Gensol's books under review: NFRA launches preliminary probe
The National Financial Reporting Authority (NFRA) has started a preliminary inquiry into the financial records of Gensol Engineering after fraud allegations surfaced. This was confirmed by NFRA chief Ravneet Kaur during an event on Tuesday.Ravneet Kaur, who also heads India's competition regulator, said that the inquiry was launched following a reference made by the Securities and Exchange Board of India (Sebi). This step marks a widening of the ongoing investigation into the company, which began last month with Sebi's report.In April, Sebi took action against Gensol Engineering and its promoters, brothers Anmol Jaggi and Puneet Jaggi. The market regulator barred the two from accessing the stock markets and called for a forensic audit into the affairs of the company. Sebi's interim report suggested misuse of funds and poor corporate governance.According to the report, Gensol had borrowed Rs 977.75 crore from lenders. Out of this, Rs 663.89 crore was meant for buying 6,400 electric vehicles (EVs) that were to be leased to BluSmart, a related company. However, Gensol admitted in its response to Sebi in February that only 4,704 EVs had been purchased. This raised questions about where the rest of the loan amount had gone.ROLE OF AUDIT BODIESThe Institute of Chartered Accountants of India (ICAI) is also looking into the matter. Last month, ICAI President Charanjot Singh Nanda said the institute would examine Gensol's financial statements and statutory audit reports for the financial year 2023-24. The ICAI will also review the financial records of BluSmart.If ICAI's Financial Reporting Review Board finds that the financial statements are not 'true and fair', the case could be forwarded to the ICAI's disciplinary committee. This could lead to action against the company's auditors.Since the release of Sebi's interim report on April 15, Gensol's shares have fallen by more than 40% in the last month. On Tuesday, the shares closed at Rs 70.99 apiece on the BSE.The loans in question were taken from state-run lenders including the Indian Renewable Energy Development Agency (IREDA) and Power Finance Corporation (PFC). Sebi has alleged that the promoters misused part of these funds. There are also concerns that the company may have diverted money and failed to follow good governance practices.
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