Gensol Electric under government inquiry for Rs 975 crore EV loan misuse: Sources

The Ministry of Corporate Affairs (MCA) has initiated a suo motu inquiry into Gensol Electric, after allegations surfaced regarding serious financial misconduct and regulatory violations, including the misuse of Rs 975 crore in loans. The government has begun examining the company’s regulatory filings and financial records to investigate potential corporate governance failures and financial irregularities.

The action follows an interim order from the Securities and Exchange Board of India (Sebi), which barred Gensol Electric’s promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, from the securities market and from holding any directorial positions in listed companies. Sebi’s investigation accused the promoters of treating the company "like their own piggy bank," citing gross misuse and diversion of company funds for personal benefit.

Gensol Electric had secured loans totaling Rs 975 crore from agencies like the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC) for electric vehicle purchases. However, only a fraction of the loan amount was used for the intended purpose. Instead, over Rs 200 crore was funneled through a car dealership and diverted to promoter-linked entities, with a substantial portion used for personal luxury assets, including real estate.

Investigators also found that fake documents were submitted to credit rating agencies to falsely show timely repayment of loans. Even ring-fenced funds, meant strictly for designated business activities, were allegedly diverted without authorization, raising serious concerns about the company's internal financial controls.

Sebi further flagged the drastic drop in promoter shareholding—from 70.72 percent in FY20 to 35 percent in FY25—as a warning sign, suggesting waning confidence in the company's governance standards. The regulatory body warned that some of the diverted funds might have to be written off, potentially causing heavy losses to shareholders.

Gensol Electric’s parent company, Gensol Engineering, operates mainly in the renewable energy sector, particularly in solar EPC projects, and has recently expanded into the electric vehicle leasing space. Despite strong revenue growth—from Rs 61 crore in FY17 to Rs 1,152 crore in FY24—and an increase in net profits from Rs 2 crore to Rs 80 crore, the group now faces intense scrutiny over its internal operations and ethical standards.