As troubles mount at Gensol, BluSmart is fighting for survival

At their peak, the combined worth of Gensol Engineering, a publicly listed mid-tier turnkey solar engineering and construction company, and its sister concern BluSmart, the EV cab-hailing service provider, was around $900mn or ₹7,700 crore. But Anmol Singh Jaggi’s humble demeanour and sweet smile never gave away the air of someone who built the companies from scratch. He addresses everyone “sir” and “madam”. A person who has known Jaggi closely had once seen him calling an elderly office assistant “bhaiyya”.But of late, the Jaggi brothers, Anmol and Puneet, are facing several problems that threaten the very existence of the formidable climate businesses they built over the past 12 years. They face questions over alleged falsification of critical financial documents, defaults on debt repayments and rapid expansion. They are dealing with top-level exodus, distress sale of assets, dissolution of partnerships and bad press.How did things come to such a pass?To be fair, Gensol has grown steadily over the past decade. Based on the publicly stated financials of the company, it is profitable, growing at 30% and sitting on a large order book of ₹7,000 crore. It made ₹53 crore profit on ₹996 crore revenue in FY24.Jaggi’s green mobility startup BluSmart carved a niche for itself in cab service. BluSmart has been a unique player in the ride-hailing industry, known for its strong customer satisfaction due to higher-quality cabs, better ride comfort and well-trained drivers who adhere to safe driving habits. Additionally, its air-conditioned BEV (battery electric vehicle) fleet ensures lower noise levels, enhancing the overall customer experience.Although BluSmart’s operating revenue was still a modest ₹57 crore in FY23 and it lost nearly 4x at ₹216 crore before taxation, it is much loved among a set of passengers and has raised $168mn venture capital at $336mn valuation.Now the bad news.Both Gensol and BluSmart are in trouble. From the peak of ₹4,250 crore in May 2024, Gensol’s market capitalisation has now nosedived to ₹665 crore. The shares have crashed 66% since the beginning of March. As one of the most prominent EV-only ride-hailing brands operating in NCR and Bengaluru, if BluSmart collapses, it will be a significant setback to the country’s transition to sustainable mobility. medium nocaptionhttp://youtu.be/z9szLCoupUo?si=mNTM_Vx-ZOXirR5wCup of woesBluSmart has been unable to raise crucial funding, and a series of financial and operational headwinds have now raised many questions over its future.BluSmart Mobility, formerly known as Gensol Mobility, and Gensol are facing a massive storm. Gensol, which provides most of BluSmart’s fleet on lease, attempted to sell around 3,000 EVs to another company, Refex. But the deal collapsed.According to industry sources, transferring leased vehicles requires mandatory fresh fitness assessment certificates as per insurance contracts. However, due to frequent fast charging, BluSmart’s EVs are said to have suffered accelerated battery degradation. This has significantly reduced the vehicles’ useful life and residual value, which was far below the ₹315 crore that Gensol had hoped to sell them for. If the assets are revalued downward, both BluSmart and Gensol could face a severe financial hit, worsening their already fragile balance sheets.With this uncertainty, key financiers have reportedly withdrawn their support for BluSmart. The company’s desperate attempts to secure new equity investors have also failed, pushing it further into financial distress.Adding to the crisis, several landlords housing charging infrastructure have sent termination notices, fearing that the cash-strapped company will default on lease rental payments. Meanwhile, a mass exodus of top executives, including key CXO-level officers, has left BluSmart without the leadership it critically needs to navigate these turbulent times.BluSmart could also be losing its customer base. In fact, many of its vehicles are being redeployed on rival ride-hailing platforms after having their branding removed. Customers have increasingly complained of delayed ride arrivals — a stark contrast to BluSmart’s earlier reputation for timeliness. In Bengaluru, customers of late complain about booking failures.The company has been eager to sell off assets to stay afloat, given its failed attempts to raise equity. It attempted to sell its most valuable assets — its charging network — to a third party. However, the deal reportedly fell through because many landlords not only own the land but also control the charging infrastructure. The troubles at Gensol have brought BluSmart’s own vulnerability to the fore. medium119898855BluSmart’s inherent challenges1. Business modelNegative net worth: As per the last reported financials, BluSmart had financial liabilities of approximately ₹1,500 crore, a negative net worth of ₹251 crore, and half of its total assets classified as intangible and a paltry ₹21 crore in fixed assets.High expenses: Operating costs were around four times the net operating revenue in the last reported financial year, and the yet-to-be-released FY24 accounts are expected to