Annual reports are the human equivalent of a peacock fanning its feathers to lure a peahen in the underbrush.
Gensol Engineering’s annual report for the 2023-24 investor mating season is a superb example of this fascinating courtship display, replete with effusive self-accolades for innovation, excellence, commitment to sustainability and good corporate governance. Confronted by this self-congratulatory feast, one could not help but venture from the underbrush.
Imagine the disappointment on April 15 when India’s regulator, the Securities and Exchange Board of India (SEBI), barred the firm’s founders from holding managerial positions in the firm or engaging in any securities market activity.
SEBI’s action was in response to alleged diversion of funds for personal expenses, including a luxury apartment and golf equipment. Gensol’s stock price plummeted following the news.
The more than 90% collapse was foreshadowed by the Transparently risk engine, which gave Gensol an accounting manipulation risk rating of F for the 2023-24 mating season. This rating put Gensol among the worst 3% of industrial companies globally for accounting quality risk.
An investor using the Transparently system would not have invested in this company.
Companies with such a rating are highly prone to stock price collapse and the AI system recommended: “A thorough and immediate investigation … to assess the validity of the financial statements and the integrity of the company's financial reporting practices.”
An investor using the Transparently system would not have invested in this company.
The history of Gensol Engineering
Gensol Engineering was co-founded by Anmol Singh Jaggi and Puneet Singh Jaggi in 2007, providing carbon-credit advisory services to various industries. The company subsequently branched into engineering, procurement, and construction (EPC) for solar projects globally.
More recently, the company expanded into electric vehicle leasing, notably supplying vehicles to BluSmart Mobility, an EV ride-hailing service also co-founded by the Jaggi brothers. Gensol's revenue multiplied by more than 15 times between 2017and 2024 on the back of 39% compound annual growth. Profit grew 43% CAGR over the same period to ₹530 million. Operating cash flow, however, evaporated from ₹60 million to negative ₹980 million.
The scandal began to unfold when SEBI received complaints from an undisclosed source regarding potential price manipulation and fund diversion in June 2024. Investigations revealed that Gensol had taken loans totaling about ₹9.78 billion from government-backed lenders to purchase 6,400 EVs for its BluSmart Mobility business. However, SEBI alleged that only around 4,700 EVs were actually purchased. This discrepancy raised significant red flags about how funds were being utilized.
Subsequent investigations raised a raft of further allegations by SEBI against the company, as outlined in the April 15 statement. In particular, SEBI alleges the company used fake documents to hide its debt and repayment status to ratings agencies, and failed to fulfill certain contractual agreements under the loan covenants. According to the SEBI interim statement, there was an unaccounted gap of ₹2.6 billion in payments.
SEBI alleges that substantial amounts of borrowed money were diverted for personal use by the promoters on luxury purchases. SEBI further alleges to have uncovered a network of transactions designed to obscure the flow of money.
SEBI's interim order of April 15, 2025, barred Anmol and Puneet Jaggi from holding any managerial positions within Gensol or engaging in capital market transactions. The order highlighted severe governance failures within the company.
Separately, India’s Enforcement Directorate (ED) subsequently froze over 500,000 shares linked to Gensol on 16 April due to their connection with individuals involved in illegal betting activities associated with the Mahadev Book app scandal. Prior to this, shares were also frozen in February 2024 as part of ongoing investigations into similar allegations. It remains to be seen whether there is any Gensol connection to the illegal gambling operation.
The fallout from Gensol's financial issues has significantly impacted BluSmart Mobility, which began shutting down its services as soon as the interim order was released. This has led to speculation in the Indian media that Gensol bled BluSmart dry.
The Transparently prognosis
From a legal perspective, the Gensol saga is only just unfolding and will run for a number of years. It remains to be seen whether SEBI and the ED will be able to make their allegations stick. From the perspective of the Transparently risk engine, we suspect that prosecutors will have quite a bit of ammunition for their case.
Gensol Engineering registered significant concerns on 11 of the 14 risk clusters examined by the AI engine (See Figure 1). The list is long and we won’t explore it too deeply. However, we should emphasise the risks pertaining to growth signals, corporate governance and gearing.
Figure I: Accounting red flags raised by Gensol Engineering
The risk engine emphasized potential problems with Gensol’s reported growth including the consistently unusual sales growth patterns and lack of operating cash flow in relation to reported sales growth. Gensol was equivalent to a person claiming to consume 20,000 calories a day but consistently losing weight. The discrepancy between claimed sales and profit growth versus operating cash flow is as wide as we have witnessed.
Gensol was equivalent to a person claiming to consume 20,000 calories a day but consistently losing weight
The system flagged corporate governance due to Gensol’s unusually high audit fees, multiple past name changes and frequent restatement of accounts. Frequent name changes are a remarkably powerful indicator of poor corporate governance since it makes it difficult to track the company's history.
The risk engine flagged high gearing as a risk. Of course we know the company recently assumed significant debt and, in spite of supposedly having enormous residual cash on hand remaining from this borrowing, was forced to shutter BluSmart a day after the SEBI enforcement. The implication is that Gensol’s operations were potentially insolvent. The system identified “potential for manipulation to appease lenders and investors.”
Diversion of funds is more difficult to identify from published accounts but the risk clusters for investing activity, business manipulation and cash quality all pointed to risk in this direction.
%20-%20Wirecard.png)
