How BluSmart’s promise of a green revolution went up in smoke

When BluSmart first hit the roads in June 2019, it made quite a statement. Positioned as India’s first all-electric ride-hailing service, it arrived with the promise of transforming urban mobility. For consumers tired of the incumbent app-based duopoly’s practice of exorbitant surge pricing, messy cars, and those frustrating “driver cancelled” notifications, BluSmart brought a breath of fresh (and emission-free) air. The clean fleet of company-operated electric cars with salaried drivers (as opposed to driver-partners with varying degrees of commitment) won over passengers quickly. Many became loyalists.“The reason I loved BluSmart was because with other apps you didn’t know if they would turn up or not, and even after they did there was no guarantee on how the driver would be. I used BluSmart a lot for airport trips,” says Nakul, a Bengaluru-based restaurateur.After the scale-up to a fleet of 8,000 cars at its peak, with partnerships with Tata Motors and other Tata Group companies, Anmol Singh Jaggi rose to prominence as the face of the clean mobility revolution sweeping Indian shores. With investments from marquee names such as BP Ventures and celebrities such as Deepika Padukone and Mahendra Singh Dhoni, the BluSmart star was on the ascend, with the perfect brew of high customer satisfaction, the aura of the spunky disruptor committed to clean energy and a cap table with some muscle.It was that perfect visage that came crumbling down when the securities markets regulator Sebi this week found BluSmart promoters Anmol and Puneet Singh Jaggi had diverted funds from their listed solar energy company Gensol, and indulged in a range of fraudulent activities, including stock price manipulation, sending shockwaves through India’s markets, startup and clean energy ecosystems.The episode has come as a wake-up call on the roles and effectiveness of auditors, independent directors and rating agencies, and has also shone a spotlight on retail investors who are being lured into tricky scrips by social media influencers who don’t disclose any conflict of interest, such as if they have been paid to promote that stock.Brothers’ bluesFor BluSmart watchers, the writing was on the wall for a while now. The firm had failed in its efforts to raise $50mn earlier this year, and as a result, salary payments were delayed in March. The number of daily rides on its platform had dipped to less than half of the 25,000-30,000 it was clocking at its peak last year. And then there was the exodus at the top including CEO of fleets business Anirudh Arun, CTO Rishab Sood and CBO Tushar Garg.Despite Gensol Engineering not holding any stake in BluSmart, the two firms shared an asset relationship. A large part of the over 8,000 electric cars plying on BluSmart were owned by Gensol. Other lessors included state-owned firm Energy Efficiency Services Ltd and Mahindra & Mahindra Financial Services’ vehicle leasing unit Quiklyz.According to Tracxn, BluSmart has raised around $168mn in total funding through both debt and equity from investors such as BP Ventures, Mayfield, impact investor responsAbility and celebrities.In mid-2022, the firm said it was looking to raise $250mn from investors including BP’s venture capital division but ended up conducting two smaller fundraising instances totalling about $66mn in 2023, including a rights issue later in the year that saw its founders increase their stake.“This relationship made it look like BluSmart could improve efficiencies by not bearing the cost of those vehicles or the cost to finance those vehicles… but really that cost was being passed on to Gensol,” said a Mumbai-based investor, who backed BluSmart in its early years. “Once we realised this murkiness, we decided to not participate in another funding again.” medium nocaptionhttp://youtu.be/s-t1xZppZSo?si=8c_q5Y00y0UJGqjOThe red flagSometime in the first half of 2024, markets regulator Sebi received a complaint about share price manipulation and fund diversion at Gensol Engineering, a solar EPC (engineering, procurement and construction) contractor and EV lessor. Upon scrutinising Gensol’s financial records and associated data, the regulator sensed something was amiss.The company’s operating profit had rocketed 10,350% to ₹209 crore in FY25 from ₹2 crore in FY17, and investors jumped in, with the number of shareholders surging to 1.09 lakh from just 155. The stock touched an all-time high of ₹1,126 in June 2024, giving Gensol a market cap of ₹4,300 crore. At that price, it was more valuable than Pilani Investments, one of the holding companies of the $66bn Aditya Birla Group.But what alarmed Sebi was the company’s borrowings, which increased from zero in FY2017 to ₹1,260 crore in FY2024, while the promoters’ holding in Gensol reduced from 71% to 35%.The turning point came when credit rating agencies Care and Icra informed Sebi that Gensol had not provided them with term loan statements from their lenders IREDA and PFC when sought. Instead, it had shared conduct letters from the lenders that stated it was regular in its debt servicing. However, when cross-checked, they found the company had forged the letters. The agencies acted quickly, downgrading Gensol’s credit facilities owing to concerns