SEBI Bars Gensol’s Jaggi Brothers From Markets For Treating Company’s Funds As Their ‘Piggybank’

Markets regulator SEBI has barred the promoters of Gensol Engineering, Anmol Singh Jaggi and Puneet Singh Jaggi, from holding the position of director or key managerial personnel of the troubled company for various violations, including misutilisation and diversion of funds.

In an interim order today, the regulator said that the Jaggi brothers, who are also cofounders of EV ride-hailing giant BluSmart, along with Gensol, have also been barred from the securities market.

“… the prima facie findings have shown mis-utilization and diversion of funds of the company in a fraudulent manner by its promoter directors, Anmol Singh Jaggi and Puneet Singh Jaggi, who are also the direct beneficiaries of the diverted funds,” the SEBI order said.

The interim order said that Gensol attempted to mislead SEBI, credit rating agencies (CRAs), lenders and investors by submitting forged conduct letters purportedly issued by its lenders. 

The markets regulator noted that the promoters of Gensol and their related parties/ relatives benefitted from the funds of Gensol through layered transactions. 

“The promoters were running a listed public company as if it were a propriety firm. The company’s funds were routed to related parties and used for unconnected expenses, as if the company’s funds were promoters’ piggybank,” the order read.

SEBI has also put on hold Gensol’s proposed 1:10 stock split and said it would appoint a forensic auditor to examine the books of accounts of Gensol and its related parties. Besides Gensol’s subsidiaries, related parties also include BluSmart. 

More Troubles For BluSmart

The trouble for Gensol began following a default by BluSmart on its non-convertible debentures. When CRAs sought details of the default, Gensol said that it was regular in its debt servicing and the default by BluSmart had no impact on the company.

It was from here that the murky saga began, which resulted in SEBI unearthing multiple violations detailed in its order. But, before proceeding further, let’s understand Gensol’s connection with BluSmart.

Founded by the Jaggi brothers in 2007, Gensol primarily operates as an EPC (engineering, procurement, and construction) company. Sensing an opportunity to disrupt the ride-hailing space with EVs, the brothers launched a ride-hailing business, which began operations under the Gensol umbrella. 

The ride-hailing company was incorporated as Gensol Mobility Private Limited in October 2018, before its name was changed a year later to Blu-Smart Mobility Private Limited. BluSmart’s three subsidiaries also started life with the Gensol branding before their names were also changed. 

Along the way, the Jaggi brothers brought Punit K Goyal, who earlier founded solar energy company PLG Power and also sold two power plants in Gujarat and Maharashtra for $68 Mn and $56 Mn respectively, on board to helm the operations of BluSmart, even as they held the majority of the company.

Coming back to the SEBI order, it said that Gensol availed a loan of INR 977 Cr from Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC), of which INR 663.9 Cr was to be used for purchasing 6,400 EVs for leasing to BluSmart. 

“Gensol was to provide an additional equity (margin) contribution of 20%, bringing the total expected deployment of approximately INR 829.86 Cr for the purchase of 6,400 electric vehicles,” the order added.

However, Gensol only procured 4,704 EVs from this, and an amount of INR 262.13 Cr is unaccounted, SEBI said. 

The regulator’s investigation also showed that a part of these funds was used to purchase an apartment in DLF’s ‘The Camellias’ project. Besides, Jaggi diverted INR 50 Lakh from funds meant for Gensol to invest in former BharatPe cofounder and MD Ashneer Grover’s startup, Third Unicorn.

All in all, the SEBI order has raised further questions on the future of BluSmart, which has raised a total funding of $180 Mn to date from investors like bp Ventures, Venture Catalysts, Green Frontier Capital, responAbility, among others.

Last week, it was reported that the startup has delayed salary payments for the month of March amid the financial crisis.

Meanwhile, a report by ET yesterday said that BluSmart may exit its core ride-hailing business and transition to operating as a fleet partner of its rival Uber.