After fund diversion issues surrounding Gensol Engineering came out in the public domain, ace investor Vijay Kedia let out a sharp warning -- There are many Gensols still hiding in the cupboard, just waiting to tumble out with time. Sebi recently came down heavily on Gensol Engineering, barring the company and promoters from public markets for diverting funds for personal use.
Kedia hoped by the time these other companies, which he didn't mention explicitly, come out, it’s not too late by then. However, he put out 10 red flags that investors can look out that scream before a scam.
Kedia said It’s wiser to be wary of companies that: 1) Talk big and overpromise 2) Maintain constant media presence — through news coverage, hyperactive social media posts, and endless interviews 3) Magnify even the smallest developments 4) Raise funds frequently without clarity on deployment. 5) Diversify into unrelated businesses just to ride trending narratives 6) Overuse flashy buzzwords to sound innovative without real substance. 7) Flaunt lavish promoter lifestyles that don’t match company performance 8) Have high levels of promoter pledging 9) Face frequent exits of key personnel (CFOs, auditors, CXOs) and 10) Engage in excessive related-party transactions.
Sebi alleged financial mismanagement and diversion of funds in its interim order and cancelled the stock split announced by the company. Following the order, promoters Anmol Singh Jaggi and Puneet Singh Jaggi, have resigned from their directorial roles.
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.
Gensol Engineering said it will fully cooperate with the forensic audit to be conducted at the behest of Sebi. The regulator will appoint a forensic auditor to thoroughly examine the books of accounts of the company and its related entities.
"The company is committed to providing the auditor with complete access to records and information to ensure a transparent and comprehensive audit process," Gensol said in a filing.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
Kedia hoped by the time these other companies, which he didn't mention explicitly, come out, it’s not too late by then. However, he put out 10 red flags that investors can look out that scream before a scam.
Kedia said It’s wiser to be wary of companies that: 1) Talk big and overpromise 2) Maintain constant media presence — through news coverage, hyperactive social media posts, and endless interviews 3) Magnify even the smallest developments 4) Raise funds frequently without clarity on deployment. 5) Diversify into unrelated businesses just to ride trending narratives 6) Overuse flashy buzzwords to sound innovative without real substance. 7) Flaunt lavish promoter lifestyles that don’t match company performance 8) Have high levels of promoter pledging 9) Face frequent exits of key personnel (CFOs, auditors, CXOs) and 10) Engage in excessive related-party transactions.
Sebi alleged financial mismanagement and diversion of funds in its interim order and cancelled the stock split announced by the company. Following the order, promoters Anmol Singh Jaggi and Puneet Singh Jaggi, have resigned from their directorial roles.
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.
Gensol Engineering said it will fully cooperate with the forensic audit to be conducted at the behest of Sebi. The regulator will appoint a forensic auditor to thoroughly examine the books of accounts of the company and its related entities.
"The company is committed to providing the auditor with complete access to records and information to ensure a transparent and comprehensive audit process," Gensol said in a filing.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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