Net::SMTPAuthenticationError in UsersController#create

our Rails 3.2 application's "resend activation code" mail feature was working until the code was transferred from the previous developer to us. Now we get this error

Net::SMTPAuthenticationError in UsersController#create  

Our mail settings remain untouched like this:

ActionMailer::Base.smtp_settings = {  
:address              => "smtp.sendgrid.net",  
:port                 => 587,  
:domain               => "example.com",  
:user_name            => "username",  
:password             => "password",  
:authentication       => "plain",  
:enable_starttls_auto => true  
}  

We are somehow not able to figure it out as to why the email stop's working.
We have checked the gmail server also responding back to us via telnet.
We have also enabled the Less Secure Apps feature of Gmail's in Security -> Account permissions -> Access for less secure apps
Thanks in advance.