Gensol Engineering Announces Plan To Raise Rs 600cr

Gensol Engineering Limited, which has seen over half its market cap degrade over the past month today announced that its Board of Directors has approved fund-raising initiatives amounting to Rs 600 crore aimed at significantly enhancing its financial standing. The solar player has defaulted on debt payments, and faces a liquidity squeeze primarily due to commitments made for Blusmart, another promoter entity where Gensol itself has no stake.

The Board of Directors has approved and passed resolutions for the following fund-raise plan:

• Rs. 400 crore to be raised through the issuance of Foreign Currency Convertible Bonds (FCCBs); and
• Rs. 200 crore to be raised through the issuance of warrants to promoters.

This initiative, combined with the company’s ongoing divestments, including the sale of vehicles and the sale of a subsidiary, is expected to significantly improve Gensol’s debt- equity ratio, positioning it for long-term financial strength and resilience. The subsidiary should be Scorpius trackers, which the firm has announced earlier.

Key financial impact of the fund-raise and divestments:

• Currently, Gensol Engineering has a debt of Rs. 1,146 crore against reserves of Rs. 589 crore, resulting in a debt-equity ratio of 1.95.
• With this announcement of Rs. 600 crore fund-raise, the company’s reserves are expected to increase to approximately Rs. 1,200 crore.
• Additionally, with Rs. 615 crore of divestments underway, the company’s debt will be reduced to approximately Rs. 530 crore.
• These measures will lead to a significantly improved and healthy debt-equity ratio of 0.44.

Tough Task Convincing Investors

With a market cap slipping below Rs 1000 crores at the time of filing this story, Gensol faces a formidable challenge of recovering market confidence, at a time when the firm has a strong order book and projects in hand that will require funding to execute as well. Cost of funding will likely go up significantly when made available, placing project return ratios at serious risk. At this stage, key projects including its three wheeler EV are at risk, no doubt.

With over a thousand crores raised for BluSmart as well in the past three years, the optimism of Anmol Jaggi to manage all issues eventually might have led him into a situation where he will need to let go of more than just a little more stake in Gensol or BluSmart to ensure both emerge out of this mess. An FCCB issue is also fraught with risk today, considering the volatile global markets and the exchange risk for a firm that has very little foreign earnings as a natural hedge.