A 68% fall in Gensol stock prompts creditors to seize 7% promoter pledged shares

Bengaluru: Gensol Engineering Ltd's promoters continue to lose ownership as three creditors wrested 6.96% of the pledged shares after the founders could not provide more collateral for the loans after the company's stock price tanked 68% since 1 January. 

Last week, creditors led by Virtue Financial Services Private Ltd and SICPA India Pvt Ltd invoked 4.3% and 1.19% of the pledged shares, respectively, according to exchange data dated 17 March. Earlier this month, Badjate Stock Broking Pvt. Ltd invoked 1.47% of promoter shares, implying that the three creditors have taken ownership of 6.96% of Gensol shares since action by two rating agencies first brought to the fore the problems faced by the Ahmedabad-based company. 

Since the start of the month, Anmol Jaggi and his younger brother Puneet Jaggi have been fighting to retain control of the solar engineering, procurement and construction, and electric vehicle leasing company they co-founded in 2012. 

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The two brothers managed to get 0.4% of the shares released from Shine Star Build Cap Pvt Ltd, a Delhi-based non-deposit taking non-banking financial company. 

However, an 82% fall in the share price from its peak of ₹1,377.1 on 20 February last year has forced the co-founders to cough up more money to the lenders as the shares are worth less than they were pledged at. This forced the Jaggi brothers to pledge an additional 6.23% shares between 1 January and 8 March, according to a Mint research. As the promoters had pledged 81.7% of shares at the end of December last year, the total promoter pledge, before last week’s action by the three creditors, rose to about 88%. 

An immediate fallout of these actions by creditors is on Gensol's ownership. Gensol promoters sold a 2.37% stake on 7 March and have lost control of 6.96% of shares, implying that the founders have lost 9.37% of their shares in nine trading days since 3 March, when Care Ratings Ltd downgraded its ₹716 crore bank loan to default, citing delays in “servicing of term loan obligations." 

Icra Ltd followed the next day, stating Gensol "apparently falsified" information about its debt servicing.

Denies wrongdoing 

Gensol has denied wrongdoing and assured investors it plans to clear its current debt of ₹1,146 crore soon. The company intends to bring more money through preferential allotment of shares from promoters and by selling some of its electric cars leased to Blu-Smart.

Virtue Financial Services, the Delhi-based financial services firm, owns 4.3% and is the largest public shareholder of Gensol. Nagpur-based Badjate Stock Broking, with 1.47%, becomes the second-largest public shareholder. SICPA India, the Indian arm of the Swiss maker of security inks for currencies SICPA, is the third-largest shareholder, with 1.19%. 

Emails sent to Mayank Khemka of Virtue Financial, and Arun Vij, the managing director of SICPA India, went unanswered. 

Gensol did not comment on the latest share invoked by the creditors. 

"The share pledge has increased primarily on account of additional collateral given to the existing lenders due to a decline in the share price," a spokesperson for Gensol told Mint last week. 

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Anmol pledged 0.88% with SICPA India on 7 August last year when Gensol shares traded at ₹955. Puneet pledged 0.18% with SICPA on 18 February when Gensol shares were at ₹540. Anmol pledged 1.45% with Virtue Financial Services on 26 December last year, followed by another pledge of 0.55% shares on 13 February, 0.92% on 18 February and 0.97% on 5 March. Gensol shares traded at ₹720, ₹610, ₹550 and ₹372 on 26 December 2024, 13 February, 18 February and 5 March, respectively. 

Similarly, Anmol pledged 1.11% with Badjate Stock Broking on 4 June last year, followed by another 0.05% pledge on 19 November. Gensol’s share traded at ₹925 on 4 June and ₹760 on 19 November. 

On Monday, Gensol’s shares closed at ₹248.65 apice on the BSE, the lowest in about 32 months. The stock had ended at ₹238.8 on 18 July 2022. 

“The share pledge follows the simple rule that the loan-to-value (LTV) ratio increases when share prices fall. Hence, additional shares need to be pledged when share prices fall," Shriram Subramanian, founder and managing director of InGovern Research Services, a Bengaluru-based proxy advisory firm, told Mint last week. 

LTV is the amount borrowed compared to the value of collateral such as shares, expressed as a percentage.

Also read |  Gensol Engineering share price extends losses to 10-day,touches 5% lower circuit