 "Gensol Engineering independent director Arun Menon quits amid Sebi probe")
Gensol Engineering, currently under scrutiny by the Securities and Exchange Board of India (Sebi) for alleged fund diversion and governance issues, announced the immediate resignation of its independent director, Arun Menon.
In his resignation letter addressed to promoter Anmol Singh Jaggi, Menon expressed concern, saying, "There was growing concern on the leveraging of GEL balance sheet to fund the capex of other business's; and the sustainability of servicing such high debt costs by GEL."
Resignation follows Sebi’s interim order
His departure came just a day after Sebi issued an order on Tuesday, barring Gensol Engineering and its promoters — Anmol Singh Jaggi and Puneet Singh Jaggi — from participating in the securities markets until further notice in connection with the ongoing probe into financial mismanagement.
Additionally, Sebi instructed the company to suspend its proposed stock split and prohibited the promoters from serving as directors or Key Managerial Personnel in any publicly listed entity. This action followed a complaint received by Sebi in June 2024, alleging share price manipulation and fund diversion from Gensol Engineering, prompting the regulator to launch an investigation.
Company confirms Menon’s exit from committees
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In a regulatory filing on Wednesday, Gensol confirmed Menon's resignation, noting, "Consequently, he shall also cease to be a member of various committees of the company."
Menon said that his resignation is due to constraints imposed by his current employer and his belief that he was "adding limited value to the company."
In a letter addressed to Anmol Singh Jaggi, Menon referred to efforts he made in mid-2024 to engage with the company on its financial health. "I would like to take you back to last year, July/August of 2024, when I had tried reaching you to seek clarity on the debt position of the company, and had also offered assistance to reduce the interest cost through a debt restructure route. While you had messaged me that you would call back, it never progressed," he wrote.
Failed engagements with company secretary, CFO
Menon also noted attempts to communicate with the company's secretary, stating he had "spoken to Parmar (GEL's company secretary Rajesh Parmar) on 2-3 occasions and asked him for a meeting with the CFO, which never seemed to materialise".
He raised concerns about Gensol Engineering Ltd (GEL) using its balance sheet leverage to fund expansion in other businesses, warning about the implications of such high debt burdens. "There was growing concern on the leveraging of GEL balance sheet to fund the capex of other businesses; and the sustainability of servicing such high debt costs by GEL," the letter said.
Menon said that he had previously indicated that he wanted to resign. "Since I felt I was adding limited value to the company, I had expressed last year to Parmar that I would like to put in my resignation, but was told to hold on till the IPO of Matrix is successfully concluded."
He further cited professional limitations, saying, "My present employment, where our parent is a PE firm, also restricts me from taking up ID role in companies."
Menon further said, "I do understand these are difficult times for the company, and am confident that the learnings from the past would not only help you come out from the current predicament, but will help guide the company to greater heights."
Sebi to conduct forensic audit; company pledges cooperation
Meanwhile, the Sebi has announced plans to appoint a forensic auditor to examine Gensol Engineering and its associated entities. The company said on Wednesday that "Gensol will fully cooperate with the forensic audit to be conducted at the behest of Sebi".
It also clarified that Anmol Singh Jaggi and Puneet Singh Jaggi have stepped back from managerial roles following Sebi's directives.
Luxury spending and related-party dealings under scanner
Sebi’s interim order alleged that the company’s promoters treated Gensol as a personal enterprise, misusing funds to purchase a luxury apartment in DLF Gurgaon’s The Camellias, invest in a premium golf set, settle credit card bills, and transfer money to close relatives.
The order also revealed that Gensol borrowed a total of ₹977.75 crore from IREDA and PFC, with ₹663.89 crore earmarked for acquiring 6,400 electric vehicles (EVs). These EVs were meant to be leased to BluSmart, a related entity.
However, in its February submission to Sebi, the company acknowledged procuring only 4,704 EVs. This figure was confirmed by Go-Auto Private Limited, the supplier, which stated it had delivered 4,704 units worth ₹567.73 crore.
Considering Gensol’s obligation to contribute an additional 20 per cent in equity, the expected overall expenditure for the EVs came to around ₹829.86 crore. Based on this, there remains a discrepancy of ₹262.13 crore that is yet to be accounted for.