After rising over 2,200 per cent, are troubles about to rise for Gensol Engineering?

As an investor, if you’re asked to go back in time and change anything in your portfolio; what would that be and why? 

As an investor, if you’re asked to go back in time and change anything in your portfolio; what would that be and why? 

If your answer is related to Gensol Engineering; we can guess why! Nevertheless, this stock is garnering all the limelight on D-Street for delivering superlative returns of 2,200 per cent returns in a span of just one year! Who wouldn’t want to grab such a wonderful opportunity? 

Superlative gains are not only the reason that the stock has been in the limelight! Other reasons include the company’s Q1FY23 revenue wherein, it achieved a milestone mark of over Rs 100 crore. Apart from this, the company has accomplished a major milestone in the designing & engineering of its EVs, as part of its advanced product quality planning (APQP) process, which is a structured process that includes critical tasks from concept approval through production. The company is fully geared to start production as per the expected timeline in January 2023. Furthermore, the acquisition of shares from the open market by Anmol Singh Jaggi, Promoter & Director of Gensol Engineering Ltd on September 5 got all the investors' eyes on this stock. However, there’s a twist in the tale!

The stock, which was defying gravity and was moving at an unpreceded clip, all of a sudden, turned its course. The stock started to correct after recording an intraday high of Rs 1,990. The correction is not a concern but the manner in which the correction has occurred i.e. lower circuits being hit by the stock despite buying support from the promoter raises some eyebrows! Is this an anti-climax for the stock?   

We have observed that as per the quarter ended June 2022, promoters-initiated pledges of 27.41 per cent of holdings. Remember, the pledging of a promoter’s share is not necessarily bad if its operating cash flow is constantly increasing and the company has got good prospects. However, an interesting thing to note is that Anmol as well as Puneet Singh Jaggi, Promoter & Director of the company, as per the exchange, has created a pledge of 34,128 and 14,896 shares, respectively as of August 30, 2022. This is almost two-day prior to the stock that hit an intraday peak of Rs 1,990 in early September. So, the recent acquisition of shares from the open market by Anmol Singh Jaggi is because he would be requiring additional shares as collateral, or is it because he wants to have more skin in the game at this level of price as well? Only time will unfold this mystery! Meanwhile, the total debt-to-equity for FY22 stands at 1.77, which was 0.29 in FY21. 

However, the company mentioned total capital expenditure incurred for FY22 at Rs 50.7 crore, which majorly includes the purchase of four-wheel electric cars that are further leased out to ride-hailing platforms.  

What are your views and thoughts on the stock? Do let us know in the comments section.