SEBI puts Gensol Engineering stock split on hold, bars promoters from accessing market

From a luxury apartment purchase in The Camellias to an expensive golf set and various personal expenditures, the promoters of Gensol Engineering Ltd diverted crores of company funds while treating the listed company like a proprietary firm, the stock market regulator said on Tuesday, April 15.

In a stinging order, the regulator barred brothers Anmol Singh Jaggi and Puneet Singh Jaggi from directorships in listed companies, stopped the company's planned stock split, and named a forensic auditor to investigate the matter further.

SEBI order

The Securities and Exchange Board of India (SEBI) order, which came after it investigated a complaint received in June 2024, pointed to serious governance lapses, fund diversion and submission of falsified documents.

The complaint had alleged share price manipulation and misappropriation of company funds. The probe unearthed what it described as a "complete breakdown" of internal controls and corporate governance.

“The promoters were running a listed public company as if it were a proprietary firm,” SEBI whole-time member Ashwani Bhatia wrote. “Company funds were routed to related parties and used for unrelated expenses—as if the company’s funds were the promoters’ piggy bank.”

To be sure, this is an interim order while the regular conducts a full investigation, and the promoters are at liberty to challenge it. Still, the SEBI action comes as yet another setback for the company that is already facing downgraded debt and seized promoter shares.

The investigation highlighted a web of fund transfers primarily benefiting entities related to the Jaggi brothers. One such instance involved a ₹71.39 crore disbursed by the Indian Renewable Energy Development Agency (IREDA) to Gensol on 30 September 2022. The money was transferred to Go-Auto Pvt. Ltd., an EV supplier, which transferred ₹50 crore to Capbridge Ventures LLP, a related entity.

Within days, Capbridge transferred ₹42.94 crore for the purchase of a luxury apartment in Gurgaon’s upscale ‘The Camellias’ project in Gurugram. The unit was acquired in the name of a firm in which the Jaggis are partners.

The investigation also found that ₹25.76 crore was diverted by Anmol Singh Jaggi for personal use, investments in related entities, and luxury purchases. Tuesday's order said Jaggi invested ₹50 lakh in Third Unicorn Pvt. Ltd, a tech start-up of Ashneer Grover, and held 2,000 shares in the company as of 31 March, 2024.

The order also highlighted a ₹26 lakh payment to TaylorMade for a golf set, and various other personal expenditures. SEBI also tracked an additional ₹70 crore transferred from Go-Auto to Capbridge in FY23, with Capbridge later repaying ₹47.5 crore to Go-Auto using funds borrowed by Param Care Pvt. Ltd, another related party. The loan was backed by a ₹50 crore fixed deposit from BluSmart Mobility, a Gensol affiliate.

In another case, Gensol received ₹117.47 crore from Power Finance Corp. on 27 September 2023, supplemented by an internal transfer of ₹29.37 crore. SEBI said ₹96.69 crore of these funds were swiftly diverted to promoter-linked entities, bypassing the sanctioned purpose of the loan. Further, ₹37.5 crore from a ₹171.30 crore facility intended for Gensol's EV Lease ended up in the personal account of Anmol Singh Jaggi, the order said.

Ajay Agarwal, managing director of Go-Auto, told SEBI that Gensol owes it approximately ₹50 crore. However, SEBI's probe revealed that Gensol has already transferred ₹207.27 crore more than the actual cost of the EVs delivered to them, painting a picture of irregular financial transactions.

Gensol had secured loans totalling ₹977.75 crore from IREDA and PFC, of which ₹663.89 crore was allocated for the purchase of 6,400 EVs. However, only 4,704 units were reportedly acquired.

Separately, the company has faced questions on disclosures. Credit rating agencies CARE Ratings and ICRA downgraded its facilities to default rating last month, citing delays in debt servicing. ICRA said documents submitted by Gensol to establish repayment history appeared to be falsified.

The ratings review was triggered by reports of default by BluSmart Mobility—an entity linked to Gensol. Though Gensol claimed the BluSmart default had no bearing on its operations, it failed to provide term loan statements from IREDA and PFC. Instead, it submitted purported ‘Conduct Letters’—later denied by both lenders.

SEBI accused the promoter directors of misappropriating funds and failing to disclose related-party transactions as mandated under listing norms. The regulator noted that even ring-fenced institutional borrowings were redirected at the discretion of the promoters.

“The diversion of funds reflects a culture of weak internal control,” Bhatia observed. “Retail investors would be at risk if such a company were allowed to attract more participation through a stock split.”

Gensol had proposed a stock split in a 1:10 ratio, a move that was expected to increase retail investor interest. SEBI’s interim order has now suspended the corporate action pending further investigation.