Stock Crash: Lower circuit imposed on stock after SEBI's strict action, Stock Split also stopped

Shares of solar EPC company Gensol Engineering Ltd. (GEL) hit a lower circuit of 5% on April 16. Market regulator Securities and Exchange Board of India (SEBI) passed an interim order against the company and its promoters, Anmol Singh Jaggi and Punit Singh Jaggi, over alleged fund diversion and false disclosures. SEBI has barred the promoters from holding any directive or management role. SEBI has also banned them from trading in securities.

SEBI's order said, "In the present case, there has been a complete breakdown of internal control and corporate governance norms in Gensol Engineering, a listed company. The promoters were running a listed public company as if it was a proprietary company. Company funds were sent to related parties and used for unrelated expenses, as if the company's funds were the piggy bank of the promoters."

After this action of SEBI, the stock saw a sharp decline today and opened at a lower circuit down 5%. Currently, this stock is down 5% at 122.68. Stock split also banned for now SEBI whole-time member Ashwani Bhatia directed GEL to postpone the stock split. On Saturday, the company had announced a stock split in the ratio of 1:10. What else did SEBI say? According to SEBI's order, promoter holding in GEL has already reduced substantially and there is a risk of promoters selling more shares to naive investors. Therefore, it is necessary to make investors aware of the wrongdoings mentioned above through regulatory action. Also, allowing promoters to continue as directors or key managerial persons in the company may further harm the interests of the company. SEBI suspects that the stock split of shares in the ratio of 1:10 announced recently by GEL was likely to attract more retail investors. Shares of Gensol Engineering have been falling continuously since reports of corporate mismanagement and debt concerns. In the last month, Gensol Engineering shares fell 46 per cent, while in the last 12 months it declined 86 per cent.

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