SEBI cracks down on Gensol Engineering founders in Rs 262cr EV fund scandal

Why did SEBI bar Gensol Engineering’s Jaggi brothers?

In a high-profile regulatory intervention, the Securities and Exchange Board of India (SEBI) has issued an interim order banning Gensol Engineering Limited’s co-founders, Anmol Singh Jaggi and Puneet Singh Jaggi, from holding any key managerial positions in the company or accessing the securities market. The move follows a detailed probe into allegations of financial misconduct, corporate governance violations, and the misuse of public funds secured through loans intended for an electric vehicle (EV) procurement programme.

What is the controversy surrounding Gensol and BluSmart?

At the heart of the controversy is a series of loans amounting to ₹977.75 crore sanctioned by government-backed institutions, the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC). These funds were intended for the acquisition of 6,400 electric vehicles to support the operations of BluSmart Mobility, an EV ride-hailing service co-founded by the Jaggi brothers.

However, SEBI’s findings revealed that only 4,704 electric vehicles were actually procured. The shortfall of 1,696 vehicles corresponds to a missing sum of approximately ₹262 crore, which the regulator suspects was siphoned off for personal expenses by the promoters. Among the transactions flagged by SEBI are the purchase of a luxury property in Gurgaon’s upscale DLF Camellias and a ₹26 lakh golf kit—both allegedly unrelated to the company’s operations or BluSmart’s business plan.

What corporate governance issues did SEBI highlight?

SEBI’s interim order paints a picture of severe lapses in corporate governance at Gensol Engineering. The regulator accused the Jaggi brothers of treating the publicly listed company as a personal business entity. SEBI said internal controls had been “completely eroded” and warned that investors were being misled by the company’s opaque disclosures.

Further, Gensol was found to have submitted fabricated documents to credit rating agencies in an attempt to secure favourable ratings and obscure its worsening financial position. This deception led to a series of credit downgrades, triggering a 75% collapse in Gensol’s share price and significant erosion of market capitalisation.

What happened to Gensol’s stock and board composition?

Following the revelations, Gensol Engineering’s shares have declined sharply, losing more than three-fourths of their value. The drop followed rating downgrades and investor panic over liquidity and credibility concerns. The promoters’ stake in the company also fell by around 2.4%, either through open market sales or other transactions not fully disclosed.

The company’s governance structure has further deteriorated amid the turmoil. Several independent directors resigned, citing concerns over transparency and compliance. BluSmart, the affiliated EV ride-hailing platform, has suspended operations temporarily, further compounding the reputational and operational fallout from the scandal.

What are the next steps for Gensol and SEBI?

To ensure a thorough investigation, SEBI has appointed a forensic auditor to probe Gensol’s books, particularly focusing on related party transactions and the actual utilisation of loan proceeds. The audit will also assess if any other shareholders, directors, or employees were complicit in the alleged fraud.

This interim action may be followed by further regulatory or criminal proceedings, depending on the outcome of the forensic review. SEBI’s intervention serves as a cautionary tale for India’s clean energy sector, especially as public and private capital flows into emerging green technologies like EVs.

What does this mean for India’s EV financing ecosystem?

The Gensol-BluSmart controversy underscores the risks facing India’s electric mobility sector as it scales rapidly with support from institutional lenders and climate funds. Analysts say regulatory oversight will now intensify, especially for startups leveraging public sector funding.

While the clean energy transition remains a national priority, the need for stronger due diligence and corporate compliance is becoming critical. Companies tapping into EV financing must ensure transparent reporting, robust governance, and third-party audits to avoid similar crackdowns.

Expert opinion on the SEBI action

Industry experts have noted that SEBI’s swift action reflects a rising intolerance for misuse of green finance. One legal expert familiar with SEBI proceedings said the order sends a strong message that capital market fraud—especially involving public funds—will not go unchecked.

The matter is particularly sensitive given India’s reliance on government-backed institutions to drive EV adoption and infrastructure expansion. The fallout may lead to stricter covenants for EV-related loans and increased board-level scrutiny across ESG-themed companies.

Sentiment and stock outlook for Gensol Engineering

Sentiment Analysis: Negative

Gensol Engineering Limited’s stock has witnessed sustained selling pressure since the governance-related revelations. Market confidence remains weak, and analysts anticipate further downside unless the company provides credible evidence of restructuring or management overhaul.

Institutional Flow: There has been no public disclosure of large-scale institutional exits, but retail investor interest has sharply waned. Mutual fund and FII exposure to Gensol remains minimal, which may have prevented a broader contagion in related green energy stocks.

Investment View: Avoid / Hold only if risk appetite is high

Given the current regulatory overhang, lack of operational visibility, and pending forensic audit, investors are advised to remain cautious. Any potential upside will likely be contingent on a complete overhaul of the board, management accountability, and transparent disclosures on fund usage.