Power Finance Corporation (PFC) has officially classified its loan exposure to Gensol Engineering Ltd. as fraud, following preliminary findings. The state-run lender has fully provisioned for the loan amount and is considering legal recovery options, including approaching the National Company Law Tribunal (NCLT) if other methods fall short.
Key Developments & Financial Impact
- PFC had disbursed ₹352 crore to Gensol for leasing 3,000 electric vehicles (EVs).
- The lender has recovered ₹44 crore through security encashment of fixed deposits and the trust and retention account (TRA), reducing the outstanding loan amount to ₹263 crore.
- The fraud is categorized as a promoter-specific event, with PFC asserting that it does not indicate broader sectoral risks.
Legal & Recovery Measures
PFC is exploring multiple recovery avenues:
- Debt Recovery Tribunal (DRT): Direct enforcement of secured assets.
- NCLT Proceedings: If recovery through other methods falls short, PFC may join the corporate insolvency process.
- Regulatory Actions: The Securities and Exchange Board of India (SEBI) has already barred Gensol’s promoters from the securities market due to fund diversion and governance lapses.
Market & Industry Impact
Despite the setback, PFC reported a 23.5% rise in net profit to ₹5,109 crore in Q4 FY25, driven by higher net interest income and bad loan recovery. The lender maintains that the Gensol case does not reflect flaws in its appraisal methodology or risk mitigation strategies.
With legal proceedings underway and financial institutions tightening governance, the Gensol fraud case is expected to have far-reaching implications for corporate lending practices.
For more updates on financial markets and corporate governance, stay tuned!
