There is more bad news for investors in Gensol Engineering as capital markets regulator Sebi has put on hold the stock split (1:10) announced by the company last month. This was supposed to be the first instance where Gensol Engineering planned to split the shares.
Alleging financial mismanagement and diversion of funds, Sebi had barred promoters of Gensol Engineering from accessing the capital markets and also ordered them to cease to be key managerial personnel.
"It must be mentioned that Gensol recently announced a stock split of its shares in the ratio of 1:10, which is likely to attract more retail investors to the script. At this stage, allowing this corporate action may not be in the interest of the investors," Sebi said.
The order follows a detailed probe that began after complaints of share price manipulation and default in loan repayments.
In a strongly worded order Sebi said, there is complete breakdown of internal controls and corporate governance norms in Gensol as a listed company. "The promoters were running a listed public company as if it were a proprietary firm."
Sebi said Gensol had raised Rs 975 crore in loans from institutions like IREDA and PFC for buying electric vehicles. However, only a part of the money was actually used for that purpose.
The probe by the regulator showed that more than Rs 200 crore was routed through a car dealer and cycled back to promoter-linked entities. Some of it was used for unrelated personal expenses, including buying luxury real estate.
"The company’s funds were routed to related parties and used for unconnected expenses, as if the company’s funds were promoters’ piggybank. The diversions would mean they need to be written off from the company’s books, ultimately resulting in losses to the investors," Sebi said.
The diversion of funds of the company by promoter entities reflects a culture of weak internal control, according to the regulator, where even ring-fenced borrowings from institutional creditors were rerouted at the total discretion of the promoters.
"The internal controls at Gensol appear to be loose and through the quick layering of transactions, funds have seamlessly flowed to multiple related entities," the regulator said.
Alleging financial mismanagement and diversion of funds, Sebi had barred promoters of Gensol Engineering from accessing the capital markets and also ordered them to cease to be key managerial personnel.
"It must be mentioned that Gensol recently announced a stock split of its shares in the ratio of 1:10, which is likely to attract more retail investors to the script. At this stage, allowing this corporate action may not be in the interest of the investors," Sebi said.
The order follows a detailed probe that began after complaints of share price manipulation and default in loan repayments.
In a strongly worded order Sebi said, there is complete breakdown of internal controls and corporate governance norms in Gensol as a listed company. "The promoters were running a listed public company as if it were a proprietary firm."
Sebi said Gensol had raised Rs 975 crore in loans from institutions like IREDA and PFC for buying electric vehicles. However, only a part of the money was actually used for that purpose.
The probe by the regulator showed that more than Rs 200 crore was routed through a car dealer and cycled back to promoter-linked entities. Some of it was used for unrelated personal expenses, including buying luxury real estate.
"The company’s funds were routed to related parties and used for unconnected expenses, as if the company’s funds were promoters’ piggybank. The diversions would mean they need to be written off from the company’s books, ultimately resulting in losses to the investors," Sebi said.
The diversion of funds of the company by promoter entities reflects a culture of weak internal control, according to the regulator, where even ring-fenced borrowings from institutional creditors were rerouted at the total discretion of the promoters.
"The internal controls at Gensol appear to be loose and through the quick layering of transactions, funds have seamlessly flowed to multiple related entities," the regulator said.
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