Gensol Eng Misconduct Sebi order explained Impact on Shareholders
Gensol Engineering Misconduct: Impact on Shareholders and Detailed Analysis"
Key Points from SEBI's 29-Page Interim Order on Gensol Engineering Limited
Gensol Engineering Limited (GEL) Case Summary
Background
Company Overview-
Gensol Engineering Limited provides solar consulting services, EPC services, and electric vehicle (EV) leasing. It was listed on BSE SME in 2019 and later on BSE and NSE in 2023.
Financial Growth-
Between FY 2017 to FY 2024, revenue rose from ₹61 crore to ₹1,297 crore, with net profit growing from ₹2 crore to ₹80 crore.
Borrowings-
Increased from ₹10 crore in FY 2017 to ₹1,045 crore in the first half of FY 2025.
Key Findings -
1. Fund Diversion and Misuse
Loans amounting to ₹829.86 crore, meant for EV procurement, were partly diverted to unrelated expenses, including luxury real estate.
₹262.13 crore remains unaccounted for despite the company acquiring 4,704 EVs (short of the 6,400 planned).
2. Misrepresentation-
Forged documents, including Conduct Letters and No Objection Certificates (NOCs), were submitted to SEBI and credit rating agencies (ICRA and CARE).
Misleading disclosures about pre-orders and MOUs inflated investor expectations.
3. Stock Trading Manipulation-
Related entities, such as Wellray Solar Industries, predominantly traded in Gensol's stock (99% of their portfolio), influencing stock prices.
- ₹101.35 crore funded by Gensol was routed through Wellray for this purpose.
4. Corporate Governance Failures-
Promoters treated Gensol's funds as their own, funneling money to related parties and personal expenses.
Promoters reduced their shareholding from 70.72% (FY 2020) to 35% (FY 2025).
Promoters Holding - 35.1250
Public Holidng - 64.8750
5. Debt Servicing Default-
Defaults on loans from IREDA and PFC, with overdue amounts exceeding ₹207 crore.
Promoters pledged shares to raise funds but risks of pledge invocation remain.
records show that the company received loans aggregating Rs.
663.89 Crore from IREDA and PFC.
Gensol was to provide an additional equity (margin) contribution of 20%, bringing the total expected deployment of approximately Rs. 829.86 Crore for the purchase of
6,400 Electric Vehicles. Based on these figures, an amount of Rs. 262.13 Crore (Rs. 829.86 Crore – Rs. 567.73 Crore) remains unaccounted, even though more than a year has passed since the Company availed the last tranche of the
above mentioned financing.
to understand the end-use of funds, bank statements of both the Company and the dealer, Go-Auto, were examined.
The analysis showed that once the funds were transferred from Gensol to Go-Auto, ostensibly for the purchase of EVs, they were, in most of the instances, either transferred back to
the Company itself or routed to entities that were directly or indirectly related to Anmol Singh Jaggi and Puneet Singh Jaggi, promoters and directors of Gensol.
Some of these funds were then used for purposes unrelated to the purpose/objective of the sanctioned term loans, which included
(i) personal expenses of the promoter, including purchase of high-end real estate;
(ii) benefit to the private promoter entities / transfer of funds to promoters’ close relatives; etc.
Regulatory Actions-
SEBI Orders -
1. Promoters Anmol Singh Jaggi and Puneet Singh Jaggi are barred from holding director/key positions at GEL.
2. Trading of GEL securities by the company and promoters is prohibited.
3. Announced stock split is placed on hold.
4. Forensic audit to be conducted on Gensol and related entities.
Investigation Goals-
Verify the utilization of funds.
Trace fund movement to related entities.
Assess corporate governance practices and compliance failures.
Implications-
Investors-
Significant losses due to stock price decline from ₹1,126 to ₹133.
Risk of further devaluation if promoters offload shares.
Company Reputation-
Alleged fund mismanagement and falsification of documents severely impact credibility.
Risk to future projects and government contracts.
Gensol Engineering's share price has experienced a dramatic decline due to allegations of financial misconduct and governance failures. Here's a closer look at the situation:
Share Price Details -
Current Price :
As of April 16, 2025, the stock is locked at ₹123.65 per share, hitting the 5% lower circuit.
52-Week High and Low -
The stock's 52-week high was ₹1,125.75, and its 52-week low is ₹123.65.
Year-to-Date Decline -The stock has fallen by 83% in 2025 alone.
Long-Term Impact -Over the past year, the stock has lost 85% of its value.
Investor Situation -
Approximately 90 lakh retail investors are currently holding shares, many of whom are facing significant losses.
The stock's classification under the Enhanced Surveillance Measure (ESM) framework restricts intraday trading and mandates delivery-based transactions, further limiting trading flexibility.
Stock Split Halted: Gensol Engineering had announced a stock split in the ratio of 1:10, but SEBI directed the company to suspend this action, citing concerns about misleading investors amid serious governance issues.
What Investors Can Do
1. Stay Informed - Monitor updates from SEBI and the company regarding ongoing investigations and governance reforms.
2. Seek Professional Advice - Consult financial advisors to evaluate whether holding or exiting the stock aligns with your investment strategy.
3. Diversify Investments -Avoid concentrating investments in a single stock to mitigate risks in the future.
4. Exercise Caution -Be wary of speculative trading in stocks under regulatory scrutiny.
This situation highlights the importance of due diligence and diversification in investment portfolios.
download and read the Sebi order on Gensol Engineering
Posts
