The Securities and Exchange Board of India (SEBI) has taken significant action against Gensol Engineering, placing restrictions on its Chief Executive Officer, Anmol Singh Jaggi, and Promoter-Director Puneet Singh Jaggi. These individuals are barred from participating in any key managerial roles within the company due to allegations of fund diversion. This decision underscores the growing scrutiny of corporate governance within the Indian securities market.

SEBI’s Investigation into Gensol Engineering

On Tuesday, SEBI’s order revealed serious concerns over Gensol’s financial practices, notably involving fund diversion linked to luxury property purchases and personal expenses of its promoters. The regulator has mandated that Gensol halt its previously announced stock split and has ordered a forensic audit of the company’s financial records, as well as those of its related entities.

• Key Findings:
  • SEBI’s investigation highlighted that Gensol diverted ₹663.89 crore in loans, which were intended for the procurement of 6,400 electric vehicles (EVs). However, records indicate that only 4,704 EVs were purchased for ₹567.73 crore, leaving a staggering ₹200 crore unaccounted for.
  • Allegations surfaced that these funds were channeled through a dealer, Go-Auto Pvt. Ltd., to various companies associated with the Jaggi brothers, raising red flags about potential misuse.

The Impact on Gensol’s Ratings and Shareholding

The repercussions of these findings were swift, with credit rating agencies downgrading Gensol’s rating to “D” in March 2025 due to confirmed delays in payments. Notably, the company had reportedly submitted falsified debt servicing letters from state-owned lenders IREDA and Power Finance Corp., which were later denied by these institutions.

• Promoter Shareholding:
  • Gensol’s promoter holding, which was previously over 70%, plummeted to 35% by March 2025. Out of this, 75.74 lakh shares are pledged with IREDA, many of which have been invoked, signaling significant financial distress.

Concerns Over Operational Transparency

Gensol’s stock exchange disclosures have also faced criticism. Earlier this year, the company announced it had received 30,000 EV pre-orders, yet these were based on non-binding memorandums of understanding (MoUs) for 29,000 units, lacking solid delivery timelines or pricing agreements. An investigation by officials from the National Stock Exchange (NSE) revealed no actual manufacturing activities at Gensol’s Chakan facility, casting doubt on its operational integrity.

• Strategic Partnerships:
  • Gensol’s claim of a ₹315 crore strategic partnership with Refex Green Mobility was abruptly withdrawn in March 2025. Additionally, a purported $350 million deal involving a newly established U.S. subsidiary was found to lack concrete evidence.

In light of these developments, Gensol’s future in the market remains uncertain as it navigates the ramifications of SEBI’s stringent measures and the ongoing investigations into its financial practices. As retail investors hold approximately 65% of the company’s shares, the situation warrants close attention from all stakeholders involved.