New Delhi, March 5 -- Gensol Engineering Ltd (GEL), the flagship engineering, procurement and construction (EPC) company of Gensol Group, founded by BluSmart co-founders Puneet Singh Jaggi and Anmol Singh Jaggi, could face the heat for alleged corporate misgovernance after a major credit rating agency accused it of falsifying documents related to its debt servicing track record.

This comes as GEL's loss-making promoter group entity, ride hailing cab service BluSmart Mobility Pvt Ltd, has been facing criticism for delaying payments to bondholders, triggering a default.

A day after Care Ratings downgraded GEL's bank loan of Rs 716 crore to default status due to delays in servicing term loan obligations, another credit rating agency, ICRA, followed suit. ICRA said it had "learnt that certain documents" provided by the company "were apparently falsified", raising concerns about GEL's corporate governance practices and liquidity position.

ICRA's March 4 note indicated that it downgraded GEL's ratings to default grade after receiving feedback from lenders about "ongoing delays" in debt servicing. Although GEL had previously communicated to ICRA that it had substantial liquidity to support its operations, ICRA noted that the documents shared appeared to be falsified.

Another factor in ICRA's decision was the deterioration in the company's financial flexibility, highlighted by an increase in the promoter's share pledge to 85.5% in February from 79.8% in September 2024. "The increase in share pledge amidst a continuous decline in the share price of GEL over the past few months can constrain the ability of GEL to raise capital to support its future growth plans," ICRA said.

GEL's stock, which had already fallen 20% on Tuesday, dropped another 10% on Wednesday. The company has lost over 74% of its value since its July 2023 listing and is currently trading at Rs 372 a share on the National Stock Exchange.

ICRA also noted concerns about GEL's business linkages with Blusmart Mobility, which is a loss-making entity, it said. ICRA said BluSmart's recent delays in its non-convertible debenture (NCD) payments could have an adverse impact on GEL's financial flexibility and capital-raising ability.

GEL's precarious financial situation is further exacerbated by delays in its equity raising plans. "On equity raising plans, as against ICRA's earlier expectations of equity infusion in GEL of Rs 244 crore in FY25 through preferential share warrants, only Rs 140 crore has been infused till date, with the balance infusion to be deferred till December 2025, reflecting a delay of around one year compared to ICRA's previous expectation," the credit rating agency said.

Timely equity infusion is critical for GEL's growth plans, given the investment required for its various businesses, ICRA added.

Despite these challenges, GEL does have a strong order book worth over Rs 7,000 crore, with projects expected to be executed over the next 12-18 months, offering some medium-term revenue visibility. According to ICRA, the orders are "majorly from government, semi-government and reputed private players, which have an established track record of timely payment in the past, thus offsetting the counterparty credit risk to a large extent." However, ICRA cautioned that the availability of funds for the execution of such a large order book remains uncertain.

GEL also carries high leverage due to long-term debt associated with its electric vehicle lease business, with total debt at Rs 1,512 crore as of March 31, 2024.

In an effort to raise funds, GEL said last month that it was selling its US unit, Scorpious Trackers Inc, to a major renewable solutions provider for Rs 350 crore.

Published by HT Digital Content Services with permission from VC Circle.