Indian ride-hailing startup BluSmart swept up in Gensol investigation alleging misuse of EV loans

India’s market regulator launched a probe Tuesday into Gensol Engineering after discovering alleged misuse of electrical automobile loans. BluSmart, a ride-hailing startup linked to Gensol that was as soon as seen as an rising Uber rival within the South Asian market, has additionally been swept up into the investigation.

The Securities and Change Board of India (SEBI) barred Gensol Engineering’s founders, Anmol Singh Jaggi and Puneet Singh Jaggi, from holding key positions within the public-listed firm and taking part within the securities market whereas the company investigates. The Jaggi brothers additionally co-founded BluSmart Mobility.

Anmol Singh Jaggi advised TechCrunch the corporate was “absolutely cooperating” with the Indian regulator and is “placing collectively all the mandatory paperwork and information to make clear.”

“That is simply an interim step, not a last resolution, and I’m assured that when the whole lot’s reviewed correctly, our place might be clear. We’ve all the time believed in doing issues responsibly, and that gained’t change,” Jaggi mentioned.

In its interim order, the regulator accused the Jaggi brothers of redirecting substantial mortgage quantities for private use, together with shopping for luxurious actual property on the outskirts of India’s capital.

The regulator mentioned Gensol Engineering availed time period loans of 9.78 billion Indian rupees (round $114 million) from the state-owned Indian Renewable Power Growth Company and Energy Finance Company. Of that, 6.63 billion rupees had been set for buying 6,400 EVs to lease to BluSmart. Nonetheless, the corporate acquired solely 4,704 EVs for five.68 billion rupees, the regulator famous in its order (PDF).

“A few of these funds had been then used for functions unrelated to the aim/goal of the sanctioned time period loans, which included (i) private bills of the promoter, together with buy of high-end actual property; (ii) profit to the non-public promoter entities/switch of funds to promoters’ shut kin; and so forth.,” the regulator mentioned.

Gensol beforehand denied the alleged defaulting on debt funds. Nonetheless, the regulator has cited info from the lenders and mentioned there have been “a number of cases of default” by the Gujarat-headquartered firm.

“The promoters had been working a listed public firm as if it had been a proprietary agency,” the regulator alleged within the order.

The order comes over a month after credit-rating companies downgraded Gensol, elevating considerations over the delays within the firm’s debt servicing and company governance practices.

In the meantime, BluSmart, a Gensol buyer and the entity sharing its co-founders, is struggling as a consequence of mounting money burns and a scarcity of exterior capital. The startup shut down its service in Dubai, which was launched final yr, and is at present exploring methods to maintain its enterprise in India, which spans Delhi-NCR, Bengaluru, and Mumbai.

The ride-hailing startup deliberate to pivot right into a fleet associate for its arch-rival Uber, the Indian newspaper Financial Occasions reported earlier this week, citing individuals acquainted with the developments.

Based in late 2018 as Gensol Mobility, BluSmart began as an Uber fleet operator. Nonetheless, the startup emerged as an all-EV rival to Uber after beginning its standalone operations earlier than the COVID-19 pandemic.

BluSmart raised $25 million in January 2024 to spice up its EV charging stations from Switzerland-based affect fund ResponsAbility. Later that yr, the corporate was reportedly in talks to raise up to $100 million, however that funding by no means materialized.

The Gurugram-based startup has raised greater than $486 million in whole funding, per Crunchbase. It counts BP Ventures and Mayfield India Fund amongst its early traders.

Final yr, BluSmart had a fleet of 6,000 EVs, together with round 180 ZS SUVs from MG Motor and the remaining batch made up of Tata Tigor sedans. The startup deliberate to extend its fleet dimension to 10,000 EVs by year-end, however it didn’t attain the goal.

Jaggi didn’t reply what measures they’re taking particularly for BluSmart.

Gensol Engineering’s inventory tumbled greater than 83%, final buying and selling at 129 rupees shortly earlier than the market closed on Tuesday.