Concerns over corporate governance in India’s booming startup ecosystem have resurfaced with force following explosive revelations of financial misconduct at Gensol Engineering and its affiliate, BluSmart Mobility. Founders Anmol Singh Jaggi and Puneet Singh Jaggi have been barred from the securities market by the Securities and Exchange Board of India after an investigation revealed the diversion of company funds for personal use—a breach that has sent shockwaves through the clean mobility sector and beyond.
BluSmart, the poster boy of India’s electric vehicle revolution, has abruptly suspended operations in Mumbai, Bengaluru, and the Delhi-NCR region. The fallout from the Gensol debacle, coming on the heels of earlier governance failures at high-profile firms like Paytm Payments Bank and Byju’s, underlines a worrying trend: the regulatory apparatus has failed to keep pace with the rapid evolution of India’s startup landscape.
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What went wrong at Gensol-BluSmart?
At the heart of the Gensol controversy lies a familiar failure—flimsy corporate governance and the blurring of lines between personal and professional interests. BluSmart leased its EV fleet from third-party providers, with Gensol Engineering acting as the primary financier, securing large loans from state-backed institutions such as the Power Finance Corporation (PFC) and the Indian Renewable Energy Development Agency (IREDA).
Sebi’s preliminary investigation revealed that Gensol secured loans totalling Rs 978 crore, ostensibly to procure 6,400 electric vehicles. However, only 4,704 vehicles were actually purchased. The remaining Rs 262 crore, Sebi alleges, was siphoned off by the Jaggi brothers for personal expenses—a staggering misappropriation of public funds under the guise of corporate borrowing.
Sebi has censured the founders for treating a publicly listed company as a private fiefdom, with no regard for fiduciary duties or internal checks. A forensic audit has been ordered, and a detailed examination of the company’s financials is expected to follow. The regulator’s language was unequivocal: Gensol had suffered a complete collapse of internal controls and corporate governance.
A chilling signal to India’s startups
The implications of this scandal extend far beyond one company or sector. India’s startup ecosystem, already reeling from a funding slowdown, now faces a deeper crisis of credibility. Misuse of loans and opaque financial practices could make banks and investors even more risk-averse, choking off vital funding channels for legitimate startups.
Thousands of drivers employed through BluSmart, along with customers who stored money in its digital wallets, have been left in the lurch. The incident illustrates how the collapse of a single startup can have cascading effects across a broad stakeholder network—employees, lenders, customers, and the public. The need for better oversight and corporate accountability has never been more urgent.
A call for governance reform
The Gensol episode has reignited calls for tougher regulation, stronger internal controls, and a fundamental shift in how startups are governed. Just last week, Union Minister Piyush Goyal urged Indian startups to focus on accountability and transparency. While some new-age firms—such as BharatPe, which weathered its own governance storm—have taken corrective action, many continue to chase growth at the cost of ethics and compliance.
To be fair, India has made strides in improving corporate governance. The 2013 Companies Act mandated independent directors and whistleblower protections. In 2023, the Confederation of Indian Industry (CII) introduced a Startup Governance Charter. But these measures will remain toothless unless founders and boards take governance seriously and regulators enforce accountability with consistency.
Traditional firms, often derided as staid, offer lessons in long-term stewardship and conservative financial management—virtues increasingly forgotten in a landscape obsessed with blitz-scaling. It is time that India’s startup founders absorb these lessons, not just the valuation hype.
Culture, speed, and the illusion of scale
The BluSmart case is symptomatic of a deeper cultural problem. Startups, often run like personal ventures with little board oversight, are operating in an environment where aggressive marketing and inflated growth claims are rewarded over fundamentals. The media, too, bears some blame—glamorising unicorns and their founders with little scrutiny or independent verification.
Influencers promoting startups for personal gain, and journalists acting as brand ambassadors rather than watchdogs, have contributed to the opacity. A course correction is long overdue. The media must return to its core function—scrutinising, not celebrating, corporate conduct.
SEBI’s litmus test—and the stakes for India’s growth story
For Sebi, the coming months will be a crucial test. One more failure could severely damage the fragile trust that underpins India’s capital markets and startup investments. The broader Indian growth story cannot rest on companies where governance is a façade and financial integrity is compromised.
India’s startup ecosystem, once the poster child of digital innovation and global investor confidence, is now at a crossroads. Without serious introspection and reform—by founders, regulators, boards, and the media alike—the promise of India as a hub for innovation risks being eclipsed by a trust deficit too large to overcome.
The country must decide what kind of startup culture it wants to foster: one built on hype and shortcuts, or one that can stand the test of time.