about delays in servicing debt.Sebi called for more information from the lenders on Gensol’s debt servicing status, loan sanction letters issued to the company, and its account statements. Soon the regulator discovered an unexplained gap between the ₹978 crore loan obtained for buying EVs and the actual amount it utilised for the purpose. ₹262 crore had vanished.Further scrutiny revealed the unaccounted amount was transferred to its dealer Go Auto, which funnelled the money back to the company or to entities related to the promoters.The ₹262 crore was used by the promoters, the Jaggi brothers, to purchase a luxury apartment in DLF Camellias, Gurugram (₹43 crore), an ultra-expensive golf set from US-based TaylorMade (₹26 lakh), to make an investment in Ashneer Grover’s Third Unicorn (fantasy cricket platform CrickPe), and transfer ₹9.18 crore to their mother and spouses.A part of the ₹262 crore was also used by the promoters to trade in Gensol’s stock. The trading, which accounted for 99% of the total trade value, was conducted through one of their affiliated entities, Wellray Solar Industries. Sebi analysed Wellray’s bank statements, which revealed that out of the ₹138 crore transferred to stock broker Sharekhan, ₹101 crore was received from Gensol and its related parties. medium120404607Lies and half truthsSebi also found that Gensol misled investors by making incorrect disclosures. For example, it claimed to have received orders for 30,000 EVs, but those memoranda of understanding were just expressions of willingness with no reference to the price of the EV or delivery schedules, Sebi noted.Similarly, Gensol claimed in February it had signed a non-binding deal for the sale of its US subsidiary for ₹350 crore. But in reality, it had set up the US subsidiary only in July 2024. When Sebi probed the company for the rationale behind such valuation, it failed to explain. Another startling revelation was that the company’s Pune facility had just three labourers with no manufacturing activity to show for.The lenders informed Sebi that the promoters had pledged a significant part of their stake as collateral for the loans and they had been invoking them following defaults. As a result, the promoter holdings have fallen further in the company. The stock price of Gensol has dropped 85% in 2025.Legal experts noted that while Sebi meticulously traced the promoters’ transactions, it has conspicuously remained silent on the accountability of key gatekeepers — auditors, independent directors and stock exchanges — particularly regarding related-party transactions that in retrospect should have raised more questions.“While Sebi has not halted trading in the company’s shares, it has imposed sweeping restrictions by suspending the stock split — an action that neither addresses nor achieves its intended regulatory objective,” according to Regstreet Law Advisors’ managing partner and former Sebi officer Sumit Agrawal. He added that the “regulator’s directive singularly targets the promoters’ conduct but ends up injuring the company and, consequently, its investors”.Sebi will now engage a forensic auditor to scrutinise the books of Gensol and its related parties. medium120404619The road aheadIronically, the Gensol scam — built on massive loans extended by state-run NBFCs Power Finance Corp (PFC) and Indian Renewable Energy Development Agency Ltd (IREDA) — unravelled the same week that IREDA reported its highest ever annual net profit at ₹1,699 crore on a loan book of ₹76,281 crore. However, there was no mention of any increase in provisions due to the Gensol defaults.Today, both the NBFCs are staring at an immediate provision of close to ₹1,000 crore for their loan exposure to Gensol due to the proven fund diversion allegations against the promoters of the company. The detailed Sebi order pegs the ongoing term loans given to the company by PFC and IREDA at ₹978 crore. Rating agencies put the total fund and non-fund based exposure to the company by NBFCs and banks at more than ₹2,050 crore.IND AS guidelines followed by NBFCs in India require them to make a 100% provision in fraud accounts. According to those calculations, PFC will have to make a minimum provision of ₹353 crore while IREDA will have to set aside ₹625 crore as provision on its term loans which are in default today.Both PFC and IREDA have remained silent on how things came to such a pass and how they are going to deal with it. IREDA and PFC officials did not reply to ET’s emails, phone calls and messages. Anmol Jaggi did not respond to messages.As the regulators and credit agencies ponder how matters went on for this long under their nose, there is an outpouring of grief on the demise of what netizens call as “rare, perfectly functional” cab service.As one of them posted on X: “A cab service that simply worked, and was the gold standard ahead of the Uber-Ola nightmares. Mostly good cabs and drivers, including so many women drivers. So how did that happen? How did such evil, scamming founders manage to build such a great cab service that beat global and local giants? What did they do right?”Meanwhile, Nakul in Bengaluru is weighing his options for his next ride to the airport. “I have a trip to Delhi next month, and I’m dreading BluSmart not being around anymore,” he said.