BluSmart from India wrapped in a Gensol investigation for alleged misuse of loans for electric vehicles.

The market regulatory authority in India has launched an investigation into Gensol Engineering after detecting possible misuse of loans for electric vehicles. BluSmart, a ride-sharing startup linked to Gensol and previously considered a potential competitor to Uber in the South Asian market, is also involved in this case.

The Securities and Exchange Board of India (SEBI) has prohibited the founders of Gensol Engineering, Anmol Singh Jaggi and Puneet Singh Jaggi, from holding key positions in the listed company and participating in the stock market while the inquiry is ongoing. The Jaggi brothers also co-founded BluSmart Mobility. Anmol Singh Jaggi stated that the company is "fully cooperating" with the Indian regulator and is gathering the necessary documents to clarify the situation.

In its provisional decision, the regulator accused the Jaggi brothers of diverting a significant amount of loans for personal use, including the purchase of luxury real estate in the vicinity of the Indian capital. Gensol Engineering had applied for term loans of 9.78 billion Indian rupees (approximately 114 million dollars) from the Indian Renewable Energy Development Agency and the Energy Financing Corporation. Of that amount, 6.63 billion rupees were intended for acquiring 6,400 electric vehicles to lease to BluSmart. However, the company only acquired 4,704 electric vehicles for 5.68 billion rupees, according to the regulator's order.

The regulator stated that "some of these funds were used for purposes unrelated to the goal of the approved loans, which include (i) personal expenses of the promoter, such as the purchase of luxury real estate; (ii) benefits to private entities of the promoter or transfers of funds to close relatives of the promoters, among others."

Gensol had previously denied the allegations of debt payment defaults, although the regulator cited information from lenders indicating "multiple cases of default" by the Gujarat-based company. In its order, the regulator claimed that "the promoters were operating a publicly listed company as if it were a privately owned firm." This decision comes a month after credit rating agencies downgraded Gensol, raising concerns about delays in debt servicing and the company's corporate governance practices.

On the other hand, BluSmart, a client of Gensol and an entity that shares co-founders, is facing difficulties due to increasing capital consumption and lack of external financing. The startup halted its service in Dubai, which it had launched last year, and is currently exploring options to continue its business in India, where it operates in Delhi-NCR, Bengaluru, and Mumbai. According to reports, BluSmart had planned to become a fleet partner for its competitor Uber.

Founded in late 2018 as Gensol Mobility, BluSmart started as a fleet operator for Uber. However, the startup positioned itself as a fully electric competitor to Uber after commencing independent operations prior to the COVID-19 pandemic. BluSmart received 25 million dollars in January 2024 to expand its electric vehicle charging stations. Subsequently, it was in talks to raise up to 100 million dollars, but that funding did not materialize. The Gurugram-based startup has raised over 486 million dollars in total and counts BP Ventures and Mayfield India Fund among its early investors.

Last year, BluSmart had a fleet of 6,000 electric vehicles, including around 180 MG Motor ZS SUVs and the rest Tata Tigor sedans. The company aimed to increase its fleet to 10,000 electric vehicles by the end of the year but did not reach that goal. Jaggi did not clarify what specific measures are being taken for BluSmart. Gensol Engineering's stock has fallen more than 83% this year, trading at 129 rupees just before the market closed on Tuesday.