Governance failure at Gensol Engineering/BluSmart
Rapidly growing electric mobility startup BluSmart’s parent company, Gensol Engineering Ltd (GEL), is under intense scrutiny from the Securities and Exchange Board of India (SEBI) for alleged financial misconduct. In an interim order, SEBI has accused the company’s promoters of treating the publicly listed company as their personal enterprise. According to SEBI’s findings, large sums intended for business purposes were diverted by the promoters for personal luxuries. Funds were also allegedly funneled to close relatives.
At the core of SEBI's concerns is the misuse of term loans sanctioned by two government-backed lenders — the Indian Renewable Energy Development Agency (IREDA) and the Power Finance Corporation (PFC). Gensol secured a total of Rs. 977.75 crore, with Rs. 663.89 crore earmarked specifically for the procurement of 6,400 electric vehicles. These EVs were meant to be leased to BluSmart, a related entity. SEBI's analysis revealed that some of these funds were used for purposes entirely unrelated to the sanctioned loans.
Following SEBI order, manufacturing facility visit by an NSE official revealed that there was no manufacturing activity at the plant. Earlier the company informed stock exchanges on January 28, 2025, that it had received pre-orders for 30,000 units of its newly launched EVs showcased at the Bharat Mobility Global Expo 2025. However, SEBI’s review revealed that these were only Memorandum of Understandings (MoUs) with nine entities for 29,000 vehicles. These MoUs did not mention pricing or delivery timelines. Therefore, it prima facie appeared that the company was making misleading disclosures to investors.
