Gensol Engineering Ltd
A fast-growing company, disrupting the Solar and EV market
About the Company
Gensol Engineering Ltd is primarily engaged in EPC, EV Manufacturing, EV Leasing and Battery Energy Storage Systems. Its EPC segment includes solar EPC, Solar O&M, solar monitoring & analysis.
Gensol has established a state-of-the-art EV manufacturing facility in Pune for the development and production of electric 3W and 4W vehicles, with an annual capacity of 30,000 vehicles. Additionally, it offers comprehensive EV leasing solutions and serves leading ride-hailing players with its buy-and-lease package of EV cars. To date, it has leased over 3,000 EVs and plans to lease 5,000 EV cars and 1,000 EV Cargos in the next 12 months.
As of FY’24, the company has:
Market Cap of Rs 3,878 Crore
Stock PE of 72.40 against the industry PE of 38.10
ROE of 20.00% and ROCE of 14.60%
However, the company also shows some red flags, such as pledged percentage of 78.40 % and a debt-to-equity ratio of 4.63. The management addressed these issues during the Earnings conference call Q4 FY ’24 and Q1 FY ’25.
The Promoter holding stands at 62.80 % and FII’s at 1.98 %
Outlook
Gensol targets to reach total revenue of more than Rs 2000 Crore PLUS by FY ’25 out of which EPC business is expected to add a revenue of Rs 985 Crore, the leasing business to add Rs 376 Crore and EV manufacturing business to add Rs 669 Crore.
Financial and Growth Analysis during the period FY ’19 to FY ’24
Historic sales increased from Rs 83 Crore to Rs 963 Crore, a growth of almost 1160%
Operating Profits jumped from Rs 9 Crore to Rs 228 Crore during the period with a growth of around 2533%
Net Profit rose from Rs 7 Crore to Rs 53 Crore, an increase of nearly 757%
EPS grew from 2.73 to 15.73 during the period.
The share price also went from Rs 20 to Rs 880 (with the period high of Rs 1377) with a growth percentage of 4400%.
Company’s compounded sales growth for the last 5 years stands at 63% and for last 3 years at 147% with the TTM at 145%
Compounded profit growth for the last 5 years is 52%, 156% for the last 3 years, with the TTM of 114%
Major Clients
As Gensol primarily operates in the solar power and renewable energy sectors, provides engineering, procurement, and construction (EPC) services, as well as operations and maintenance (O&M) for solar power projects. Some of their major clients typically include:
Government Entities: Gensol often works with various state and central government agencies in India involved in solar and renewable energy projects.
Corporate Clients: Many large corporations, especially those with a focus on sustainability, have engaged Gensol for their solar power needs. This includes companies in sectors like manufacturing, IT, and real estate.
Renewable Energy Companies: Gensol collaborates with other renewable energy firms that need expertise in solar EPC and O&M services.
International Clients: Gensol has expanded its operations to various countries, with international clients in regions like Africa, the Middle East, and Southeast Asia.
Note: The client list evolves over time, and for specific, up-to-date details, it would be best to refer to their official communications or financial reports from time to time.
Gensol in its Q4 FY ’24 Results Conference Call explained the company’s growth story, financial performance and explained certain red flags as well:
Revenue surged 2.5 times to Rs 996 crores for FY '24.
EBITDA has shown an impressive 3 times growth to Rs 260 crores and the profit before tax has grown 2 times to Rs 78 crores as compared to FY '23.
Gensol ranks amongst the top 10 EPC players in India and within the top 5 in terms of independent EPC players. By FY '24, the company successfully executed over 770 megawatts of diverse solar projects, encompassing rooftop, ground mount, and floating solar installations across India.
Won its first project in battery energy storage system under the build-own-operate model and sees a strong opportunity in this future.
In Q4 FY '24, EPC business generated a revenue of Rs 354 crores, which translates into an increase of 145% year-on-year. For the full financial year, the solar segment grew 2 times to over Rs 830 crores, showcasing robust performance, remarkable strength and resilience.
