Gensol Engineering Shares Hit 5% Lower Circuit Again After SEBI Bars Promoters

On April 17, 2025, Gensol Engineering Ltd.’s share price plummeted to a 5% lower circuit for the second consecutive session, closing at ₹117.50 on the BSE and ₹116.54 on the NSE. This sharp decline follows a stringent interim order issued by the Securities and Exchange Board of India (SEBI) on April 15, 2025, which barred the company’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, from trading in the securities market and holding directorial or key managerial positions at Gensol Engineering. The regulatory action, triggered by allegations of fund diversion and governance lapses, has also halted the company’s proposed 1:10 stock split, further eroding investor confidence. With the stock down 89% from its 52-week high of ₹1,125.75 and nearly one lakh retail shareholders impacted, this article examines the reasons behind the crash, SEBI’s findings, market implications, and what lies ahead for Gensol Engineering.

SEBI’s Crackdown: What Triggered the Regulatory Action?

SEBI’s 29-page interim order, issued on April 15, 2025, outlined serious allegations against Gensol Engineering and its promoters, based on a complaint received in June 2024. The regulator’s investigation revealed prima facie evidence of financial mismanagement, fund diversion, and fraudulent practices, prompting swift action to protect investors. Key points from SEBI’s order include:

1. Alleged Fund Diversion

Gensol Engineering secured loans totalling ₹977.75 crore from the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC) to procure 6,400 electric vehicles (EVS) for its EV leasing business. However, only 4,704 EVS were purchased for ₹567.73 crore, leaving ₹262.13 crore unaccounted for. SEBI alleges that these funds were diverted to entities linked to the promoters, including private companies and relatives, for purposes unrelated to the loan’s objective, such as:

• Personal expenses, including the purchase of high-end real estate.
• Transfers to promoter-linked entities and close relatives.

This misutilization of funds was described as a “fraudulent manner” by SEBI, with the Jaggi brothers identified as direct beneficiaries.

2. Misleading Disclosures

SEBI accused Gensol of making misleading disclosures to investors, particularly regarding its EV business. The company announced pre-orders for 30,000 EVS, but SEBI found that these were based on vague Memoranda of Understanding (MoUs) lacking pricing or delivery details. Such disclosures were deemed manipulative, potentially inflating investor expectations and stock prices. Additionally, SEBI noted that during a visit to Gensol’s Pune EV manufacturing plant, no significant activity was observed, with only 2–3 labourers present, casting doubt on the company’s operational claims.

3. Falsified Documents

Gensol allegedly submitted forged conduct letters to SEBI, credit rating agencies (CRAS), and lenders, misrepresenting its debt servicing track record. Credit rating agency ICRA downgraded Gensol’s bank facilities to [ICRA]D in early 2025, citing “ongoing delays in debt servicing” and falsified documents. This downgrade, coupled with similar actions by CareEdge Ratings, highlighted liquidity and governance concerns, further damaging investor trust.

4. Governance Lapses

SEBI’s order described a “complete breakdown of internal controls and corporate governance norms” at Gensol, accusing the promoters of treating the listed public company as a “proprietary firm.” The regulator noted that the Jaggi brothers channelled ring-fenced borrowings to related parties, bypassing oversight mechanisms. The resignation of independent director Arun Menon on April 15, 2025, and the earlier exit of CFO Ankit Jain in March 2025, added to perceptions of instability at the board level.

5. Stock Split Suspension

Gensol’s proposed 1:10 stock split, announced to enhance liquidity and attract retail investors, was halted by SEBI. The regulator argued that allowing the split amidst governance concerns could lure unsuspecting retail investors, exacerbating potential losses. This decision intensified selling pressure, as the stock split was seen as a positive catalyst before SEBI’s intervention.

Market Impact: A Downward Spiral

The SEBI order has triggered a severe sell-off, with Gensol Engineering’s share price crashing 89% from its 52-week high of ₹1,125.75 on June 24, 2024, to ₹117.50 on April 17, 2025. The stock has declined for seven consecutive sessions, with the 5% lower circuit on April 16 and 17 marking its lowest levels ever. The company’s market capitalisation has plummeted to ₹470 crore, down 86% in the past year, wiping out significant wealth for nearly one lakh retail shareholders.

The stock is now under the ‘T’ group on the BSE and NSE, requiring mandatory delivery and prohibiting intraday trading strategies like Buy Today, Sell Tomorrow (BTST). It has also been placed under Stage 1 of the Enhanced Surveillance Measures (ESM) framework, with 100% margins applied, signalling heightened regulatory scrutiny. The Relative Strength Index (RSI) at 10 indicates the stock is in oversold territory, but persistent negative sentiment suggests limited near-term recovery.

Posts on X reflect widespread investor frustration, with users highlighting SEBI’s crackdown and governance concerns as key drivers of the crash. Some posts also criticised the promoters for allegedly dumping shares on retail investors, further eroding trust.

