India's market regulator, the Securities and Exchange Board of India (SEBI), has launched a probe into Gensol Engineering over alleged misuse of electric vehicle loans, with ride-hailing startup BluSmart Mobility also swept up in the investigation. The regulator has barred Gensol Engineering's founders, Anmol Singh Jaggi and Puneet Singh Jaggi, from holding key positions in the public-listed company and participating in the securities market while the agency investigates.

The Jaggi brothers, who also co-founded BluSmart Mobility, have been accused of redirecting substantial loan amounts for personal use, including buying luxury real estate on the outskirts of India's capital. According to SEBI's interim order, Gensol Engineering availed term loans of 9.78 billion Indian rupees (around $114 million) from the state-owned Indian Renewable Energy Development Agency and Power Finance Corporation. Of that, 6.63 billion rupees were set for purchasing 6,400 EVs to lease to BluSmart. However, the company acquired only 4,704 EVs for 5.68 billion rupees, with the remaining funds allegedly used for unrelated purposes.

Anmol Singh Jaggi has stated that the company is "fully cooperating" with the Indian regulator and is "putting together all the necessary documents and facts to clarify." Jaggi expressed confidence that once everything is reviewed properly, their position will be clear, and emphasized that the company has always believed in doing things responsibly. However, the regulator's allegations suggest that the company's founders were running the listed public company as if it were a proprietary firm.

The probe comes over a month after credit-rating agencies downgraded Gensol, raising concerns over the delays in the company's debt servicing and corporate governance practices. Meanwhile, BluSmart is struggling due to mounting cash burns and a lack of external capital. The startup shut down its service in Dubai, which was launched last year, and is currently exploring ways to sustain its business in India, which spans Delhi-NCR, Bengaluru, and Mumbai.

BluSmart had planned to pivot into a fleet partner for its arch-rival Uber, according to a report by the Indian newspaper Economic Times. Founded in late 2018 as Gensol Mobility, BluSmart started as an Uber fleet operator before emerging as an all-EV rival to Uber after starting its standalone operations before the COVID-19 pandemic. The startup has raised more than $486 million in total funding, per Crunchbase, and counts BP Ventures and Mayfield India Fund among its early investors.

Last year, BluSmart had a fleet of 6,000 EVs, including around 180 ZS SUVs from MG Motor and the remaining batch made up of Tata Tigor sedans. The startup planned to increase its fleet size to 10,000 EVs by year-end, but it did not reach the target. The company's struggles have been compounded by the lack of external capital, with a reported $100 million funding round failing to materialize earlier this year.

Gensol Engineering's stock tumbled more than 83%, last trading at 129 rupees shortly before the market closed on Tuesday. The investigation and allegations have raised concerns over the company's corporate governance practices and its ability to manage its debt obligations. As the probe continues, it remains to be seen how this will impact the future of Gensol Engineering and BluSmart Mobility.

The implications of this investigation go beyond the companies involved, highlighting the need for greater oversight and accountability in the electric vehicle industry. As India continues to push for greater adoption of EVs, it is essential that companies operating in this space are held to high standards of governance and transparency.