Burnt by BluSmart: Gensol meltdown puts solar energy solutions at risk

Ride-hailing commuters have suddenly discovered that BluSmart is in the process of shutting down. There is a lot of anxiety among users waiting for refunds of cash parked in the BluSmart digital wallet.

 

The startup, with its all-electric vehicle (EV) fleet, had a reputation for efficient, affordable service — with clean, quiet vehicles and polite drivers who knew the basics of navigation. The green branding didn’t hurt. BluSmart introduced a new business model, with the fleet fully owned by the company, along with charging infrastructure. Drivers worked shifts and were paid wages on an hourly basis. In other ride-hailing services, it’s a lottery in terms of vehicle cleanliness, and passengers are inured to capricious cancellations, and drivers who cannot read maps.

 

Startups supported by venture capitalists and private equity investors accept large cash burns and running losses, so long as there’s high growth rates. Scaling up is the dominant mantra, since scale equates to valuation — and high valuation allows early investors to cash out at big multiples. Uber has an asset-light model. The vehicle is owned by an individual (often the driver). Uber has incurred global losses for many years.

 

Quite a few people were examining the BluSmart model with some curiosity. Could the finances work for BluSmart, in the sense of eventually generating positive profit margins? An EV is more expensive than the equivalent internal combustion vehicle. Capital costs are higher (despite the subsidies).

 

The charging infrastructure needed to provide city-wide coverage also involves capital outlay and figuring out a hub model with a centrally charging location, or setting up charging infra in many locations. Can the company defray some costs and generate another revenue stream by sharing the charging infra with other users? The backend, which matches ride requests to available vehicles, has to take longer recharging periods into account, making the IT more complex.

 

However, subsidised electricity charges for EVs are lower than CNG, diesel or petrol. Moreover, EVs are low-maintenance. There are fewer moving parts, which means less in terms of mechanical repair and maintenance costs. But there is a large recurring cost every so often, when the battery needs replacement.

 

Balancing and offsetting all these factors is a difficult task — and sadly, we are unlikely to ever receive clear answers about the business viability of BluSmart. In March, BluSmart said it expected to turn a profit within the next six quarters. Gross revenue for October-December 2024 was ₹176 crore, and for April 2024-January 2025, revenues increased 72 per cent year-on-year to ₹514 crore.

 

BluSmart is not winding down due to operating losses. It is in trouble because its promoters have been indicted by the Securities and Exchange Board of India (Sebi) in a strongly worded order alleging misuse of funds and loan diversions in another connected company, the listed Gensol Engineering.

 

Sebi alleged that money raised for Gensol’s EV business was diverted to purchase a luxury apartment and other personal indulgences. The Jaggi brothers, who are the promoters, have been barred from participating in the securities market, holding directorial or key managerial positions, or trading in listed securities. Sebi’s order mandates a forensic audit of Gensol, citing a “complete breakdown” of governance and internal controls, and accusing the promoters of using Gensol as a “personal piggybank”.

 

Gensol offers solar energy solutions as its core competency. It also raised money for BluSmart. The BluSmart EV fleet is actually owned by Gensol. Gensol had raised ₹978 crore in loans, of which ₹665 crore was allocated to buying 6,400 EVs to be leased to BluSmart. This might seem like smart financial engineering. Gensol buys the vehicles, and leases them to BluSmart, which pays monthly rentals. But Sebi alleges that “layered transactions” were employed to divert those funds. A regulatory filing in February 2025 revealed only 4,704 EVs had been purchased, and only ₹568 crore had been utilised. Where is the remaining cash? Sebi says it’s been diverted for purchases of luxury flats and other such expenses. I’m sure we’ll see more details emerging soon. Meanwhile, investors are licking their wounds.

 

This sounds like a good old-fashioned scam in a new-age business. The problem is, such scandals tend to be the kiss of death for new-age industries. We’ve seen it happen recently with l’affaire Byju, which destroyed the IT-enabled edutainment sector. The Gensol debacle might just take down solar energy solutions and ride-hailing in its wake.