Gensol Engineering’s Business and Financial Context

Gensol Engineering operates in three segments: Engineering, Procurement, and Construction (EPC) for solar projects, EV leasing, and EV manufacturing. The company is among India’s top 10 EPC players and has a reported order book of over ₹7,000 crore, providing revenue visibility. In 9M FY25, Gensol reported:

• Revenue: ₹1,056 crore, up 42% year-on-year.
• EBITDA: ₹246 crore, up 89%.
• Profit After Tax (PAT): ₹67 crore, up 34%.

Despite these figures, the company faces challenges, including a low interest coverage ratio and 81.7% of promoter holdings pledged, raising concerns about financial stability. The company’s net profit for Q4 2024 was ₹17.86 crore on revenue of ₹344.51 crore, but governance issues have overshadowed operational performance.

Gensol’s EV ambitions, particularly through its association with ride-hailing platform BluSmart, have been a focal point. However, SEBI’s findings of fund diversion in the EV leasing segment and the cancellation of a ₹315 crore EV sale deal with Refex Industries in March 2025 have dampened investor confidence.

SEBI’s Next Steps and Company Response

SEBI has appointed a forensic auditor to examine Gensol’s books and those of related parties, with a report expected within six months. This audit will scrutinise the company’s financial transactions, loan utilisation, and governance practices, potentially uncovering further irregularities. The regulator’s restrictions on the promoters and the stock split will remain in place until the investigation concludes.

Gensol has denied allegations of wrongdoing, with CEO Anmol Singh Jaggi previously rejecting claims of document falsification in March 2025. The company issued a statement emphasising its commitment to long-term growth and financial stability, citing asset divestments worth ₹665 crore to reduce debt by ₹230 crore in FY25. However, these efforts have failed to stem the stock’s decline, as investor sentiment remains battered.

Should Investors Buy, Sell or Hold?

The current scenario presents significant risks for Gensol Engineering investors. Here’s a breakdown of the options:

Buy: High Risk, Uncertain Reward

• Why Consider? The stock’s 89% decline may suggest it is oversold, and the RSI at 10 indicates a potential technical rebound. Gensol’s order book and renewable energy focus align with India’s green energy push, offering long-term potential if governance issues are resolved.
• Risks: Ongoing SEBI investigations, promoter restrictions, and forensic audit uncertainties pose substantial risks. The stock’s placement in the ‘T’ group and ESM framework limits trading flexibility, and further negative findings could drive prices lower.
• Verdict: Buying is highly speculative and suitable only for high-risk investors willing to wait out the forensic audit and regulatory clarity.

Sell: Locking in Losses

• Why Consider? The stock’s persistent decline, coupled with governance concerns and regulatory restrictions, suggests limited near-term recovery. Selling may help investors minimise further losses, especially for those who entered at higher levels.
• Risks: Selling at current lows locks in significant losses, and a potential rebound post-audit could result in missed gains. The stock’s low liquidity due to the lower circuit may also complicate exits.
• Verdict: Selling is advisable for risk-averse investors or those needing to reallocate capital, but timing the exit during a circuit-bound session is challenging.

Hold: Waiting for Clarity

• Why Consider? Holding allows investors to await the forensic audit’s outcome and potential management restructuring. If Gensol addresses governance concerns and stabilises operations, the stock could recover, given its renewable energy exposure.
• Risks: Prolonged uncertainty and further negative revelations could exacerbate losses. The stock’s high promoter pledge (81.7%) and debt concerns add to the downside risk.
• Verdict: Holding is the most balanced approach for existing investors with a high risk tolerance, but they should closely monitor SEBI updates and audit progress.

Key Considerations for Investors

1. Regulatory Uncertainty: The forensic audit’s findings, expected by October 2025, will be critical. Adverse outcomes could lead to further penalties or delisting risks, while a clean report might restore confidence.
2. Governance Overhaul: The removal of the Jaggi brothers from leadership roles and the appointment of independent directors could signal a commitment to reform, potentially stabilising the stock.
3. Sector Tailwinds: India’s renewable energy and EV sectors remain high-growth areas, and Gensol’s EPC and leasing businesses could benefit if operational credibility is restored.
4. Liquidity Constraints: The stock’s ‘T’ group status and 5% circuit limit restrict trading flexibility, making it harder to enter or exit positions.
5. Retail Investor Impact: With nearly one lakh retail shareholders, any recovery will depend on restoring trust, which hinges on transparent communication and regulatory compliance.

Conclusion

Gensol Engineering’s share price hit a 5% lower circuit for two consecutive sessions on April 16 and 17, 2025, reflecting the severe fallout from SEBI’s crackdown on its promoters. The allegations of fund diversion, falsified documents, and governance lapses have shattered investor confidence, driving the stock to an all-time low of ₹117.50 and erasing 89% of its value from its 52-week high. The suspension of the stock split and the appointment of a forensic auditor signal a prolonged period of uncertainty, with nearly one lakh retail investors bearing the brunt of the decline.

For now, holding appears to be the most prudent strategy for existing investors, allowing time for the forensic audit to provide clarity. Buying is highly speculative, while selling may lock in steep losses. Investors should closely monitor SEBI’s investigation, audit outcomes, and any management changes, as these will determine Gensol’s path forward. Despite its renewable energy potential, Gensol Engineering’s immediate future hinges on rebuilding trust and addressing governance failures in a sector critical to India’s green ambitions.