BluSmart, co-founded by Anmol Singh Jaggi and Puneet Singh Jaggi, has rapidly expanded its fleet to over 7,000 EVs across Delhi NCR and Bengaluru. The company has also achieved significant milestones, such as carbon credit accreditation from Verra . However, its growth trajectory has been marred by governance challenges.
The Jaggi brothers also lead Gensol Engineering Ltd., a publicly listed company that has been under scrutiny for alleged financial mismanagement. The Securities and Exchange Board of India (SEBI) recently barred them from holding key positions in Gensol and participating in the securities market due to defaults on loans amounting to approximately ₹9.78 billion . These funds were primarily used to purchase EVs for BluSmart, raising concerns about the financial and operational interlinkages between the two entities.
The situation highlights several governance issues:
Lack of Transparency: The financial relationships between Gensol and BluSmart were not adequately disclosed, leading to questions about the use of public funds for private ventures.
Conflicts of Interest: The dual roles of the Jaggi brothers in both companies created potential conflicts, with decisions in one entity possibly benefiting the other unfairly.
Accountability Mechanisms: The absence of stringent oversight allowed for financial practices that may not align with shareholder interests or regulatory expectations.
These issues have had tangible consequences. Gensol’s stock has plummeted by about 75% since the downgrades, and the promoters have reduced their stake by 2.4% . Furthermore, BluSmart is reportedly considering a shift in its operational model, including a potential partnership with Uber, which may impact its future prospects.
In conclusion, the BluSmart case serves as a cautionary tale for startups, particularly in emerging sectors like EV mobility. It underscores the necessity for clear governance frameworks, transparent financial practices, and mechanisms to address conflicts of interest. Establishing strong corporate governance not only fosters investor confidence but also ensures sustainable growth and long-term success.
We, at Lawcify, have at all times, advised our clients to maintain highest level of Corporate Governance and ethical Management Practices to build sustainable and scalable business models.
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