The Securities and Exchange Board of India (SEBI) has issued an interim order against Gensol Engineering Ltd. (GEL) and its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi. The order bars the promoters from accessing the equity markets and taking up key managerial roles in the company.
SEBI’s action comes in response to alleged fund diversion and false disclosures by the promoters. The regulatory body stated that there has been a severe breakdown in internal controls and corporate governance at Gensol. According to the order, the promoters were running the listed public company as if it were their own proprietary firm.
Company funds were routed to related parties and used for unconnected expenses, treating the company’s resources as the promoters’ personal piggy bank. The SEBI order also directed GEL to put a planned stock split on hold. The company had announced a 1:10 stock split on Saturday, but SEBI expressed concerns that this move might be an attempt to attract retail investors despite the ongoing corporate governance issues.
Over the past month, Gensol Engineering shares have plummeted by 46%, with an 86% decline in the last 12 months. The decline began amidst growing concerns about corporate mismanagement and increasing debt.
Sebi orders against Gensol misuse
SEBI’s Whole Time Member Ashwani Bhatia emphasized that allowing the promoters to remain in control could worsen the company’s problems. The regulatory action aims to protect investors and address the financial irregularities discovered within Gensol. As of 9:25 am, Gensol Engineering shares were trading at Rs 122.68 a piece on the National Stock Exchange (NSE), hitting their five percent lower circuit.
The SEBI order reveals that Anmol Singh Jaggi and Puneet Singh Jaggi diverted company loans for personal use, including the purchase of a luxury apartment in DLF Camellias, Gurgaon. An amount of ₹42.94 crore from a larger loan secured by Gensol was channeled through Capbridge Ventures, a firm controlled by Anmol Singh Jaggi, to finance the apartment purchase. Additionally, Jaggi used ₹50 lakh from the funds to invest in the startup Third Unicorn, diverted ₹6.20 crore to his mother, and gave ₹2.98 crore to his wife.
He also allegedly spent ₹26 lakh on a golf set and personal travel. These actions are likely to result in the diversions being written off from Gensol’s books, leading to losses for the company’s investors. SEBI’s Ashwani Bhatia commented on the prima facie evidence of blatant violations of corporate governance rules and the culture of weak internal control within the company.
The developing situation at Gensol Engineering Ltd. highlights significant concerns over corporate governance and the ethical use of company funds by its promoters.
