BluSmart, previously the world’s largest fully electric, app-based ride-hailing service, has halted new cab bookings as financial challenges deepen. Known for its high service standards, including well-maintained vehicles and courteous drivers, the company’s rapid decline highlights significant issues within its business model and governance.
BluSmart was established to transform urban mobility by adopting electric vehicle technology. It fueled the imaginations of venture capitalists and captured the hearts of early adopters and eco-conscious consumers. The company’s fortunes have turned dramatically for the worse. With operations suspended, hundreds of users have taken to social media over the past week to express their anger and sadness.
BluSmart’s business model is based on long-term leasing of its fleet. It mainly imports these vehicles from Gensol Engineering Limited (GEL), a publicly listed company with a focus on solar energy and EV leasing. The Jaggis family does run GEL, but has recently suffered more dramatic consequences due to BluSmart’s poor fiscal administration. BluSmart has more recently defaulted on over $1 million in payments to GEL. Consequently, credit rating agencies CARE Ratings and ICRA have downgraded GEL’s investment grade.
These downgrades stemmed directly from BluSmart’s loan defaults, revealing systemic flaws in the company’s financial governance. The patchwork implementation has led to criticism and skepticism from state and federal regulatory agencies and industry experts.
As corporate governance expert, Dr. Aniruddha Malpani pointed out, this was the time for independent directors of BluSmart to step up.
“The independent directors have a ‘fiduciary responsibility, they need to be answerable’,” – Dr. Aniruddha Malpani
Even setting aside the breakdown of GEL’s internal controls, the disastrous state of corporate governance standards at least deserves mention. Reacting to this shocking situation, the Securities and Exchange Board of India (Sebi) expressed.
“What has been witnessed in the present matter is a complete breakdown of internal controls and corporate governance norms in Gensol, a listed company,” – Sebi
Undoubtedly, BluSmart’s management are still reeling from the aftermath of these incidents. It’s too soon to tell how many jobs will be affected, or whether they can do anything to restore public confidence in their service. Their unexpected closure has lost investors millions of dollars in previously put capital. This dangerous state of affairs poses threatening implications for the advancement of electric ride-hailing services in India.
“The company’s funds were routed to related parties and used for unconnected expenses, as if the company’s funds were promoters’ piggy bank,” – Sebi
The upcoming closure has serious economic ramifications. It ignited intense outrage from passengers who relied on BluSmart as a transparent solution for their everyday travel needs. Social media platforms have flooded with posts expressing anger and sadness at the loss of a service that was seen as an environmentally friendly alternative to traditional ride-hailing platforms like Uber.
BluSmart’s downfall serves as a cautionary tale about the importance of financial management. It highlights the necessity of strong corporate governance at the forefront of new business models. As the electric vehicle market expands in India, companies must prioritize transparency and accountability to maintain investor and consumer trust.
Competition among ride-hailing services in India is intensifying quickly. While companies like Uber continue to dominate, BluSmart’s failure emphasizes the challenges that new entrants face in establishing themselves sustainably.
The landscape for ride-hailing services in India is shifting rapidly. While companies like Uber continue to dominate, BluSmart’s failure emphasizes the challenges that new entrants face in establishing themselves sustainably.