Gensol Engineering Share Price: Why Company Share Tanked 5% - All You Need To Know

Gensol Engineering Share Price: Gensol Engineering's share price took a hit, dropping 5% following a major setback from the Securities and Exchange Board of India ( SEBI ). The capital markets regulator has barred Gensol Engineering and its promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, from participating in the securities markets until further orders.

The action stems from a case involving fund diversion and governance lapses within the company, shaking investor confidence and leading to a significant drop in the stock price.

SEBI's order, issued on Tuesday, also prohibits Anmol and Puneet Singh Jaggi from holding any director or key managerial positions at Gensol Engineering until further notice.

In addition, the regulator directed the company to put its stock split plan on hold, further fueling concerns about the company's operations.

SEBI’s Investigation and Findings

The issue came to light after SEBI received a complaint in June 2024, alleging manipulation of Gensol Engineering's share price and diversion of company funds. Following this, SEBI initiated an investigation into the matter. The findings, detailed in a 29-page interim order, pointed to serious corporate governance issues and fraudulent fund mismanagement by the promoters.

SEBI's report revealed that Gensol’s promoter directors, Anmol Singh Jaggi and Puneet Singh Jaggi, were found to have misused and diverted funds in a fraudulent manner, benefiting personally from the diverted amounts. The regulators also accused the company of trying to mislead them by submitting forged conduct letters from its lenders, further complicating the case.

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Serious Violations And Consequences

The order highlighted the serious nature of these violations, with SEBI noting that Gensol Engineering had been managed as if it were a private business rather than a listed public company. “The promoters were running a listed public company as if it were a propriety firm,” SEBI stated. According to the investigation, Gensol’s funds were routed to related parties and used for unrelated expenses, creating a culture of weak internal controls within the company.

In a stark warning, SEBI said that the company’s practices would likely lead to the need to write off the diverted funds, causing losses to investors. “The result of these transactions would mean that the diversions at some time need to be written off from Gensol’s books, ultimately resulting in losses to the investors of the company,” SEBI pointed out.

Ashwani Bhatia, SEBI’s whole-time member, added, “...prima facie evidence of a blatant violation of rules of corporate governance is writ large over the workings of the company. The diversion of funds of the company (GEL) by promoter entities reflects a culture of weak internal control, where even ring-fenced borrowings from institutional creditors were rerouted at the total discretion of the promoters.”

Action Plan Moving Forward

The market regulator has taken further steps to ensure accountability, directing Gensol Engineering to appoint a forensic auditor to examine its books of accounts and those of its related parties. This forensic audit will provide a clearer picture of the scale of the financial mismanagement and help determine the extent of the damage caused by the fund diversions.