Gensol: The Jaggi brothers made smart moves. So, why did they need a ‘piggybank’?

That was not just wishful thinking. Along with his brother, the man, Anmol Singh Jaggi, was running a listed company and had plans to list two more in the next five years. He was betting on renewable energy and e-mobility, the hottest investor themes in the market.

At that moment, Jaggi couldn’t have predicted that just three years later, his company would default on loans. And that he, and his brother, Puneet Singh Jaggi, would find themselves on the wrong side of the law.

The duo, on 15 April, was accused of securities fraud and forgery by the Securities and Exchange Board of India (Sebi), India’s market regulator. Anmol Singh Jaggi is the chairman and managing director of the publicly-listed Gensol Engineering Ltd while his brother is a whole-time director.

In an interim order, Sebi minced no words when it summarized the affairs at Gensol. There was a complete breakdown of internal controls and corporate governance norms, it said. “The promoters were running a listed public company as if it were a proprietary firm. The company’s funds were routed to related parties and used for unconnected expenses, as if the company’s funds were promoters’ piggybank," Sebi stated. The diverted funds would ultimately have to be written off from the company’s books, resulting in losses to the investors, the regulator added.

The market regulator has barred the brothers from holding any executive or board position at Gensol or from trading in securities until further orders. It has also put on hold a proposed 1:10 stock split by the company and will be appointing a forensic auditor to comb through its books for irregularities.

“The restraining directions on the company and the stock split lack detailed justification, and questions remain on regulatory accountability. The order also exposes the failure of oversight from Sebi and the stock exchanges, particularly when the company was shifted from SME platform to the main board," Sumit Agrawal, founder and partner of Regstreet Law Advisors, and a former Sebi officer, said.

“Unfortunately, regulatory lapses leading to investor losses and defaults on vendor obligations often go unaccounted for in India, with enforcement actions frequently coming only after significant damage has been done," he added.

Gensol was listed on the BSE SME Platform on 15 October 2019 and on the main board of BSE and NSE on 3 July 2023.

How did the Jaggi brothers, sons of a decorated army officer, go from being celebrated entrepreneurs to being accused of siphoning off money, market manipulation and forgery in just three years?

Clue in a golf kit

When did Sebi sniff the alleged rot?

In June 2024, the regulator received a tip-off about share price manipulation and funds diversion at the company. It launched a probe, which ultimately led to the current 29-page order.

Between FY22 and FY24, Gensol raised ₹664 crore from the Indian Renewable Energy Development Agency Ltd (Ireda) and the Power Finance Corporation (PFC) for buying 6,400 electric vehicles (EVs). The loans were meant to fund 80% of the cost of the EVs, with Gensol expected to put up another 20% in equity, taking the total corpus to ₹830 crore.

The vehicles were then meant to be leased to BluSmart, which is an EV-only ride hailing company started by the Jaggi brothers.

However, Gensol bought 4,704 EVs at a cost of ₹568 crore. The remaining ₹262 crore was unaccounted for, even after a year since the last tranche of financing was received from the lenders, Sebi noted. The two promoters siphoned this money from the company through multi-layered transactions for personal benefit, the regulator alleged.

What did they do with the money? Sebi found that ₹43 crore went towards paying for an apartment in The Camellias, an ultra-exclusive housing complex developed by DLF in Gurugram. The promoters also spent on a golf kit ( ₹26 lakh), Titan watches and jewellery ( ₹17 lakh), credit card bills ( ₹60 lakh) and in Emirati Dirhams (over ₹2.5 crore).

In addition, the brothers transferred several crore rupees to their mother and wives as well as invested in startups. Anmol Jaggi put in ₹50 lakh in former BharatPe managing director Ashneer Grover’s startup Third Unicorn and ₹1.35 crore in Gurugram-based lithium-ion battery recycling startup BatX Energies.

Letters never written

Further allegations include falsification of documents to hide the fact that Gensol had defaulted on its loans.

When credit rating agencies Care and Icra sought loan statements from Gensol as part of their review, the company provided documents from most of its lenders—the notable exceptions were Ireda and PFC.

For these two lenders, it offered ‘conduct letters’ or documents where the lenders purportedly said that Gensol was making good on its loans.

Gensol also requested Care to withdraw the credit rating assigned to it, a process that would absolve it from the requirement of monthly disclosures of its financials to the rating agency. It submitted no objection certificates (NOCs) from its lenders to support the withdrawal of ratings.

However, when the rating agencies reached out to the two lenders to confirm the veracity of these conduct letters and NOCs, “both the lenders categorically denied having issued such letters," Sebi noted. Further, Gensol had defaulted on several of its loans starting 31 December, a fact that it did not disclose to its shareholders as mandated by market regulations.

“This is not just a securities fraud and goes beyond the Sebi order. The promoters forged documents on the letterhead of Ireda and PFC. If this happened in any other market, a case would be filed with the attorney general, and the management would have been immediately raided and arrested," said Shriram Subramanian, the managing director of proxy advisory firm InGovern and a corporate governance expert. “Ireda and PFC should file a police complaint for fraud and forgery," he added.

Kunal Sharma, partner at Singhania & Co, a law firm, said that Sebi does not have the authority to arrest. However, it could escalate the matter to investigative bodies like the Economic Offences Wing or the Central Bureau of Investigation (CBI).