Gensol in FY '24, established Gensol EV Lease Private Limited. The subsidiary has recently turned the brand name of “Let’sEV” and it's transforming the market with innovative solutions and comprehensive EV lifecycle management, covering two-wheelers, three-wheelers, four-wheelers, large and heavy commercial vehicles and buses. The leasing business achieved a total revenue of Rs 134 crores in FY '24, a tremendous growth of 227% from FY '23
The financial performance of the company in the full year FY '24 reflects a very commendable growth trajectory. On a consolidated basis, revenue has grown from Rs 403 crores in FY '23 to Rs 996 crores, which translates into a growth of 147%. The revenue from operations has increased by 143% to Rs 963 crores from Rs 398 crores.
Company in Q1 FY ’25 results conference call elaborated that:
Total revenue jumped by 105% to Rs 297 crore in Q1 FY ’25 from Rs 145 crore in Q1 FY ’24.
EBITDA climbed by 143% to Rs 89 crore in Q1 FY ’25 from Rs 37 crore in Q1 FY ’24.
EBITDA Margin increased by 470 basis points.
In Q1 FY ’25, Gensol recorded a net profit of Rs 15 crore, up 50% from Rs 10 crore in the same period last year.
As of June 30, 2024, the firm had a net debt-to-equity ratio of 1.86x.
Order Book
Gensol has a strong order book, with a big pipeline that far surpasses the numbers. The company expect to win a good portion of these orders. It has also started winning some good orders in the Middle East. The order book is growing and some announcements in the current FY, are around there. Accordingly:
The company has recently emerged as the winning bidder for 116 MW (150 MWp) of solar projects in Gujarat with EPC revenue of INR 600 Crores. These projects will be distributed across 27 diverse locations, all under the purview of Paschim Gujarat Vij Co Ltd, the state electricity distribution company.
The company has also received an EPC award for Rs 463 crore solar plant at Gujarat’s Khavda RE Power Park.
The Gensol-Matrix consortium secured a cumulative 300 MW capacity, including a prior 63 MW awarded in the first tranche of the SECI tender that equates to Rs 450 Crore cumulatively incentive under the PLI scheme.
As of June 30, 2024, the firm had a total order book value of Rs 5,025 crore.
ARAI certification for EV vehicle
In February '24, the company received ARAI certification for its EV vehicles and is currently testing the vehicle post ARAI, and will start sending tested vehicles to the customers from Q2 of the current financial year. Company is anticipating a revenue of between Rs 50 crore to Rs 100 crores from EV manufacturing in FY '25
Gensol is likely to execute over Rs 2,000 crores in revenue in the current year and has a projection for next year. So, the company is accordingly building the order book and in such a way that the revenue can be comfortably achieved as per guidance and projections.
BluSmart Mobility
BluSmart, with a fleet of 7300 vehicles, is creating significant buzz and 50% of the leasing is through Gensol. They are planning to expand to maybe 12,000 to 25,000 cars and then a grand launch in Dubai. But on every progressive basis, the company plans to reduce, BluSmart's dependency and also, diversify the book of Gensol EV through Let'sEV.
BluSmart Mobility is an Indian ride-sharing company founded by Anmol Singh Jaggi, Punit K Goyal and Puneet Singh Jaggi in 2019 as an independent company. As of 2022, the company's fleet of vehicles includes the Mahindra e-Verito, Tata e-Tigor, Tata Xpres-T EV, Hyundai Kona Electric and MG ZS Electric. BluSmart functions on an asset-light business model. Cars are procured on a monthly lease from companies like EESL. The company's mobile application can be used to get rides that are similar to Uber, Ola Cabs and Lyft business model. The company uses all-electric cars with their branding on it.
Debt and Future Fundraising
The company explains that the debt is primarily linked to the rapid expansion of its EV leasing business. The company also expect that there is a decent increase in the cash in hand. So, company raised the debt and kept it as a war chest for future bidding in EV leasing and expects that the cash which the company has will get converted into fixed assets for the leasing business. Commitment letters from a number of investors are also finalized for a total of Rs 900 crores that Gensol is raising. It will further help, to raise more equity, and to help improve the business further.
Promotor’s Pledge
Regarding the high promoter pledges, the company explains that there are two types of pledges.
The first one is promoter funding to invest in the warrants round of Rs 900 crore where promoter investment is Rs 130 crores. Promotors raised the money by pledging the shares to invest into Gensol.
The second one is actually as a collateral, which has been given to IREDA and Power Finance Corporation, against their sanctions for the company.
