Sebi Criticizes Gensol for Lack of Manufacturing and Misappropriated Funds

Markets regulator Sebi has raised serious concerns regarding Gensol Engineering’s electric vehicle (EV) manufacturing operations in Pune. Following a site inspection by an official from the National Stock Exchange (NSE), Sebi reported that the facility showed no signs of manufacturing activity, with only a handful of workers present. This investigation stems from a complaint alleging share price manipulation and fund misappropriation by the company, leading to an interim order issued by Sebi on April 15.

No Manufacturing Activity Observed

Sebi’s investigation revealed alarming findings at Gensol’s EV subsidiary, Gensol Electric Vehicle Private Ltd, located in Chakan, Pune. During a site visit on April 9, the NSE official noted that only two to three laborers were on-site, and there was no visible manufacturing activity. The official also requested the electricity bills for the facility, which indicated that the highest amount billed over the past year was just Rs 1,57,037.01 for December 2024. This lack of activity is particularly concerning given Gensol’s recent announcements, including a claim made on January 28, 2025, about receiving pre-orders for 30,000 units of its newly launched EVs. However, Sebi found that these orders were merely non-binding Memorandums of Understanding (MoUs) with nine entities for 29,000 vehicles, raising questions about the company’s transparency and disclosures to investors.

Concerns Over Financial Transactions

Sebi’s scrutiny also uncovered suspicious financial transactions involving Gensol. On January 16, 2025, the company announced a strategic partnership with Refex Green Mobility Ltd, which included transferring 2,997 electric four-wheelers. This deal was supposed to involve Refex taking over Gensol’s existing loan of Rs 315 crore. However, this transaction was later withdrawn, as indicated in a disclosure made on March 28. Additionally, Gensol revealed on February 25, 2025, that it had signed a non-binding term sheet for a Rs 350 crore strategic transaction involving the sale of its US-based subsidiary, Scorpius Trackers Inc. Sebi noted that this subsidiary was only recently incorporated, and Gensol could not justify its high valuation when questioned.

Allegations of Fund Misappropriation

The investigation by Sebi indicated potential misappropriation of funds by Gensol’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi. Between FY22 and FY24, Gensol secured Rs 977.75 crore in loans from the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC), with Rs 663.89 crore designated for purchasing 6,400 EVs. However, Gensol admitted to acquiring only 4,704 vehicles worth Rs 567.73 crore, as confirmed by supplier Go-Auto. This discrepancy left Rs 262.13 crore unaccounted for, with indications that funds meant for EV purchases were diverted to Gensol or related entities controlled by the Jaggi brothers. Allegations surfaced that some of these funds were used for personal expenses, including luxury apartment purchases and transfers to relatives.

Regulatory Actions Taken

In light of these findings, Sebi has imposed several restrictions on Gensol and its promoters. The regulator has barred the company and the Jaggi brothers from accessing the securities market until further notice. They are also prohibited from holding any directorships or key managerial roles within the company. Additionally, Sebi has directed Gensol to halt its planned 1:10 stock split. Following the interim order, both Anmol and Puneet Singh Jaggi have stepped down as directors of the company, marking a significant shift in the company’s leadership amid ongoing investigations.

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