Gensol Engineering and BluSmart have common promoters – Anmol and Puneet Singh Jaggi.

Blusmart Mobility, the ride-hailing platform, and Gensol Engineering share the same promoters, but the two companies’ relationship is deeper than that.

Blusmart has a 6,000-strong fleet. Nearly two-thirds of it is leased from Gensol and accounts for over half of Gensol’s assets under management in leasing.

The leasing agreement between the two companies helps Blusmart pay less than what other customers have to, thereby putting Gensol’s minority shareholders at a disadvantage.

As per Gensol’s annual reports, the transactions with Bluesmart were at “arm’s length” but it appears that wasn’t the case. Neither did Gensol seek shareholders’ nod for these pacts or disclose the term.

Over the past year, multiple new-age fintech platforms facilitated the sale of nearly Rs 100 crore worth of BluSmart Mobility bonds to retail investors and high net-worth individuals (HNIs), offering a coupon rate of around 12%. While the term sheet and deed of hypothecation says investment in bonds is secured, by BluSmart’s EV fleet, this security is only valid if Blusmart legally owns those vehicle. But if the vehicles where bought under another group companies that means the security banking the NCD may not be enforceable at all. In this case it turned out that vehicles were bought by Gensol, which were hypothecated by Gensol to lenders and leased to Blusmart.

Debt platform Yubi, wealth management startup Centricity and revenue-based financing startup Klub are among fintechs that syndicated BluSmart’s debt instruments to retail investors and HNIs, according to documents sourced from the Ministry of Corporate Affairs (MCA).

BluSmart sold bonds worth around Rs 62 crore to Yubi while Centricity and Klub acquired bonds worth Rs 2.5 crore and Rs 8 crore, respectively, as per regulatory filings.

In June 2024, there were complaints made to Sebi. The brokers were selling these bonds to the retail investors and HNIs till recently. So, due diligence is in question – said an investor who is holding a significant amount of BluSmart bonds.

According to interim SEBI order, of the Rs. 978 crore loaned to Gensol Engineering  to buy EV for BluSmart, the Jaggi brothers used Rs. 262 crore for personal expenses.

In the case of default, bonds holders BluSmart are now in the same situation as lenders like Power Finance Corporation (PFC) and Indian Renewable Energy Development Agency (IREDA).

Following point need to be considered and evaluated (covered in Part B below):

• What is the company background?
• Clues on issue unfolding in company operations
• Industry views and
• Way ahead expected

Only time could tell if Gensol and Blusmart can turn things around.

And if there’s one thing market participants even for bondholders, can take away from this, it’s that when numbers and narratives don’t align, caution is key.

Part B

Background of Gensol Engineering and Blusmart

Gensol went public in 2019 through an SME IPO. And working in renewable energy and EV mobility, two fast-growing sectors, meant that there was a lot of excitement around it. The IPO saw good demand, the stock price soared, profits grew and by 2023, it had moved to the NSE and BSE main platforms. Add to it the fact that the company had a solid order book, rising revenues and big expansion plans, and Gensol looked like a great investment.

Two companies—Blusmart Mobility Pvt. Ltd and Gensol Engineering Ltd.—are more closely intertwined than is immediately apparent.

Co-founded by Jaggi and his brother Puneet, along with Punit Goyal in 2019, Blusmart was among the earliest ride-hailing companies in India to take on Uber and Ola with an all-electric fleet. Backed by the venture-capital arm of energy giant BP, Blusmart was valued at US$134 million in April 2023.

The biggest car supplier for Blusmart, though, is Gensol itself—accounting for two-thirds of its fleet. And Blusmart is Gensol’s largest customer in the leasing business by a distance.

In other words, the relationship between the two has served them both well. But the leasing arrangement seems to favour Blusmart at the expense of Gensol’s minority shareholders.

Clues on issue unfolding in company operations

Something wasn’t quite adding up beneath the surface. And it all started bubbling up when two ratings agencies, ICRA and Care Ratings, recently downgraded its credit ratings.

First up is the fact that Gensol has huge debts to pay – about ₹1,146 crores. Compare this to its reserves and equity of ₹589 crores and you get a debt-to-equity ratio of about 2x (a sign of financial stress). The bigger problem? It’s struggling to pay back its loans (which means troubles in cash flows). Even murkier? GEL has been telling rating agencies that all debts are being paid on time. So think about it – if a company starts doctoring its paperwork to appear financially stable, it raises big questions about what else could be hidden. It throws the governance and credibility in question. And when lenders and banks lose trust, funding dries up quickly.

