidiary for ₹350 crores. If successful, these moves should bring the debt-equity ratio down to 0.8.
A strong order book offers hope
Despite the current turbulence, Gensol is banking on its strong order book of over ₹7,000 crores. The company reported a 42% revenue growth to ₹1,056 crores in the first nine months of the fiscal year. EBITDA surged 89% to ₹246 crores, while profit increased 34% to ₹67 crores. These figures suggest that while short-term challenges exist, the long-term outlook remains promising.
For those looking to invest in stocks, it is important to consider the risks and rewards. While Gensol is taking steps to reduce debt and improve liquidity, investor confidence will depend on how effectively these plans are executed.
What lies ahead?
To regain trust, the company has denied allegations of falsifying debt documents and has set up a committee to investigate the matter thoroughly. It has also reassured stakeholders of its commitment to transparency and sustainable business practices.
As of March 7, 2025, at 12:15 PM, Gensol Engineering was trading at ₹318.61 per share. With a 40% drop in share price over the last four days, investors who want to invest in stocks should approach with caution. While Gensol has outlined clear strategies to fix its financial woes, the real test will be whether it can execute them effectively and rebuild confidence in the market.
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