The Securities and Exchange Board of India (Sebi) has recently uncovered significant discrepancies at Gensol Engineerings electric vehicle (EV) manufacturing facility located in Pune. The findings emerge from an ongoing investigation, which revealed that the plant was largely inactive, with only a handful of laborers present during an inspection conducted by a representative of the National Stock Exchange (NSE).

According to Sebi's interim order issued on April 15, 2025, the investigation was prompted by a complaint filed in June 2024 that alleged the company was engaged in share price manipulation and the misappropriation of funds. The regulator's findings indicated a troubling lack of transparency and manufacturing activity at Gensol Engineering's facility, which is operated through a leased property.

During the inspection carried out on April 9, 2025, the NSE representative reported that merely two to three workers were present at the plant, calling attention to the apparent absence of any active manufacturing processes. To further investigate the facility's operations, the NSE official requested documentation pertaining to the plant's electricity usage. The records revealed that the highest electricity bill recorded over the past year was a modest Rs 1,57,037.01, billed for December 2024.

Compounding the situation, Sebi's order revealed that in January 2025, Gensol Engineering announced it had secured pre-orders for an impressive 30,000 units of its newly launched electric vehicles, which had been showcased at the Bharat Mobility Global Expo 2025. However, upon further scrutiny, it was found that these orders were merely non-binding Memorandums of Understanding (MoUs) with nine different entities for a total of 29,000 vehicles. These MoUs lack any concrete details regarding pricing or delivery timelines, which raised serious concerns about the potential for misleading disclosures that could misinform investors.

In another troubling episode, Gensol disclosed a strategic partnership with Refex Green Mobility Ltd on January 16, 2025, involving the transfer of nearly 3,000 electric four-wheelers. As part of this deal, Refex was set to take over a substantial loan of Rs 315 crore from Gensol. However, this transaction was subsequently retracted, as indicated in a disclosure made on March 28, 2025.

Additionally, on February 25, 2025, Gensol announced the signing of a non-binding term sheet concerning a strategic transaction valued at Rs 350 crore, which involved the potential sale of its U.S.-based subsidiary, Scorpius Trackers Inc. Notably, this subsidiary was established only recently, in July 2024, and Gensol was unable to provide justification for the high valuation proposed during the discussions.

The allegations and subsequent investigation revealed what Sebi characterized as prima facie evidence of the misappropriation and diversion of company funds by the promoters, brothers Anmol Singh Jaggi and Puneet Singh Jaggi. It appears that they have benefitted directly from the alleged financial misconduct.

From the fiscal years 2022 to 2024, Gensol reportedly secured loans totaling Rs 977.75 crore from the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC). Of this amount, Rs 663.89 crore was intended for the acquisition of 6,400 EVs. However, the company acknowledged the acquisition of only 4,704 vehicles, valued at Rs 567.73 crore, according to supplier Go-Auto. This discrepancy raises red flags regarding the utilization of the remaining funds, as Gensol needed to contribute 20% equity towards the purchases, leading to an expected total financial outlay of Rs 829.86 crore. This leaves Rs 262.13 crore unaccounted for.

Investigations have suggested that funds meant for EV acquisitions were allegedly redirected to Gensol or related entities controlled by the Jaggi brothers. Reports indicate that some of these funds were purportedly used for personal expenses, including the purchase of a luxury apartment, transfers to relatives, and investments that benefitted private entities linked to the promoters.

In light of these serious findings, Sebi has taken decisive action. The regulator has prohibited Gensol Engineering and the Jaggi brothers from accessing the securities market until further notice. Furthermore, they are barred from holding any directorships or key managerial positions within the company. Consequently, Gensol has been instructed to halt its plans for a 1:10 stock split. Following the interim order, both Anmol and Puneet Singh Jaggi have stepped down from their respective roles as directors of the company, indicating a significant shift in the leadership structure amid ongoing scrutiny.