“The risk of custodial action becomes more pronounced where the offence impacts public interest or poses systemic risks, both of which Sebi appears to underscore in the order," he said.

On 3 March and 4 March, Care and Icra downgraded Gensol’s credit rating to default status, triggering a meltdown in its stock price. The Gensol stock, which traded at a weighted average price of ₹535.92 on 28 February, fell to ₹123.65 as of market close on 16 April. It has fallen 89% from its 52-week high of ₹1,125.75.

Everything’s related

Sebi scanned the bank statements of Gensol and Go-Auto, an auto dealer that sold 4,704 EVs to the company. The regulator found that as soon as money was transferred from Gensol to Go-Auto, it was either transferred back to Gensol or to entities that were directly or indirectly related to the brothers.

Between Ireda and PFC, ₹664 crore was transferred to Gensol in nine tranches between FY22 and FY24. Sebi disclosed the paper trail in three of these transactions. Here’s one: On 30 September 2022, Gensol received ₹71.39 crore from Ireda in an account it maintains with Axis Bank. On the same day, the company put up its equity contribution of ₹26.06 crore in the account, taking the total funds credited to ₹97.46 crore. A few days later, on 3 October 2022, ₹93.88 crore was transferred from this account to Go-Auto. Immediately upon receiving this money, Go-Auto transferred ₹50 crore to Capbridge Ventures LLP, in which the Jaggi brothers are partners. Three days later, Capbridge transferred ₹42.94 crore to realty developer DLF Ltd for the purchase of an apartment in The Camellias.

A key piece in the puzzle is Wellray Solar Industries Pvt. Ltd, a company which was owned by the Jaggi brothers until 2020. Today, it is owned by Lalit Solanki, a former employee of Gensol.

During FY23 and FY24, Gensol transferred ₹424 crore to Wellray. The company then transferred ₹382 crore to Anmol and Puneet Jaggi as well as entities related to Gensol. Anmol received almost ₹26 crore; Puneet just under ₹14 crore.

Wellray used Gensol’s money to buy the company’s shares from the open market. Between 2022 and 2024, Wellray purchased Gensol shares cumulatively worth ₹160 crore in multiple transactions. These shares were sold for ₹178 crore, a tidy profit. The trades were in violation of section 67 of the Companies Act, 2013, Sebi noted, given that the source of funds was from related entities.

Plant with 3 workers

Visitors at the Bharat Mobility Expo in January this year were greeted by a peculiar vehicle—two all-electric trikes, with a front facia similar to conventional cars but a truncated back with just one rear wheel. The white-coloured vehicles were adorned in the signature blue triangular motif of BluSmart.

Gensol, which was so far leasing EVs to BluSmart, was going to manufacture these vehicles. What’s more, the company said it had received 30,000 pre-orders already–a feat that many large automakers would envy.

But when Sebi’s investigators dug deeper, they found the pre-orders to be nothing more than memoranda of understanding (MoU) that Gensol signed with nine companies for about 29,000 vehicles. The MoUs were simply an expression of interest from the fleet operators, with no reference to the price of the vehicle or delivery schedules.

In fact, when a representative of the National Stock Exchange visited the plant site of Gensol Electric Vehicle Pvt. Ltd near Pune on 9 April, they were greeted not by the din of a busy manufacturing plant but silence—three labourers loitered around.

The site had drummed up a maximum electricity bill of ₹1.6 lakh in the last 12 months, leading Sebi to conclude that no manufacturing activity happened there.

Nobody questioned?

“The directors on the board and the auditors should have asked the logic of all related party transactions. If there is no logic, then something is amiss," InGovern’s Subramanian said.

Gensol’s seven-member board consists of five independent directors apart from the Jaggi brothers. They are Rajesh Jain, K.S. Popli, Vibhuti Patel, Harsh Singh and Arun Menon. Popli was the chairman and managing director of Ireda from March 2014 to February 2019.

The interim order is silent on the role of auditors and independent directors. This likely stems from the procedural limitations of such an order. “Sebi’s primary concern at this stage is to prevent further investor harm and preserve the evidentiary trail. Hence, its action against those in operational control," Sharma said.

However, Sumit Agrawal clarified that as this was an interim order, Sebi could be awaiting the forensic audit to determine if auditors or directors were negligent or complicit. “Action, if warranted, would follow post-audit findings," he said.

Legal experts added that the forensic audit of the company’s financial transactions was likely to uncover evidence regarding fund diversion, misrepresentation, and misuse of shareholder capital.

To be sure, Gensol Engineering continues to have a viable solar engineering procurement and construction (EPC) business. The company has an order book of ₹7,000 crore as of 31 December, it said in an investor presentation.

A fallout of the alleged fraudulent activities on Gensol’s operations could negatively impact all stakeholders.

Gensol and its promoters did not respond to clarifications sought by Mint on the Sebi order. Mint also reached out to Ireda and PCF but didn’t hear back.

Anmol Jaggi intends to contest the Sebi order. On Wednesday evening, Jaggi addressed investors of his privately held firm, Matrix Gas and Renewables. He told them that the regulator’s order was one-sided, said an investor in Matrix Gas, who did not wish to be identified.