Notes from Gensol Credit Rating Revision by CareEdge Ratings

Summary

Rating revised from BB to BB+.

Positives (leading to upgrade):

• Strong execution in solar EPC projects.
• Significant growth in TOI.
• Improved profitability.
• Growing orderbook with strong revenue visibility (FY25-FY26).
• Successful EV leasing business with timely payments from Blu-Smart (FY24).
• Experienced promoters.
• Healthy and geographically diversified solar EPC orderbook from reputable clients.
• Structured lease rental agreement with Blu-Smart.
• Adequate liquidity.

Negatives (constraining the upgrade):

• Profitability susceptible to solar module price volatility.
• Deteriorated capital structure due to increased debt for EV leasing.
• Execution and funding risk associated with the ongoing EV manufacturing plant.

Details

Business:

• Strong revenue growth driven by EPC and EV leasing.

  Revenue	FY’23	FY’24
  Total Op Inc Rs cr	393	960
  YoY growth	145%	144%

• Revenue shifting towards EV leasing

  Revenue share	FY23	9MFY24
  EPC	84%	80%
  EV leasing	9%	16%

Strengths:

• Orderbook:

  • Rs. 1176 crore solar EPC orderbook (3.57x FY23 TOI).
  • EPC fixed price contracts to be executed in 6-10 months.
  • Lowest bidder for contract of Rs.520 crore in March 2024.
  • Low counterparty credit risk (government & reputable clients in 7 states).

• Experienced promoters and management

• Improved Profitability:

  • 14.89% PBILDT* margin in FY23.
  • 291 bps YoY increase.
  • Expected operating margins around 20% in FY24 (higher Blu-Smart lease income).

• Structured Lease Agreement:

  • No cash outflow for EV leasing (Blu-Smart covers repayments). [Facilitation fee?]

Weaknesses:

• High Leverage:

  • Overall gearing of 2.10x (FY23, deteriorated from FY22).
  • Increased debt due to debt-funded EV acquisition for leasing.
  • Expected further deterioration due to continued debt-funded acquisitions for leasing.

• Delayed EV Production:

  • EV mfg plant in Pune to produce Electric Cars and Electric Urban Cargo vehicles.
  • Capacity: 40 units per day per shift.
  • Expected project cost ~Rs 230 cr
  • Expected starts of Q2FY24 delayed by year due to ARAI approval.
  • ARAI approval received in Feb24. Expected start H2FY25.

Liquidity:

• Adequate liquidity with lease payments from Blu-Smart and healthy cash flow.
• Plans to raise Rs 500 crore through share warrants in FY25. [Dilution risk?]

*Profit Before Interest, Lease rentals, Depreciation and Taxation

PNB HF. Cmp 770. Stock price corrected from resistance at 720 and in line with overall market went down to retest key support zones. It went below 30 WEMA briefly and retraced 61.8 % of its previous upmove (marked on charts) and then last week gave a big bullish close. An ascending triangle is marked on the weekly charts.

Overall structure is that resembling a rounding structure with top near 1700 levels. Fundamentally company has now regained its growth focus under new CEO Girish Khousgi and asset quality has shown sequential improvement. For those who want to do detailed research, company provides presentations and does regular concalls.

disc: invested recently.

Their khavda project is facing major cost pressures…next few quarters to be muted

1 crore penalty for loan non compliance imposed by RBI.

i think TAN business is what looks more lucrative to me as mining as a theme will rise in india their tan facility and Consultancy services which they are providing, as discussed in latest concall will be of key competitive edge.
post demerger things will be interesting & i am looking forword to it.