Sebi Uncovers Major Fund Misuse by Gensol Engineering's Promoters
Sebi's Findings on Gensol Engineering
In a recent interim order, the Securities and Exchange Board of India (Sebi) revealed that the promoters of Gensol Engineering treated the publicly listed company as if it were their personal business. They allegedly misappropriated corporate funds to purchase a luxury apartment in The Camellias, DLF Gurgaon, indulge in high-end golf equipment, settle personal credit card debts, and transfer money to family members.
Sebi's investigation highlighted a troubling trend of fund misallocation by Gensol's promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, indicating significant governance issues within the firm.
Central to the allegations is the misuse of term loans obtained by Gensol Engineering Ltd (GEL) from IREDA and PFC. The company secured loans totaling Rs 977.75 crore, with Rs 663.89 crore earmarked for acquiring 6,400 electric vehicles (EVs). These vehicles were intended for leasing to BluSmart, a related entity.
However, Gensol acknowledged in a February response to Sebi that it had only acquired 4,704 EVs, significantly below the funded amount. This was confirmed by Go-Auto Private Limited, the supplier, which reported delivering 4,704 units for Rs 567.73 crore.
Considering Gensol was also obligated to contribute an additional 20% equity, the total expected expenditure for the EVs was approximately Rs 829.86 crore, leaving Rs 262.13 crore unaccounted for.
To trace the funds' usage, Sebi scrutinized bank statements from both Gensol and Go-Auto. The regulator discovered that many funds transferred to Go-Auto for EV purchases were redirected back to Gensol or to entities associated with the promoters.
Sebi's findings indicated that some of these funds were utilized for purposes unrelated to the loans, including personal expenses of the promoters, such as the luxury apartment purchase, family transfers, and investments in private entities owned by them.
One significant revelation was the diversion of Rs 42.94 crore through Anmol Singh Jaggi's Capbridge Ventures to finance the luxury apartment. Additionally, Rs 50 lakh was reportedly invested in Ashneer Grover's startup, Third Unicorn, with other funds covering personal travel and leisure activities.
The financial trail also showed Rs 6.20 crore allegedly sent to Anmol's mother, Jasminder Kaur, and Rs 2.98 crore to his wife, Mugdha Kaur Jaggi. Extravagant personal expenditures included Rs 26 lakh on golf equipment and Rs 3 lakh on travel through MakeMyTrip.
Further examination of Puneet's bank statements revealed similar patterns, with funds diverted to family members and personal expenses, including Rs 1.13 crore to his wife, Shalmali Kaur Jaggi, and Rs 87.52 lakh to his mother.
Sebi concluded that the promoters operated the company as their personal financial resource, misrouting funds to related parties and incurring expenses without considering shareholder interests.
The regulator stated, "The company's funds were routed to related parties and used for unconnected expenses, as if the company's funds were promoters' piggybank. The result of these transactions would mean that the diversions mentioned above would, at some time, need to be written off from the company's books, ultimately resulting in losses to the investors of the company," in its 29-page order released on Tuesday.
In a decisive action, Sebi has prohibited the Jaggi brothers from holding any directorial or key management roles in Gensol or any other listed company. Furthermore, it has barred Gensol and its promoters from accessing the securities market until further notice due to the fund diversion and serious governance failures.
Additionally, the regulator has instructed Gensol Engineering to suspend its proposed stock split in a 1:10 ratio, which was anticipated to attract more retail investors.
About Gensol Engineering
Gensol Engineering, listed on both BSE and NSE, specializes in solar consulting services, Engineering, Procurement and Construction (EPC) services, and leasing electric vehicles.