Gensol Engineering's shares have been under significant pressure recently, and this continued as the stock hit a 5% lower circuit. This sharp decline follows the Securities Appellate Tribunal's (SAT) denial of interim relief to the company amidst an ongoing investigation by the Securities and Exchange Board of India (SEBI) into alleged fund diversion and fraudulent practices.
Background of the Issue
SEBI's investigation centers around a ₹978 crore EV loan and accusations that Gensol Engineering misused these funds. The regulatory body has barred Gensol Engineering and its promoters, Anmol Singh Jaggi and Puneet Jaggi, from accessing the securities market and from holding executive positions in the company. SEBI alleges that Gensol engaged in fraudulent activities, including fund misuse and the submission of forged documents.
SAT's Decision
Gensol Engineering appealed to the SAT, contesting the urgency and legality of SEBI's order. The company argued that the order was issued without a prior hearing, resulting in substantial business losses. Gensol claimed that the freeze on its demat account and the ongoing forensic audit had led to potential contract cancellations and increased the risk of defaults. However, the SAT refused to stay SEBI's order, directing Gensol to file its reply to SEBI's show-cause notice within two weeks. SEBI is expected to issue a confirmatory order four weeks after the hearing.
Gensol's Defense
In its appeal, Gensol argued that SEBI presented a distorted narrative that caused significant reputational and commercial harm. The company specifically challenged SEBI's allegation that ₹50 crore was used improperly, emphasizing that a related party had repaid a substantial portion of that amount. Gensol also pointed out that its stock had dropped significantly and that clients were canceling or threatening to exit contracts.
Mounting Troubles
Gensol Engineering's troubles are compounded by intensifying regulatory actions. The Ministry of Corporate Affairs (MCA) has launched an investigation into Gensol and BluSmart Mobility, a related entity. Additionally, IREDA and PFC have filed complaints with the Economic Offences Wing (EOW), alleging that Gensol submitted falsified repayment certificates to conceal defaults. SEBI corroborated that these certificates were fabricated.
Financial Impact and Market Reaction
The ongoing investigation and the denial of interim relief have had a severe impact on Gensol Engineering's stock price. The stock has plummeted 59% in a month and has hit a new 52-week and all-time low. On May 7, 2025, the share price was ₹62.93, a 4.99% decrease compared to the previous day's closing price. The company's market capitalization stood at ₹241.81 Cr. Over the past year, the stock has seen a staggering decline of 93.02%.
Future Outlook
Despite the current challenges, Gensol Engineering has avenues for appeal, including approaching the Supreme Court or challenging the confirmatory order once issued by SEBI. However, some experts are skeptical about the Supreme Court intervening at this stage. The company must respond to SEBI's charges within two weeks, and SEBI is expected to pass a final order within four weeks of hearing Gensol. The next few weeks will be critical in determining the future course for Gensol Engineering.
