PFC, IREDA mull legal measures against Gensol to safeguard their loan exposure

By Admin

18 Apr, 2025

Background of the Crisis

Power Finance Corporation (PFC) and the Indian Renewable Energy Development Agency (IREDA), two prominent public sector financiers in India’s energy sector, are reportedly preparing legal action to protect their loan exposure to Gensol Engineering. The move follows serious allegations against Gensol’s promoters—Anmol Singh Jaggi and Puneet Singh Jaggi—including capital market bans, fund diversion, and document forgery, according to sources close to the matter.

Gensol, known for executing solar energy projects and vehicle leasing, is at the center of a regulatory storm after the Securities and Exchange Board of India (Sebi) issued an interim order on April 15. This order alleges that the promoters diverted funds and misrepresented loan repayment status to credit rating agencies.

Loan Exposure and Alleged Irregularities

Between FY22 and FY24, PFC and IREDA collectively disbursed ₹977 crore to Gensol, out of which ₹663 crore was specifically earmarked for purchasing electric vehicles to be leased to ride-hailing startup BluSmart, also promoted by the Jaggi brothers. Approximately 5,500 electric vehicles were leased to BluSmart, a company with high-profile investors like BP Ventures. However, the platform unexpectedly went offline recently, raising further concerns.

In a major red flag, Gensol allegedly forged letters suggesting that its loan accounts with PFC and IREDA were in good standing. These forged documents were reportedly submitted to rating agencies such as CARE and ICRA, who subsequently downgraded Gensol to a ‘D’ rating in early March—signifying default status.

Legal and Financial Implications

The two lenders—PFC and IREDA—have issued show-cause notices to Gensol, demanding clarification on how such documents were submitted on their behalf. If Gensol fails to offer a satisfactory explanation, legal proceedings may follow. The classification of the accounts as fraudulent is also under consideration, though the final decision awaits the findings of Sebi's detailed forensic audit.

Should the loans be declared fraudulent, the financial impact could be significant: provisioning requirements may rise to ₹625 crore for IREDA and ₹353 crore for PFC—effectively meaning a 100% provisioning of the loan amounts.

Structural Questions Around Loan Disbursement

Industry experts like Asutosh Mishra from Ashika Stock Broking suggest that while fund diversion is evident, whether it constitutes technical fraud is still under review. He emphasized the importance of assessing the structure of these loans—whether they were tied to Special Purpose Vehicles (SPVs), which are standard in EPC (Engineering, Procurement, and Construction) operations.

Although the loans are backed by the purchased vehicles, the effectiveness of this security is questionable given the ongoing operational disruptions at BluSmart.

Allegations of Misuse and Promoter Defense

Sebi’s interim order accuses the promoters of misusing ₹262 crore, some of which was allegedly used for personal luxuries like an upscale apartment and golf equipment. The Jaggi brothers have 21 days from the date of the order to respond. Meanwhile, Anmol Singh Jaggi, in a March 14 interview, maintained that Gensol’s loan accounts were not declared NPAs and claimed an internal committee had been formed to investigate the allegations. He also stated that the promoters planned to inject ₹600 crore into the company to improve liquidity.

What Lies Ahead

The unfolding controversy places Gensol, its promoters, and the two state-run financial institutions at a critical junction. As regulators dig deeper and legal measures loom, the outcome could significantly impact lending protocols in the renewable energy and electric mobility sectors. Until Sebi’s forensic audit is complete, the full extent of the financial and legal ramifications remains uncertain—but the case has already raised serious questions about governance, due diligence, and accountability in India’s green energy financing ecosystem.