1. Credit rating downgrade

In early March, two credit rating agencies – Care Ratings and ICRA – downgraded Gensol’s ratings. Care Ratings downgraded long-term and short-term bank facilities from BB+ (Stable) to D and ICRA downgraded long and short term loan from BBB- (Stable) to D. The “D” rating stands for default status. The probe showed the first instance of default by Gensol on December 31, 2024, even as the company submitted statements to the CRAs certifying there was no delay or default in servicing any loans. Gensol had concealed facts regarding its debt servicing track record. Delays in servicing debt to Blusmart bondholders and a rise in share pledge, were the red flags.

2. Drop in promoters holding and increase in promotor holding pledge

A sharp fall in promoter holding in Gensol  to 35% as of March 31, 2025. This is nearly half of the 62.65% stake promoters, Anmol Singh Jaggi and Puneet Singh Jaggi, held at the end of December 31, 2024. The promoter holding has come down while the debt in the company has risen substantially from Nil in FY17 to  ₹1,045 crore in the first half of FY25. Promotor holding pledge increased  to more than 80%. SEBI flagged the risk of promoter shareholding falling further, thereby increasing the stake held by the public.

3. Senior Management Exit

Gensol saw a slew of high-profile exits. Gensol CFO Ankit Jain resigned on March 6, indicating that all was not well with the company. After Sebi’s report, three independent directors have resigned.

4. Corporate Governance issue

Sebi has accused Gensol of misleading them, credit rating agencies, lenders and investors by submitting forged Conduct Letters. It stated that there is prima facie evidence of a blatant violation of rules of corporate governance. Sebi’s probe highlighted how the promoters used the company’s fund for personal expenses. The probe stated an alleged misuse of nearly `262 crore, which was a major part of the `978 crore loan from IREDA and PFC. The loan was meant to purchase 6,400 EVs for leasing to BluSmart. Only 4,704 EVs were acquired. A part of these funds were used to purchase real estate, including an ultra-luxurious apartment in DLF Camellias. Other expenses included golf equipment, luxury items and credit card payments. BluSmart’s ops stopped , it can’t pay lease rental to parent firm

Industry views:

• CEO of an EV company, requesting anonymity, said he was surprised by Sebi’s revelations. Jaggi brothers were building something great from India. BluSmart was perhaps the only ride hailing company which had a loyal customer base. Its abrupt closure is shocking for the industry. He said such incidents give a negative image to the country among global investors.
• Ace investor Vijay Kedia said Gensol is not the sole company that is riddled with such issues, there are many more hiding in the cupboard. While Kedia refrained from taking names, he hoped that by the time other scams come out it’s not too late.
• Aman Gupta, co-founder and CMO of boAt and Sabeer Bhatia, co-founder of Hotmail spoke about the burning topic. Gupta described Gensol fraud as a “much-needed reality check” for the start-up ecosystem – founders, investors, employees and customers alike. He added that the incident has dented trust in the ecosystem.
• The issue is that there is no clear documentation which shows that vehicles are the underlying assets. It is looking like all these debentures were actually issued on the basis of cash flow from the business,” said the founder of an online wealth management platform who has exposure to the entire issue.
• The Sunday Guardian mentions – There is failure of officials at PFC and IREDA in protecting public money from misuse and ensuring the integrity of their lending practices has come into focus.

This brings up a few questions…

Why did ratings agencies take so long to flag these issues? Were there red flags earlier that the market simply ignored?

Next up, how can retail investors spot these troubles before it’s too late? This is especially crucial for SME-listed companies transitioning to the main market. Many of them lack long-established track records, making them riskier bets. And in Gensol’s case, the debt buildup, promoter pledging, and struggling subsidiaries should have been ringing alarm bells. And instead of hoping for a turnaround, it would have been wiser to look elsewhere.

Way head?

And lastly, apart from the clarifications, what’s the company doing to make good for shareholder losses for the financial mismanagement which was on their part because of excessive borrowing and share pledging? Are the promoters going to put in their personal funds and buy some shares from the open market to give a vote of confidence and bring some relief in the stock’s downfall?

Well, it needs to prove it can consistently repay debt—not just talk about liquidity. It must show real profitability growth, not just wave around an order book that may or may not materialise into revenue. And its promoters need to step up, reduce their pledged shares or buy more stock to show they have skin in the game.

In the case of default, debenture holders are in the same situation as lenders to BluSmart like Power Finance Corporation (PFC) and Indian Renewable Energy Development Agency (Ireda). They may get repaid only once they can take over the company’s vehicles that have been hypothecated to the lenders. Blusmart bondholders may invoke immediate repayment provisions.

So yeah, only time could tell if Gensol and Blusmart can turn things around.