NFRA probes Gensol's audit books after Sebi flags fraud, ICAI review underway

The National Financial Reporting Authority (NFRA) has launched a preliminary inquiry into the books of Gensol Engineering following fraud allegations, according to Ravneet Kaur, the head of the audit regulator.

The move follows a reference by the Securities and Exchange Board of India (Sebi), said Kaur, who also helms the competition regulator. She was speaking on the sidelines of an event Tuesday.

This marks an expansion of the investigation into Gensol, which began with Sebi’s report last month.

Officials said the NFRA investigation would be limited to the role of auditors, if any, in the alleged fraud at Gensol and whether audit standards were adequately followed.
Separately, the corporate affairs ministry is planning to conclude its probe into the alleged corporate governance lapses at Gensol and about 18 related entities, including BluSmart Mobility, in 3-5 months, said a senior government official.

Institute of Chartered Accountants of India (ICAI) president Charanjot Singh Nanda told ET last month that the institute would review the FY24 financial statements and statutory audit reports of Gensol and BluSmart.

ICAI Probe
If ICAI’s Financial Reporting Review Board finds that the financial statements of the relevant entities are not “true and fair”, it may refer the case to the ICAI’s disciplinary committee for subsequent action against the auditors.

In April, Sebi had barred Gensol’s promoters—brothers Anmol and Puneet Jaggi—from accessing stock markets and ordered a forensic probe into their listed renewable energy firm.

An interim report by the capital markets regulator had pointed to fund diversion by the brothers and governance failures within the company. The brothers face allegation of misutilisation of term loans availed of by Gensol from state-run IREDA and PFC.

Gensol’s share price has crashed by over 45% since the release of Sebi’s interim report on April 15. The shares closed at Rs 70.99 apiece on the BSE on Tuesday.

As per the markets regulator, Gensol had secured Rs 977.75 crore in loans, of which Rs 663.89 crore was to be used specifically for the purchase of 6,400 electric vehicles ( EVs). These vehicles were to be leased to BluSmart, a related party.

But Gensol admitted in its response to Sebi in February that it had procured only 4,704 EVs.