The releasing of securities from IREDA, PFC will only happen at the end of the duration of the debt, which might be between two and three years and that taken to invest in the warrants round, the pledge coming down in about six months' time.
Future outlook of the industry
India is projected to achieve over 300 plus gigawatts of solar power by FY '30, which means that there is going to be no dearth of orders for solar and battery energy storage systems. At least till FY '30 there is no concern of slowing down of the order book. It's like once in a lifetime kind of opportunity where this is such a big market growing at such a fast pace.
CAPEX
As the company get into the fleet vehicle and thereafter, plans to get into cargo vehicles, and then into personal mobility vehicles, so there will be CAPEX associated with that in FY '25 and some amount of it in FY '26. On the EV leasing side, continuous CAPEX is required as the company continue to purchase and lease vehicles. This type of CAPEX generates revenue for the company from pretty much year one.
Further, there is also a substantial amount of opportunity in battery energy storage systems. Biding more and more BESS projects will also require CAPEX towards that.
Red Flag of Zenith Multi Trading DMCC
Shares of Gensol were stuck in a lower circuit on news that Zenith Multi Trading DMCC owns a 1.5 % stake in the company. Zenith Multi Trading DMCC is among 13 FPIs through which Dubai-based hawala operator Hari Shankar Tibrewala owns stake in Indian companies. Following the arrest of Tibrewala's associate, Suraj Chokhani, by the Enforcement Directorate, shares of various small-cap and penny stocks, including Gensol, have been battered.
On Mar 13, 2024, in an exchange filing and also in the Q4 FY24 Results conference call, Gensol clarified that Zenith, a passive shareholder since September 2022, holds less than 1.5% of the company and holds neither decision-making rights nor any involvement in the business and operational strategies of the company.
Growth Triggers/ Special Situation/ Future Visibility
The company commenced operations in 2012, stands amongst the top 10 EPC players in India, and by FY 2024 has successfully executed over 770 megawatts of diverse solar projects.
Also won its first project in battery energy storage system under the build-own-operate model and sees a strong opportunity in this future.
It has also established the brand name “Let’sEV” and is transforming the market with innovative solutions and comprehensive EV lifecycle management. The EV-leasing subsidiary Let’sEV, as well as the EV manufacturing ventures, are still in their early stages and we are investing in them so that they become significant contributors to future top line and bottom line.
On the EV manufacturing front, Gensol has a state-of-the-art manufacturing facility in Chakan, Pune with a production capacity of 30,000 vehicles per annum.
India is anticipated to have over 300 plus gigawatts of solar power by FY '30, which means that there is going to be no dearth of orders for solar, and no dearth of orders for battery energy storage systems.
Further Chairman & Managing Director Anmol Singh Jaggi through conference call for Q1 FY 25, informed that Gensol is dedicated to expanding its presence in current and new business segments like Solar, BESS & EV Leasing, which are poised for significant growth in the near future, boosting our overall profitability.
The renewable energy space is experiencing rapid expansion and is driven by increasing demand for sustainable solutions. With the increase of investments in these emerging areas, Gensol is confident to seize the opportunities in renewable energy and eMobility.
The Board of Directors considered and approved, raising funds by way of issuance of such number of equity shares having a face value of Rs 10 each of the Company and/or other eligible securities or any combination thereof, for an aggregate amount not exceeding Rs 500 crores or an equivalent thereof by way of Qualified Institutional Placement, preferential issue, or any other method or combination.
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Conclusion
Gensol Engineering Ltd has an excellent past performance and shows growth potential in all segments i.e. EPC, Battery Energy Storage Systems, EV Leasing Business and EV manufacturing ventures. The company may further diversify in other segments and has robust CAPEX plans, which will add to its future performance and plans.
The Red Flag no longer seems to be a concern and the Company after touching the price of 1377/= in Feb 2024, corrected a lot _ consolidated _ now seems ready for further uptrend. Future performance of the company seems intact for the new heights.
Peter Lynch on Page 85 _ One Up on Wall Street says, “When you buy a stock in a fast-growing company, you’re really betting on its chances to earn more money in the future.”
We hope this write-up helped you understand the business of Gensol Engineering holistically. If you enjoyed reading and have any feedback or insights, please share by leaving a comment.
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