Gensol Engineering Ltd’s stock is under close scrutiny after its promoters’ stake in the company continues to decline. After a 68% drop in stock price since January 1, the founders were unable to pledge more shares as collateral for loans. Consequently, three creditors have seized 6.96% of the shares pledged by the promoters. On Monday, the stock closed at Rs 248.65 on the BSE, its lowest in nearly 32 months.

Creditors To Sieze Promoter Shares

Data from March 17 shows that last week, Virtue Financial Services and SICPA India took control of 4.3% and 1.19% of shares, respectively. Earlier this month, Bajaj Stock Broking seized 1.47% of the promoters’ shares. This all came after two rating agencies highlighted the company’s challenges. Since early March, Anmol Jaggi and his brother Puneet Jaggi, who founded the company in 2012, have been working to maintain control. They recently managed to reclaim 0.4% of shares from Shine Star Build Cap, an NBFC in Delhi.

Gensol Engineering Placed Under Long-Term ASM Framework

The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have placed Gensol Engineering’s securities under the long-term Additional Surveillance Measure (ASM) framework. Stocks are placed in ASM frameworks to alert investors about high volatility in their prices.

Credit Downgrades by CARE and ICRA

The decline in Gensol’s stock price began following multiple credit downgrades by rating agencies CARE and ICRA. ICRA downgraded the company’s loan facilities worth Rs 2,050 crore. Specifically, a long-term term loan of Rs 925 crore and a cash credit facility of Rs 718.5 crore were downgraded from [ICRA]BBB- (Stable) to [ICRA]D. Additionally, bank guarantee (BG) facilities totaling Rs 406.5 crore, including a sub-limit BG of Rs 51.3 crore, were downgraded from [ICRA]BBB- (Stable)/[ICRA]A3 to [ICRA]D.

CARE Ratings Issues Downgrade to Default Status

CARE Ratings also downgraded Gensol’s bank facilities totaling Rs 716 crore to CARE D, indicating default or high credit risk. The long-term facilities of Rs 639.7 crore were downgraded from CARE BB+ (Stable) to CARE D, and the long-term/short-term facilities of Rs 76.3 crore were reduced from CARE BB+ (Stable)/CARE A4+ to CARE D.

A ‘D’ grade signifies a default status, indicating the company may struggle to meet its loan obligations.

Concerns Raised Over Corporate Governance

ICRA further stated that Gensol had provided falsified documents related to its debt servicing history, raising concerns over corporate governance and liquidity. The company’s order book, consisting of 10-11 large projects, is also at risk due to execution delays, regulatory approvals, and potential cost overruns.

CFO Resignation Adds to Investor Concerns

Adding to investor concerns, Gensol’s CFO, Ankit Jain, resigned for personal reasons. The company has appointed Jabirmahendi Mohammedraza Aga as the new CFO, effective March 7, 2025.

Clarification on Stock Split and Promoter Warrants

In a separate statement, Gensol clarified the stock split issue. The company explained that the issuance of promoter warrants at Rs 56 per share (Re 1 face value) represents a 113% premium over the current market price of Rs 262 per share (adjusted for the 10:1 stock split). The company emphasized that this pricing reflects the promoters’ strong confidence in its future growth and value creation potential.

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