BluSmart Under Investigation: Gensol Alleges EV Loan Misuse in India

Investigation Launched into Gensol Engineering and BluSmart

India’s financial regulatory body initiated an investigation on Tuesday concerning Gensol Engineering, following allegations of improper handling of loans designated for electric vehicles. BluSmart, a ride-hailing service linked to Gensol and previously considered a potential competitor to Uber within South Asia, is also currently under scrutiny as part of this inquiry.

Regulatory Action Against Gensol Founders

The Securities and Exchange Board of India (SEBI) has prohibited Anmol Singh Jaggi and Puneet Singh Jaggi, the founders of Gensol Engineering, from assuming leadership roles within the publicly traded company and from participating in the securities market during the course of the investigation. These same brothers also established BluSmart Mobility.

Gensol’s Response to the Probe

Anmol Singh Jaggi communicated to TechCrunch that the company is offering complete cooperation to the Indian regulator. They are actively compiling all required documentation and information to provide clarification on the matter.

Jaggi stated, “This represents an initial measure, not a conclusive judgment, and I am confident that a thorough review will demonstrate our position. We have consistently prioritized responsible conduct, and this commitment remains unwavering.”

Allegations of Misappropriated Funds

According to the regulator’s interim order, the Jaggi brothers are accused of diverting significant loan funds for personal expenditures. This includes the acquisition of luxury properties located near India’s capital city.

Loan Details and Discrepancies

Gensol Engineering secured term loans totaling 9.78 billion Indian rupees (approximately $114 million) from Indian Renewable Energy Development Agency and Power Finance Corporation. A portion of 6.63 billion rupees was specifically allocated for the purchase of 6,400 EVs intended for lease to BluSmart. However, the regulator’s order indicates that the company only procured 4,704 EVs at a cost of 5.68 billion rupees.

The regulator further stated, “Certain of these funds were subsequently utilized for purposes inconsistent with the stated objectives of the sanctioned loans, encompassing (i) personal expenses incurred by the promoter, including the purchase of high-value real estate; (ii) benefits extended to private promoter entities and/or the transfer of funds to the promoters’ immediate family members; and so forth.”

Previous Denials and Lender Information

Gensol had previously refuted claims of defaulting on debt obligations. However, the regulator has referenced information provided by the lending institutions, asserting that there were “multiple instances of default” by the Gujarat-based company.

The regulator alleges that, “The promoters were operating a publicly listed company as if it were a privately held enterprise.”

Recent Downgrades and Concerns

This order follows recent downgrades by credit-rating agencies, which expressed concerns regarding delays in the company’s debt servicing and its corporate governance practices.

BluSmart’s Current Challenges

BluSmart, a client of Gensol and sharing its co-founders, is currently facing difficulties due to substantial cash burn and a lack of new investment. The startup has ceased operations in Dubai, a market it entered last year, and is actively seeking strategies to maintain its business in India, covering Delhi-NCR, Bengaluru, and Mumbai.

Potential Partnership with Uber

The ride-hailing startup is reportedly considering a shift in strategy to become a fleet partner for its competitor, Uber, as reported by the Indian newspaper Economic Times earlier this week.

BluSmart’s Evolution

Initially founded in late 2018 as Gensol Mobility, BluSmart began as a fleet operator for Uber. The company later transitioned into an all-electric vehicle (EV) competitor to Uber after launching its independent operations prior to the COVID-19 pandemic.

Funding Rounds and Investment

In January 2024, BluSmart secured $25 million from Switzerland-based impact fund ResponsAbility to expand its EV charging infrastructure. Later that year, the company was reportedly in discussions to raise up to $100 million, but these efforts did not result in funding.

According to Crunchbase, the Gurugram-based startup has raised over $486 million in total funding, with early investors including BP Ventures and Mayfield India Fund.

Fleet Size and Expansion Plans

Last year, BluSmart operated a fleet of 6,000 EVs, comprising approximately 180 ZS SUVs from MG Motor and the remainder consisting of Tata Tigor sedans. The company aimed to increase its fleet to 10,000 EVs by the end of the year, but this goal was not achieved.

Jaggi did not elaborate on specific actions being taken to address BluSmart’s situation.

Gensol’s Stock Performance

Gensol Engineering’s stock has experienced a significant decline this year, falling by more than 83% and last trading at 129 rupees shortly before the market’s close on Tuesday.