SEBI Order on Gensol Engineering Limited- Affecting Matrix Gas

Document Summary

WTM/AB/CFID/CFID-SEC1/31379/2025-26, this interim order by the Securities and Exchange Board of India (SEBI) addresses concerns regarding Gensol Engineering Limited (Gensol/GEL/Company) and its promoters. The order is issued under Sections 11(1), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992, naming Gensol Engineering Limited, Anmol Singh Jaggi, and Puneet Singh Jaggi as noticees.

Background:

Gensol, an Ahmedabad-based company providing solar consulting, EPC services, and electric vehicle leasing, was initially listed on the BSE SME Platform on October 15, 2019, and subsequently on the main boards of BSE and NSE on July 03, 2023. The company experienced significant growth, with sales increasing from Rs. 61 Crore in FY 2017 to Rs. 1,152 Crore in FY 2024, and further to Rs. 1,297 Crore in the trailing 12 months. Operating profit rose from Rs. 2 Crore to Rs. 209 Crore, and net profit from Rs. 2 Crore to Rs. 80 Crore during the same period. The company's balance sheet also expanded impressively, with total liabilities/balance sheet size growing from Rs. 10 Crore in FY 2017 to Rs. 2,202 Crore in H1 FY 2025, and borrowings increasing from Nil to Rs. 1,045 Crore. The number of shareholders increased dramatically from 155 in FY 2020 to 1,09,872 as of March 31, 2025, while promoter holding decreased from 70.72% to 35%. The share price touched a high of Rs. 1,126, resulting in a market capitalization of Rs. 4,300 Crore, but later traded at Rs. 133 with a market capitalization of Rs. 506 Crore on April 11, 2025.

Recent Developments and Concerns:

SEBI received a complaint in June 2024 regarding share price manipulation and fund diversion, initiating an examination. Credit Rating Agencies (CRAs), CARE and ICRA, downgraded Gensol's credit ratings to “D” in March 2025 due to delays in debt servicing. ICRA cited "falsified" documents shared by GEL regarding its debt servicing track record, raising corporate governance concerns. Gensol denied any involvement in falsification claims. The CRAs initiated a review following reports of default by BluSmart Mobility Private Limited, a related party. While Gensol claimed regularity in debt servicing and no impact from BluSmart's default, it provided statements from lenders excluding IREDA and PFC. For IREDA and PFC, Gensol shared purportedly issued Conduct Letters stating regularity in debt servicing, which both IREDA and PFC categorically denied issuing upon confirmation. SEBI found multiple instances of default by Gensol in servicing loans from IREDA and PFC. Gensol continued to submit "No Default Statements" to the CRAs despite these defaults.

Fund Diversion and Misutilization:

Of the Rs. 977.75 Crore availed from IREDA and PFC, Rs. 663.89 Crore was for purchasing 6,400 Electric Vehicles. Gensol acknowledged procuring only 4,704 EVs. An amount of Rs. 262.13 Crore remains unaccounted for. Funds transferred to Go-Auto, ostensibly for EV purchases, were often transferred back to Gensol or entities related to Anmol Singh Jaggi and Puneet Singh Jaggi and used for unrelated purposes, including personal expenses and transfers to promoter entities. A loan of Rs. 71.41 Crore from IREDA was used to purchase an apartment in The Camellias, DLF Gurgoan, through layered transactions. A Rs. 43.69 Crore loan from IREDA also saw Rs. 54.62 Crore transferred to Go-Auto, with subsequent transfers to Wellray Solar Industries Private Limited and other related parties, as well as Rs. 50 Lakh used for trading in Gensol's scrip. A Rs. 117.47 Crore loan from PFC was also diverted to promoter-linked entities through a similar process. Funds were transferred back and forth between Wellray and Go-Auto to inflate transaction volumes. Gensol's disclosure of loan utilization appears to be inaccurate. Gensol has a payable of Rs. 5.37 Crore to Go-Auto on a consolidated basis, despite claims from the MD of Go-Auto that Rs. 50 Crore is due from Gensol. Wellray, connected to Gensol through promoter positions and key managerial associations, booked most of its revenue through Gensol. Substantial funds transferred between Gensol and Wellray did not correspond to the underlying commercial transactions, and Wellray transferred Rs. 382.84 Crore to various other entities. Anmol Singh Jaggi and Puneet Singh Jaggi, promoters of Gensol, received Rs. 39.31 Crore from Wellray, which was then used for personal expenses and transfers to family members. In September 2022, Gensol made a preferential issue of equity shares to investors, including promoter group entities. Funds were provided by Gensol, through layered transactions, to Gensol Ventures Private Limited for subscribing to 97,445 equity shares of Gensol. Wellray primarily traded in Gensol's scrip (99% of total trade value) and received significant funds from Gensol and its related parties for this purpose.

Disclosures and Manufacturing Activity:

Gensol made a disclosure about receiving pre-orders for 30,000 EVs, but these were actually MOUs with no pricing or delivery schedules. There was no manufacturing activity observed at Gensol Electric Vehicle Private Limited's plant site. Gensol's announcement of a strategic tie-up with Refex Green Mobility Limited for transferring 2,997 EVs was later withdrawn. A proposed sale of Gensol's US Subsidiary, Scorpius Trackers Inc., was announced without adequate rationale.

Pledged Shares:

Promoters' shareholding has decreased, and they have pledged 75.74 Lakh shares of Gensol to IREDA, with recent pledge invocations.

Prima Facie Violations and Need for Interim Directions:

The findings suggest mis-utilization and diversion of funds in a fraudulent manner by promoter directors. Gensol attempted to mislead SEBI, CRAs, lenders, and investors by submitting forged Conduct Letters. Transactions qualified as related party transactions but were not disclosed, and internal controls and corporate governance norms were weak. The promoters were running the company as their "piggybank". A stock split was announced, which may attract more retail investors. There is a risk of promoters further offloading shares.

Directions:

1. Anmol Singh Jaggi and Puneet Singh Jaggi are restrained from holding director or KMP positions in Gensol.
2. Gensol, Anmol Singh Jaggi, and Puneet Singh Jaggi are restrained from buying, selling, or dealing in securities. Open derivative positions must be closed within 7 days.
3. Gensol is directed to put its announced stock split on hold.
4. SEBI will appoint a forensic auditor to examine Gensol's books.

The forensic auditor/audit firm must submit a report to SEBI within six months. Concerned parties can file replies/objections within 21 days. The directions take effect immediately and remain in force until further orders. The order is to be served upon entities, stock exchanges, RTAs, and depositories. The order is dated April 15, 2025, and is issued by Ashwani Bhatia, Whole Time Member, Securities and Exchange Board of India.