Gensol Engineering share price extends fall as shares hit lower circuit; all you need to know

Gensol Engineering's share price hit a 5% low circuit on Thursday after SEBI’s interim order barred the promoters from the securities market and reported mass discrepancies and fraudulent activities in the company.

The interim order said that, “promoters misused the company's funds as the proprietor’s piggy bank”. The report stated that the company raised ₹977 crore from IREDA and PFC for the purchase of over 6,400 electric vehicles, but the report found that the company used only part of the funds for purchasing vehicles, and the remaining money was diverted to its subsidiaries through layered transactions.

The funds were also misused for personal benefits like buying real estate and other luxury items. Moreover, the promoters also falsified the documents to credit rating agencies, which later resulted in a change in the rating status from BB+ to default.

As per the exchange filing on late night Wednesday, independent director Mr Arun Menon resigned from the post effective immediately. In the resignation letter, Arun Menon stated, he had previously tried reaching the promoter Anmol Jaggin on the debt position of the company, for which he had offered assistance to bring down the interest cost via the debt restructuring route. However, the promoter failed to respond to his messages.

Further, he says, “there was growing concern about the leveraging of the GEL balance sheet to fund the capex of other businesses, and the sustainability of servicing such high debt costs by GEL”. The independent director also said he was told to hold on to his resignation until the IPO of its subsidiary, Matrix, is successfully concluded.

The unfolding crisis and poor corporate governance have led to a sharp correction in the share price of the company. The shares hit record high levels of ₹1,376 in February 2024 and currently trade more than 90% lower at ₹116 apiece on the NSE.