SEBI Bars Gensol Engineering Promoters From Securities Markets

The Securities and Exchange Board of India (SEBI) has put out an interim order against Gensol Engineering and its promoters, Puneet Singh Jaggi and Anmol Singh Jaggi, restraining them from the securities markets till further notice because of fund diversion and governance concerns. The Jaggi brothers have also been prohibited from occupying director or key managerial roles in Gensol. SEBI’s investigation, triggered by a complaint in June 2024, prima facie found misutilisation and diversion of company funds in a fraudulent manner by the promoter directors, who were also the direct beneficiaries.

Loan Misuse and Fraudulent Representations

Allegations include availing loans worth ₹978 crore from IREDA and PFC, with a portion allegedly used for personal expenses of including purchase  of high-end  real estate ; benefit  to  the  private  / transfer  of funds to promoters’ close relatives etc. In addition, SEBI charged the company with misguiding the regulator, credit rating agencies (CRAs), lenders, and investors by providing them with fraudulent conduct letters allegedly issued by its lenders. 

SEBI’s Findings & Stock Split Suspension

According to the regulator, Gensol's promoters were treating the listed public company as a proprietary company, channeling money to related parties for unrelated expenses. Channeling of funds is likely to ultimately cause losses to the company's investors. SEBI pointed towards lax internal controls that permitted rerouting of even ring-fenced borrowings. Based on these findings, SEBI has also asked Gensol Engineering to suspend its announced stock split.

90% Share Price Collapse and ‘T’‑Group Classification

The effect of these disclosures is already reflected in the share price of Gensol Engineering, which has suffered a dramatic decline, crashing about 90% from it's all-time high of ₹1,147 to about ₹129. The stock now comes under the 'T' group of shares, mandating delivery and having a 5% circuit level, hence limiting intraday and BTST/STBT transactions. This fall gathered pace after credit rating agencies ICRA and CARE downgraded the ratings of the company. CARE Ratings had classified the company as default, while ICRA pointed to delays in servicing debt and issues over corporate governance practices on account of seemingly fudged debt servicing history. 

Retail Shareholder Losses & Mutual Fund Exclusion

Gensol Engineering had close to one lakh retail shareholders as of December 2024, who have seen a significant erosion of their investment. India's domestic mutual funds had no exposure to Gensol Engineering as of the December quarter, according to reports.

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