How to identify a scam before it happens? Vijay Kedia has some suggestions

Amid fresh concerns over fund diversion and governance lapses at Gensol Engineering, veteran investor Vijay Kedia cautioned investors, saying several such scandals may still be waiting to come to light.

 

A day after the Securities and Exchange Board of India barred Gensol Engineering's founders from the securities market, Kedia took to social media to say that, "there are many 'Gensol' still hiding in the cupboard—waiting to tumble out with time."

 

Kedia said, “Let’s hope it’s not too late by then,” while refraining from naming any specific companies. His comments come as retail investors have increasingly preferred mid- and small-cap stocks to park their savings, segments that ultimately faced steeper losses during the recent market correction. 

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Vijay Kedia’s '10 red flags' that signal a scam in the making

 

• Talk big and overpromise.
• Maintain constant media presence through news coverage, hyperactive social media posts, and endless interviews.
• Magnify even the smallest developments.
• Raise funds frequently without clarity on deployment.
• Diversify into unrelated businesses just to ride trending narratives.
• Overuse flashy buzzwords to sound innovative without real substance (e.g., “AI-powered,” “next-gen,” “disruptive” etc. )
• Flaunt lavish promoter lifestyles that don’t match company performance.
• Have high levels of promoter pledging.
• Face frequent exits of key personnel (CFOs, auditors, CXOs).
• Engage in excessive related-party transactions.

 

Gensol Engineering's Story so far

 

In a fresh trigger, independent director Arun Menon has resigned with immediate effect. This comes a day after the Sebi barred Gensol Engineering promoters and directors Anmol Singh Jaggi and Puneet Singh Jaggi from the securities market over alleged fund diversion and fraudulent practices.

 

Further, the market watchdog directed Gensol Engineering to put on hold the stock split announced by it. Sebi said that the funds were used for luxury real estate, complex fund routing, and alleged misuse of public company money as if it were a private purse. 

 

Sebi started scrutinising the case after multiple complaints and subsequent downgrades of Gensol's credit ratings by CARE Rating and Icra due to delays in servicing debt obligations by BluSmart Mobility, a related party of Gensol.

 

In a 29-page interim order, Sebi said, "The prima facie findings have shown mis-utilisation and diversion of funds of the company (GEL) in a fraudulent manner by its promoter directors, Anmol Singh Jaggi and Puneet Singh Jaggi, who are also the direct beneficiaries of the diverted funds". 

Gensol stock crashes

 

Shares of Gensol Engineering hit the 5 per cent lower circuit for the 16th consecutive session on Thursday.

 

In less than two weeks, over 70 per cent of its market value has been wiped out, according to Bloomberg. This comes after the stock surged over 200 per cent since its listing to its peak in early 2024. 

 

From its peak of ₹1,376 apiece in early February, the stock has fallen by nearly 90 per cent. The stock has tumbled 84 per cent this year, compared to a 1 per cent fall in the benchmark Nifty 50