<p>Bengaluru: Earlier this month, markets regulator Securities and Exchange Board of India (Sebi) published an interim order against the Jaggi brothers, promoters of Gensol and popular ride-hailing app BluSmart, explaining how they misled investors, lenders, credit rating agencies and regulators, siphoning off Rs 262 crore. </p>.<p>This revelation has triggered questions on the role of auditors and independent directors for governance in startups. In this edition of <em>DH Deciphers</em>, Sonal Choudhary breaks down the detailed order and what comes next</p>.<p><strong>What did Sebi’s order say about Anmol Singh and Puneet Singh Jaggi?</strong></p>.<p>SEBI received a complaint in June 2024, relating to manipulation of share price and diversion of funds from listed solar firm Gensol Engineering Limited (GEL). The Jaggi brothers are the promoters of the company and also the founders of BluSmart Mobility. The company’s financials seemed promising as it grew impressively over the past few years, also fetching funding and partnerships from BP Ventures, celebrities and Tata Group companies, respectively. </p>.<p>While Gensol did not have a stake in BluSmart, a majority of the latter’s fleet was owned by Gensol. The red flags first appeared when credit rating agencies Care and ICRA informed Sebi that GEL hadn’t provided them with the loan statements from lenders IREDA and PFC when asked for and instead were shared conduct letters which stated that the company was regular in its debt servicing. However, upon seeking confirmation from IREDA and PFC, both the lenders categorically denied having issued such letters.</p>.<p>Sebi examined Gensol’s debt servicing status and found that an amount of Rs 262.13 crore, meant for buying EV cabs, remained unaccounted for. Turns out that these funds were used for purposes like personal expenses of the Jaggi brothers - purchase of a luxury apartment, transfer of funds to their relatives among others.</p>.<p><strong>What outcomes followed Sebi’s order?</strong></p>.<p>Sebi has restrained the Jaggi brothers from holding the position of a key managerial personnel or director in Gensol and has restrained them from buying, selling or dealing in securities. Gensol has also been directed to put on hold the stock split announced by it. Sebi will also appoint a forensic auditor to examine the books of accounts of Gensol and its related parties. Following the order going public, three independent directors also resigned from the company. Meanwhile, Gensol’s stock price hit the lower circuit limit, dropping 5%. </p>.<p><strong>How big is BluSmart operations and what happens to customers’ wallet money? </strong></p>.<p>BluSmart, which was considered to be a viable and somewhat more premium option to the Uber-Ola duopoly, had a fleet of 8,500 cars across Bengaluru, Mumbai and Delhi-NCR. However, it has suspended its operations. </p>.<p>BluSmart had sent an email to customers on Thursday, with the clarification, “We’ve decided to temporarily close bookings on the BluSmart app.” It added that it will initiate a refund of the customers’ money in the app’s wallet within the next 90 days if services do not resume before then.</p>.<p><strong>What is the possible future for BluSmart?</strong></p>.<p>Experts suggest that companies need to have tighter control over funds, with directors playing the role of checks and balances. Moreover, on an ecosystem level, there ought to be more governance over passing cheques, keeping track of loans and other funds. However, analysts believe that although it will be a herculean task to bring BluSmart back into the picture again, it is likely that the company will survive.</p>
<p>Bengaluru: Earlier this month, markets regulator Securities and Exchange Board of India (Sebi) published an interim order against the Jaggi brothers, promoters of Gensol and popular ride-hailing app BluSmart, explaining how they misled investors, lenders, credit rating agencies and regulators, siphoning off Rs 262 crore. </p>.<p>This revelation has triggered questions on the role of auditors and independent directors for governance in startups. In this edition of <em>DH Deciphers</em>, Sonal Choudhary breaks down the detailed order and what comes next</p>.<p><strong>What did Sebi’s order say about Anmol Singh and Puneet Singh Jaggi?</strong></p>.<p>SEBI received a complaint in June 2024, relating to manipulation of share price and diversion of funds from listed solar firm Gensol Engineering Limited (GEL). The Jaggi brothers are the promoters of the company and also the founders of BluSmart Mobility. The company’s financials seemed promising as it grew impressively over the past few years, also fetching funding and partnerships from BP Ventures, celebrities and Tata Group companies, respectively. </p>.<p>While Gensol did not have a stake in BluSmart, a majority of the latter’s fleet was owned by Gensol. The red flags first appeared when credit rating agencies Care and ICRA informed Sebi that GEL hadn’t provided them with the loan statements from lenders IREDA and PFC when asked for and instead were shared conduct letters which stated that the company was regular in its debt servicing. However, upon seeking confirmation from IREDA and PFC, both the lenders categorically denied having issued such letters.</p>.<p>Sebi examined Gensol’s debt servicing status and found that an amount of Rs 262.13 crore, meant for buying EV cabs, remained unaccounted for. Turns out that these funds were used for purposes like personal expenses of the Jaggi brothers - purchase of a luxury apartment, transfer of funds to their relatives among others.</p>.<p><strong>What outcomes followed Sebi’s order?</strong></p>.<p>Sebi has restrained the Jaggi brothers from holding the position of a key managerial personnel or director in Gensol and has restrained them from buying, selling or dealing in securities. Gensol has also been directed to put on hold the stock split announced by it. Sebi will also appoint a forensic auditor to examine the books of accounts of Gensol and its related parties. Following the order going public, three independent directors also resigned from the company. Meanwhile, Gensol’s stock price hit the lower circuit limit, dropping 5%. </p>.<p><strong>How big is BluSmart operations and what happens to customers’ wallet money? </strong></p>.<p>BluSmart, which was considered to be a viable and somewhat more premium option to the Uber-Ola duopoly, had a fleet of 8,500 cars across Bengaluru, Mumbai and Delhi-NCR. However, it has suspended its operations. </p>.<p>BluSmart had sent an email to customers on Thursday, with the clarification, “We’ve decided to temporarily close bookings on the BluSmart app.” It added that it will initiate a refund of the customers’ money in the app’s wallet within the next 90 days if services do not resume before then.</p>.<p><strong>What is the possible future for BluSmart?</strong></p>.<p>Experts suggest that companies need to have tighter control over funds, with directors playing the role of checks and balances. Moreover, on an ecosystem level, there ought to be more governance over passing cheques, keeping track of loans and other funds. However, analysts believe that although it will be a herculean task to bring BluSmart back into the picture again, it is likely that the company will survive.</p>