New Delhi: In a bid to recover outstanding loans, Power Finance Corporation (PFC) and the Indian Renewable Energy Development Agency (IREDA) are reportedly planning to auction electric vehicles (EVs) acquired by Gensol, a financially troubled company. Gensol, which leased its EVs to the ride-hailing service BluSmart, is facing serious financial challenges, compounded by legal scrutiny on its promoters.
Financial Troubles Mount for Gensol and BluSmart
The Jaggis, Anmol Singh Jaggi and Puneet Singh Jaggi, who promoted both Gensol and BluSmart, are under investigation by the Securities and Exchange Board of India (SEBI), which has accused them of fund diversion for personal expenses. The market regulator has imposed a ban on the brothers, barring them from holding positions in listed companies, further adding to the company’s financial woes.
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The lenders, PFC and IREDA, financed the purchase of over 5,000 electric vehicles for Gensol, which were hypothecated as collateral. These loans were primarily serviced through lease payments from BluSmart. However, with BluSmart halting its operations on April 17, the lease rentals have significantly dwindled, making it unlikely for Gensol to continue servicing its debts.
Loan Default Risks and Actions by Lenders
As Gensol’s financial situation deteriorates, concerns are mounting that the company may soon be classified as a non-performing asset (NPA). While the company has not yet been officially categorized as an NPA, the lenders are worried that this will happen soon if the debt is not repaid. To mitigate the risk, PFC and IREDA are preparing to auction off the electric vehicles to recover the Rs 663 crore loaned to Gensol.
Credit rating agencies downgraded Gensol’s debt to a ‘D’ rating – indicating default — in early March. However, the lenders have not yet officially labeled the account as an NPA, as they have been using a debt-service reserve account to cover shortfalls in repayments. Piyush Mishra, partner at Phoenix Legal, clarified that according to RBI norms, loans that are overdue for more than 90 days must be classified as NPAs, but there is no immediate rush to do so as long as the reserve account is used to cover the payments.
Gensol’s Uncertain Future Amid Regulatory Scrutiny
The future of Gensol remains uncertain, especially after the Jaggi brothers stepped down from the company’s board and management following a SEBI order on April 15. The order accused them of misusing company funds for personal purchases, including a luxury apartment and a golf set. They also face charges of insider trading in the company’s shares. The Jaggis have been given 21 days to respond to these charges.
With the company on the brink of default, experts suggest that PFC and IREDA may soon take independent recovery actions against Gensol and its promoters. Vaibhav Kakkar, senior partner at Saraf and Partners, pointed out that the lenders could invoke an event of default against the promoters’ pledged shares, regardless of ongoing regulatory investigations.
Pledged Shares and Promoter Holdings
Data from the latest stock exchange filings indicate that the Jaggi brothers hold a 62.65% stake in Gensol, with 19.5 million of their 23.8 million shares pledged as collateral. This means that approximately 81.6% of the promoters’ holdings are encumbered, further complicating the situation.
As the situation unfolds, PFC and IREDA are carefully exploring their options to recover the loans and secure the hypothecated assets. However, with regulatory investigations underway and the halt in BluSmart’s operations, the prospects for a quick resolution remain uncertain.
