BluSmart-Gensol EV Scam: The Investors Who Saw Red Flags Before the Collapse

As the dust begins to settle on the explosive ₹262 crore BluSmart-Gensol electric vehicle scam, a sobering truth is emerging: while the public reels from the revelations, some seasoned investors had already sensed the storm—and quietly exited before the collapse.

One such voice is Mrunal Jhaveri, Founding Partner at Ice.VC and an early investor in BluSmart. In a candid LinkedIn post, Jhaveri revealed that his firm had exited the company well before SEBI’s bombshell order hit the headlines.

“We exited early because we were paying attention to the footnotes,” Jhaveri wrote. “Investor updates looked solid—revenue up, fleet expanding—but lacked clarity on burn, margins, or sustainability. Tough questions went unanswered. Founder access dried up. The internal signals didn’t match the external story.”

The Great Disconnect: Pitch vs. Practice

BluSmart was once the poster child of India’s green mobility revolution—an all-electric ride-hailing platform with institutional backers, climate credentials, and startup swagger. But behind the glossy decks and smooth PR, troubling cracks had begun to appear.

“BluSmart and Gensol were separate on paper, but run by the same people with money flowing in unclear ways,” Jhaveri said. “The model, once hyped as future-forward, started looking unsustainable.”

Ice.VC pulled out. And then came the storm.

The SEBI Bombshell: A Scam in Broad Daylight

On April 10, SEBI issued an interim order after months of investigation into Gensol Engineering. The findings were damning.

Between 2021 and 2024, Gensol raised ₹977 crore from public institutions like IREDA and PFC to procure 6,400 electric vehicles. Only 4,704 were actually bought, valued at ₹568 crore.

The remaining ₹262 crore?

Allegedly siphoned off—used for luxury flats, golf gear, foreign travel, unrelated companies, and even personal credit card bills. According to SEBI:

• ₹43 crore went into a premium apartment at Gurugram’s The Camellias
• ₹26 lakh spent on a TaylorMade golf kit from the US
• ₹11 crore transferred to relatives of promoters
• ₹1.86 crore spent abroad in foreign currency
• Additional funds flowed to entities like Third Unicorn and BatX Energies

“The company’s funds were routed to related parties and used for unconnected expenses—as if the company’s funds were the promoters’ piggy bank,” SEBI’s order stated.

The Bigger Problem: Founders, Funding & Governance

The BluSmart-Gensol episode isn’t just a case of individual wrongdoing—it’s a symptom of deeper governance failures in India’s booming startup ecosystem.

Manish Modi, founder of Mastermind Capital, revealed his firm had declined to invest in BluSmart after red flags emerged during due diligence.

“Many founders have never handled this kind of capital before. When governance is weak, they gravitate toward excess—and eventually fraud.”

Others echoed the concern.

• Shivam Kumar, a startup founder: “Scandals like BluSmart and Byju’s damage trust across the ecosystem. Honest founders now face suspicion.”

• Madhvi Datwani, an angel investor: “Transparency behind the scenes matters more than big press releases.”

Investors described how BluSmart and Gensol—though technically distinct—operated with blurred lines. Shared leadership. Overlapping financials. Opaque fund utilization. Reduced founder access. The warning signs were there.

Public Institutions in the Crosshairs

The scam has also raised tough questions about the role of public sector lenders like IREDA and PFC.

“Was there no finance controller reporting to investors? Were funds not disbursed to EV dealers directly? Why was so much cash parked without purpose?” asked industrialist Mohan Dharmarajan.

That nearly ₹1,000 crore could be raised and misused with minimal scrutiny has sparked calls for accountability—not just from founders, but institutions, auditors, and investors alike.

What Happens Now?

BluSmart’s website is still live, but its app has stopped accepting bookings. Insiders say the company may pivot into a fleet supplier for aggregators like Uber—a major retreat from its bold ambitions.

Gensol’s stock, meanwhile, has crashed over 80% since January 2025. SEBI has barred key promoters from the securities market, and more legal action is expected.

Time for Reform: Stronger Oversight, Stricter Rules

The scandal has reignited calls for systemic reform in how startups are funded and monitored. Some proposed measures:

• Mandatory quarterly audits of fund utilization for any startup raising over ₹1 crore

• Independent audit reports to be shared with investors and regulators

• Stricter accountability for VCs, statutory auditors, and financial controllers

“Founders can’t be the only ones taking the fall,” said CEO Suunil L. “There are enablers in the system—auditors, investors, institutions—who looked the other way.”

A Wake-Up Call for India’s Innovation Economy

As the BluSmart-Gensol saga unfolds, one truth is becoming clear: valuation is not validation. In the rush for unicorn status, governance took a back seat.

This scandal could be a turning point—if the ecosystem chooses to learn from it.

“Valuation is temporary. Integrity is forever,” wrote Mrunal Jhaveri—a line that’s become a rallying cry.

The BluSmart episode is no longer just a startup gone wrong — it’s a litmus test for how seriously India takes accountability in the high-growth, high-risk world of new-age entrepreneurship. It exposes what happens when ambition outpaces governance, when storytelling masks financial reality, and when capital flows unchecked. As India doubles down on its innovation economy, this is more than a scandal — it’s a moment of reckoning. Outrage must give way to reform. Because in the end, it’s not sky-high valuations that define a startup’s legacy — it’s the values that built it.