show even higher losses.Driver payouts: Fixed salaries and incentives consume most of its revenues, leaving minimal net revenues from operations at only ₹57 crore; other income, largely from treasury, pushed total income to ₹70 crore in FY23.2. Low utilisation and revenue per vehicleLower billable runs: Unlike ICE (internal combustion engine) vehicles on platforms like Ola and Uber that run round the clock with two drivers alternating shifts, BluSmart’s EVs require extended charging breaks. As a result, utilisation dips significantly, particularly in the afternoons and at night, leading to lower billable hours and kilometres.Pricing pressure: Ride fares remain on a par with or even lower than Ola/Uber, further straining revenue generation.3. Operational limitations and market constraintsAdvance booking requirement: Except for airport and railway station rides, customers must book BluSmart cabs a day in advance or early in the morning, limiting spontaneous ride requests.Limited coverage: Strong presence in Gurugram and parts of Delhi, but inconsistent coverage across NCR. Even more restricted coverage in Bengaluru, the only other city where BluSmart operates.4. Infrastructure and depreciation challengesHigh fixed-cost structure: The company’s cost burden — including payments to drivers, cost of vehicle and charging infrastructure leasing — far outweighs its revenues.Charging infrastructure dependency: A robust charging network is essential for providing EV services and limits their geographic area.Battery degradation and depreciation: Frequent fast charging accelerates battery wear, as Indian EVs are not yet able to withstand sustained fast charging. The fleet’s actual asset life is significantly shorter than initially budgeted, leading to higher depreciation costs, which came to the fore when Gensol was trying to sell its fleet.Overpromising and underperforming?BluSmart has frequently claimed that it is close to achieving operational profitability, improving utilisation, and making positive contributions in its older markets like Gurugram and parts of Delhi. However, its last reported figures show it remains far from profitability. medium119898877Similarly, BluSmart has repeatedly announced that it is on the verge of securing fresh funding. Yet, insiders point out that the company’s complex web of related-party transactions and subsidiary structures have made the due diligence cumbersome, discouraging private equity investors from stepping in.The ambitious full-stack playPart of Gensol’s, and by extension BluSmart’s, trouble stemmed from ambitious diversification and backward integration. “The Jaggis wanted to capture value at every point of the supply chain,” said one of the insiders cited above.While having its own fleet ensured better control over customer experience, the same made BluSmart an asset-heavy model. Leasing out cabs to BluSmart was a steady business for Gensol but that capital expenditure added to its debt trouble. That didn’t stop Gensol from going further and starting EV manufacturing. It has set up a 30,000-unit production capacity plant to make three-wheel two-door EVs. The automotive R&D, factory and production make Gensol more capex heavy.Deepesh Rathore, an automotive expert, says it is extremely unlikely that passengers, particularly women, will be comfortable sitting beside the driver in the three-wheeler and it is surprising that despite running a cab business for so long the Jaggis would have missed such a crucial consumer insight in their vehicle design.Gensol has a total debt of ₹2,000 crore. All their credit instruments have been downgraded to D, as shown in a damning report by credit rating agency ICRA in early March.“Gensol had also been sharing no-default statements with ICRA at the beginning of every month, suggesting timely debt servicing. However, ICRA has now learnt that certain documents shared by Gensol with ICRA, on its debt servicing track record, were apparently falsified, which raises concerns on its corporate governance practices, including its liquidity position,” said the ICRA report.An internal inquiry is underway even as its liquidity is fast becoming precarious. A green business that is involved in solar electricity, EV leasing, EV manufacturing and EV cab service looked fascinating but met with a rude reality check. Rather than complementing, both companies are joined at the hip — the Jaggis own 62% of Gensol and 20% of BluSmart. This seems to be dragging down both companies with debt spiralling out of control.The Jaggis floated another company in 2022 — gas distribution company Matrix Gas & Renewables, which raised $45mn. They hold 25% in that company.Can BluSmart survive?BluSmart is at a critical juncture, with a crumbling balance sheet, failed fundraising attempts, executive departures, and declining trust of its critical partners for vehicle leasing and charging stations.All these factors are bound to result in a poorer customer experience. Unless BluSmart secures immediate financial backing, restructures its business model, and resolves its operational inefficiencies, the once-promising EV ride-hailing startup may soon find itself in an irreversible downward spiral.