A prominent player in India’s clean-tech revolution, Gensol Engineering is currently being investigated by regulators for financial irregularities and malpractices.
Its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, have been prohibited from trading on the securities market by the Securities and Exchange Board of India (SEBI). The case comes after claims that the two falsified paperwork to conceal loan defaults, transferred funds intended for electric vehicle (EV) projects, and used the money for luxuries.
Gensol’s stock dropped 5% after SEBI’s order, compounding the company’s already severe slide over the previous 12 months.
Gensol Engineering’s Rise And Fall
The Jaggi brothers founded Gensol, which began as a solar engineering company before branching out into EVs. In 2019, it went public on the BSE SME platform, and by 2023, it had been transferred to the main board. Additionally, it provided EVs through leasing to BluSmart, an electric taxi service that Anmol Singh Jaggi co-founded.
In its early years, the company showed potential, but things quickly went south. In a single year, Gensol’s market value fell from Rs 4,300 crore to Rs 506 crore. Thousands of individual investors suffered when its shares fell by about 85%.
The Allegations
The issue started with a Rs 978 crore loan from Power Finance Corporation (PFC) and the Indian Renewable Energy Development Agency (IREDA), two government-backed organizations. The funds were intended to be used to buy 6,400 EVs for BluSmart to lease.
But according to SEBI, Gensol only purchased 4,704 cars. SEBI suspects that the Rs 262 crore gap that resulted from this was used for personal gain.
According to reports, the Jaggi brothers used the money to purchase an exclusive condominium in Gurgaon’s upscale residential development, The Camellias. According to reports, other costs included luxury goods, credit card bills, remittances to family members, international vacation, and golf equipment.
How The Funds Were Misused
SEBI’s investigation showed how funds were misdirected through a series of transactions:
- Rs 50 crore from a Rs 71.41 crore loan was routed through a promoter-controlled entity, Capbridge Ventures, which used Rs 42.94 crore to purchase the luxury apartment.
- Another Rs 40 crore from a separate loan was transferred to Wellray Solar Industries, a company linked to the promoters.
- Funds were also transferred to other connected businesses and individuals, including Rs 29.5 crore to Gensol, and Rs 5.6 crore to Matrix Gas and Renewables.
- The money was shuffled between related firms such as Gensol EV Lease, GoSolar Ventures, and BluSmart Mobility, to hide the true trail of the diverted money.
Fake Documents And Loan Defaults
The fact that Gensol provided fictitious “Conduct Letters” to IREDA and PFC, stating that its loan repayments were consistent, is another grave accusation. Both lenders acknowledged that they had not sent any such letters when SEBI contacted them.
In March, credit rating agencies ICRA and CARE Ratings downgraded Gensol to a “D” rating, indicating inadequate repayment capacity and default risk.
The Fallout
Following the SEBI’s interim order:
- The Jaggi brothers are banned from accessing the securities market or holding key roles in listed companies.
- Gensol’s planned stock split has been suspended.
- A forensic audit has been ordered to dig deeper into the company’s financial books.
- Investor confidence has taken a massive hit, and the company’s credibility is under serious doubt.
