EV player Gensol to face corporate affairs ministry probe for 'fund diversion': Report

Following charges of serious financial misconduct and regulatory violations against Gensol Engineering Ltd, the Ministry of Corporate Affairs has launched a suo motu inquiry into it.

Sources confirmed to Business Today TV that the ministry has begun examining the company’s regulatory filings and financial records after the Securities and Exchange Board of India (SEBI) passed an interim order against Gensol’s promoters.

No fixed timeline

According to sources, the ministry’s move is an independent action aimed at investigating potential corporate governance lapses and financial irregularities. There is no fixed timeline for the inquiry, but any action will depend on the findings that emerge from the ministry’s ongoing review.

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The development comes days after SEBI barred Gensol Electric’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, from participating in the securities market and from holding any position as directors or key managerial personnel in any listed company. The capital markets regulator launched its action after receiving complaints related to share price manipulation and loan defaults.

Financial misconduct

SEBI noted that the promoters were running the company like their personal “piggy bank”, routing funds to related parties and spending without regard for shareholder interest. The result of these transactions would mean that these diversions would, at some time, need to be written off from the company's books, ultimately resulting in losses to the investors, SEBI said.

Gensol secured Rs 977.75 crore in loans from Ireda and PFC, with Rs 663.89 crore meant for purchasing 6,400 EVs. However, Gensol admitted to acquiring only 4,704 EVs worth Rs 567.73 crore, as confirmed by supplier Go-Auto. Given that Gensol was also required to provide a 20 per cent equity contribution, the total outlay should have been Rs 829.86 crore, leaving Rs 262.13 crore unaccounted for.

SEBI probe found that funds meant for EV purchases were often routed back to Gensol or entities linked to the Jaggi brothers. Some of the funds were used for personal expenses of the promoters, such as the purchase of a luxury apartment, transfers to relatives, and investments benefiting private entities owned by the promoters.

SEBI investigation

SEBI received a complaint in June 2024 related to the manipulation of share price and diversion of funds from Gensol and thereafter, started examining the matter.

Credit rating agencies (CRAs), CARE Rating and Icra, on March 3 and 4, respectively, downgraded the ratings assigned by them for fund-based and non-fund-based credit facilities availed by Gensol to “D” due to delays in servicing debt obligations.

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Icra also disclosed that “certain documents shared by GEL with Icra on its debt servicing track record, were apparently falsified, which raises concerns on its corporate governance practices, including its liquidity position”.

Fake documents

On March 5, 2024, Gensol issued an investor release, signed by its CEO Anmol Singh Jaggi, wherein the firm categorically denied “any involvement in falsification claims” made by the rating agency.

Thereafter, SEBI called for information from the CRAs regarding the downgrade of the ratings assigned to Gensol. Subsequently, it came to light that fake documents were submitted to credit rating agencies in a bid to falsely portray timely loan repayments.