Gensol IPO Review: Should you invest in this solar play?


Gensol IPO Review: Ahmedabad-based Gensol Engineering is launching its IPO on 30 September 2019 in the SME exchange of BSE. The company – a Solar Design & Engineering player – is planning to sell 2,160,000 shares in the price range of INR81 – 83 per share. In total, the company plans to raise as much as INR17.93 crore through the public offer. Please head to this page to get more details about the upcoming IPO. We have gone through the prospectus to better understand the company and have analyzed its operations on 25 parameters. Here is our analysis of Gensol Engineering IPO, please scroll down for the total score.

Gensol IPO Review: Business Basics

Are the company’s annual revenues more than INR50 crore?

Yes. The company’s top line stood at INR83.8 crore in FY2019.

Are the company’s annual profits after tax in excess of INR5 crore?

Yes, Gensol Engineering earned net income of INR6.5 crore in the latest financial year.

Has the company got a strong and recognizable brand?

Yes. Gensol Engineering works with solar power producers and related entities and its name is well-known in the industry.

Is there a strong moat in place in the form of entry barriers, market reach etc?

Yes, Gensol Engineering operates in a competitive industry where past execution track acts as a formidable entry barrier. It also has longstanding business relationships with its clients which is another positive.

Has the company got a diversified set of customers?

Yes. Gensol Engineering’s top 10 customers accounted for 62.29% of its total revenues in FY2019. For B2B (Buisness to Business) operations, this represents diversification across its clients.

Do exports contribute a sizeable chunk to annual revenues, giving the company an edge over its competitors?

No. Gensol Engineering’s revenues are largely focused on India. It exported services amounted to INR4.65 crore which is about 5.5% of its revenues in FY2019.

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Is there a strong connect between the company and retail consumers?

No. As mentioned above, the company operates in B2B trade and thus, hasn’t got a retail connect.

Gensol IPO Review: Management Analysis

Is the company’s top management experienced enough to lead operations through difficult times?

Yes. Both promoters Anmol Jaggi and Puneet Jaggi have led the company through a variety of business cycles and continue to be involved in day to day management.

Are the management members/promoters paying themselves fairly without jeopardizing shareholders’ interests?

Yes, we didn’t find excessive remuneration for management.

Do the promoters have sizeable equity left in the company after the IPO?

Yes, the promoters and promoter group currently own 5,801,165 shares or 96% equity stake in the company. Following the IPO, this shareholding will drop to 70.72%.

Is the current management trustworthy? Are there instances of putting shareholders’ interests at risk for personal gains?

Yes, we didn’t find such instances.

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Gensol’s Ground Mount EPC Project for Sunfan Energy

Are the litigations or criminal proceedings against the company insignificant in nature and don’t involve big numbers?

Yes. There are tax-related cases outstanding against Gensol Engineering and its promoters. However, the amounts involved are quite small at INR15.62 lakhs and INR24.33 lakh, respectively.

There is a criminal case filed against Gensol Engineering and Anmol Jaggi by Sunren Power Private. The case is related to dishonored cheques amounting to INR5 crore. The matter is pending before authorities.

Are the company management’s shares free from any pledge with banks or financial institutions?

Yes. As on the date of the prospectus, no promoter shares are pledged.

Are there external investors such as private equity or venture capital firms on board?

No. As mentioned above, the company is almost full-owned by the Jaggi brothers as of now.

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Gensol IPO Review: Financial performance

Have the company’s revenues grown at a CAGR of at least 10% in the last three years?

Yes. Gensol Industries’ topline jumped from INR62.32 crore in FY2017 to INR83.85 crore in FY2019.

Have the company’s net profits grown at a CAGR of at least 25% in the last three years?

Yes. The company’s earnings jumped more than 5 times in the last three years (check more about the company here).

Has the Average Return on Equity (ROE) in the last three years been more than 15%?

Yes. The company’s average Return On Net Worth (RONW) in the last three years has been 76.5%.

Has the company maintained positive operating cashflows in the last three years?


Has the company witnessed a declining trend in debt/equity (D/E) in the last three years?

No. Gensol Engineering’s D/E ratio increased from 0.32 to 0.66 in the last three years.

Are the company’s working capital requirements less than 20% of its annual sales?

Yes. Gensol Engineering required working capital of INR9.8 crore in FY2019 which translated in 11.7% of its annual revenues.

Is the Debt/Equity ratio less than 1?

Yes, the company’s D/E ratio as of 31 March 2019 stood at 0.66.

Gensol Engineering IPO Review: IPO objectives and valuations

Are the IPO objectives in line with the broad corporate guidelines? Funds raised shouldn’t be used for fancy purchases and upgrades.

Yes, the funds will be primarily used to augment working capital.

Is the company offering some discount on Price/Earnings (P/E) ratio compared to its peers?

No. The company is offering its shares at the P/E ratio of 7.53 – 7.72. While this is attractive given its performance in recent years, the valuation is slightly expensive than its competitor Zodiac Energy.

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Is the company offering some discount on Price/Book Value (P/BV) ratio compared to its peers?

No, Gensol Engineering’s P/BV is at 3.75 – 3.84 which is higher than its listed peer.

Are the contingent liabilities less than 10% of latest annual revenues?

Yes. Contingent liabilities stood at just INR1.96 crore in FY2019.

Gensol IPO Review gets a score of 19/25. Head to our IPO discussion page to get latest subscription details and check out this page for latest IPO grey market rates.

DisclaimerThe objective behind Gensol IPO Analysis is to offer an unbiased view of the company’s operations, offer details, strengths, weaknesses, financial performance and valuation. The IPO rating framework helps investors in taking a call if Gensol Engineering IPO is worth investing or not. Nevertheless, this is not an IPO recommendation to subscribe or avoid and the decision to invest should be based on individual investor’s risk profile.


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