Gensol Engineering's retail, FII holdings spiked weeks before Sebi crackdown
Retail and foreign institutional investors significantly raised their stakes in Gensol Engineering during the January–March 2025 quarter, weeks before Securities and Exchange Board of India (Sebi) issued a scathing interim order against the company for fund diversion and severe corporate governance lapses.
ADVERTISEMENT According to the latest shareholding pattern, the retail investors, defined as resident individuals with holdings up to Rs 2 lakh, increased their stake from 23.44% in December 2024 to 30.68% in March 2025, a steep 7.24 percentage point quarter-on-quarter jump.
At the same time, foreign institutional investor (FII) holding also surged, rising from 0.63% to 4.88% in the same period.
This build-up in public shareholding occurred prior to Sebi's public order on Gensol, raising serious concerns about information asymmetry, timing of disclosures, and whether retail investors unknowingly entered the counter while corporate misconduct brewed beneath the surface.It is interesting to note that between FY20 and FY25, promoter holding dropped from 70.72% to 35%, even as revenues rose from Rs 61 crore to Rs 1,152 crore. Even on a quarter-on-quarter basis, the company's promoter shareholding witnessed a decline. The promoter shareholding for the quarter ended March 2025 stood at 35.87%, significantly down from 62.65% at the end of the December 2024 quarter.
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In January, Gensol announced a 1:10 stock split, which made its shares more affordable for small investors. The move coincided with a broader rally in clean energy and EV stocks, and Gensol, with impressive top-line growth, fast became a retail favorite.
ADVERTISEMENT By March-end, the company's investor base had widened, retail interest had soared, and FII presence had grown. However, it should be noted that this increasing investor participation occurred just before Sebi revealed the extent of financial irregularities and fund diversion at the company.Sebi's investigation, triggered by a complaint in June 2024, culminated in an interim order in April 2025, revealing that Gensol diverted Rs 977.75 crore in loans from IREDA and PFC, meant for electric vehicle procurement. Only 4,704 out of 6,400 planned EVs were actually bought.
ADVERTISEMENT Over Rs 200 crore was found unaccounted for, allegedly routed through Go-Auto and Capbridge Ventures, promoter-linked entities. The funds were allegedly used for luxury personal expenses, including a DLF Camellias apartment and a Rs 26 lakh golf set.In its order, Sebi accused the promoters of treating Gensol as a personal piggy bank, cancelling the stock split, ordering a forensic audit, and barring both Anmol Singh Jaggi and Puneet Singh Jaggi from the securities market. The regulator also cited falsified documents, a breakdown in internal controls, and gross misuse of company funds.
Additionally, it should be highlighted that earlier in the month of March, CARE Ratings downgraded Gensol's credit ratings of bank facilities totaling Rs 716 crore to CARE D, indicating default or high credit risk. The long-term bank facilities of Rs 639.7 crore were downgraded from CARE BB+ (Stable) to CARE D, while the long-term/short-term bank facilities of Rs 76.3 crore were downgraded from CARE BB+ (Stable)/CARE A4+ to CARE D.
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ICRA also downgraded the credit ratings of various loan facilities amounting to Rs 2,050 crore. The long-term fund-based term loan of Rs 925 crore and fund-based cash credit of Rs 718.5 crore were both downgraded from [ICRA]BBB- (Stable) to [ICRA]D.Similarly, long-term and short-term bank guarantee (BG) facilities totaling Rs 406.5 crore and a sub-limit BG of Rs 51.3 crore were downgraded from [ICRA]BBB- (Stable)/[ICRA]A3 to [ICRA]D.Many investors entered the stock just before governance issues surfaced, amplifying their exposure to risk.Analysts say that this is not a case of poor timing, it's a failure in transparency, as the data clearly shows that thousands of investors walked into the stock unaware of what was brewing inside.Veteran investor Vijay Kedia warned of more 'Gensols' in the making, and Sebi echoed concerns that stock splits and aggressive capital raising can attract small investors to companies with opaque operations.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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