Shares of Gensol Engineering Ltd hit a 5% lower circuit on 16 April after the market regulator, the Securities and Exchange Board of India (SEBI), put restrictions on the company’s promoters. 

In an interim order, the market regulator has barred the company’s promoters, Anmol Singh Jaggi and Punnet Singh Jaggi, from holding any key positions in the company or any other of its entities under further notice over alleged diversion of funds and fraudulent practices. 

This case adds to the growing list of Indian startups across various categories that have been found lacking in regulatory compliance. 

SEBI’s probe has revealed that the term loan funds sanctioned to the company were misused for purposes beyond their intended scope. These included financing the personal expenditures of the promoters, acquiring luxury real estate, and diverting funds to benefit privately held entities owned by the promoters or their close associates.

Around Rs 262 crore worth of loans taken by the company remains untraced despite the fact that more than a year has passed since the last instalment was disbursed.

The investigation was triggered following several complaints and credit rating downgrades of Gensol by CARE Ratings and ICRA, prompted by delays in debt servicing by BluSmart Mobility, which is a related party to Gensol.

In light of these findings, SEBI has put the company’s proposed stock split on hold and will appoint a forensic auditor to scrutinize the financial records of Gensol and its affiliated entities. The auditor is expected to submit the report within six months of their appointment.

At 12:20 pm, the shares of Gensol Engineering were locked 5% lower at Rs 122.68 on NSE.

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