The following is with reference to some of the recent posts in this thread.
It is neither a defence of Gensol nor intended to criticise anyone.
The objective is to get to the facts using these ideas:
a. To ask if the presented thought is a verifiable fact or an opinion.
b. That one is presumed innocent until proven guilty. This is counterbalanced by the idea that the facts may not be clear at the moment. And one may need to be patient. As such the idea is to prevent the baby being thrown out with the bath water.
I am a shareholder in the company. It forms less than 1% of my portfolio.
1. CARE Edge rating
The rating says that “Cancellation of lease agreement with Blue-Smart” would be a negative factor. It does not mean that the agreement has been cancelled.
In the positive factor it says “Successful operations of EV leasing with demonstration of timely receipt of lease rentals from Blue-Smart.”
And in the Outlook it says “Stable outlook reflects … structured lease arrangement with Blue-Smart”.
Had the agreement been cancelled, it is unlikely the outlook would have been “stable”. Moreover, as a material event, the company would have announced such a cancellation.
2. The Ken article (article)
“the leasing arrangement seems to favour Blusmart at the expense of Gensol’s minority shareholders, The Ken has learnt.”
“seems to favour” is an opinion and not a fact. “The Ken has learnt” but has not shared these learnings. There is no data in the article to support this argument.
The 23-Jan-24 concall transcript has some data on the leasing business:
- Leasing book: 800 crore
- Gensol’s cost of debt – ~10%
- Leasing income – ~15%
- Net interest margin – ~4-5%
- 15 customers
- Bluesmart share: >50%
Is the 4-5% margin on the leasing business low?
As a rough benchmark:
- HDFC Bank’s yield on assets is 8.3% (Dec’23) vs 14% for Gensol.
- HDFC Bank’s cost of funds is 4.9% vs 10% for Gensol
- Net Interest Margin is 3.4% vs 4% for Gensol
If Gensol were a pure asset leasing business, I would expect a higher margin in lending to a small “NBFC”.
Without a breakup of this business by customer, one cannot say if Blusmart has more favourable terms than other clients.
EV leasing is 16% of revenue but loses money. There isn’t enough data to show if this is an issue of lack of scale or of favourable terms for Bluesmart.
Bottom line: there is no evidence of underhand activity. Whether this is poor asset-allocation is debatable.
3. The review on Mouthshut (review)
The only verifiable fact in that review is the reference to the case in The High Court of Punjab and Haryana.
See Indian Kanoon for the judgement. (M/S Alankaram vs Gensol Engineering P Ltd on 4 May, 2018)
The petition is for the “appointment of an arbitrator to settle the dispute between the parties.”
The dispute was settled in Feb-2018. There is no judgement of wrong-doing.
4. The MoneyControl article on Tibrewala (article)
The charges against Tibrewala are of illegal betting and “hawala movement of the betting funds”.
There are no pump-and-dump allegations. The ED believes that Tibrewala was investing the betting proceeds in the stock market.
There are no facts to suggest that the Gensol promoters are involved in any illegal activities of Tibrewala.
I’m keen to learn more about Gensol, especially the economics of the EV leasing business.
Cheers
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