How The BluSmart-Gensol Fiasco Is Wreaking Havoc For Retail Investors
KEY TAKEAWAYS
The BluSmart-Gensol fiasco has caused significant financial distress for retail investors, with Gensol Engineering's shares crashing over 50% and impacting over 1 lakh retail investors.
BluSmart's bond investors are considering invoking the 'Event of Default' provision due to covenant breaches, raising concerns about the company's ability to repay its debts.
Gensol Engineering has faced legal actions and a credit rating downgrade to 'D' due to alleged defaults and corporate governance issues, further complicating the situation for investors.
The crisis has highlighted lapses in due diligence and the risks associated with unlisted and unsecured corporate bonds, prompting scrutiny from regulatory bodies like SEBI.
SEBI is expected to examine the unlisted bond market more closely to protect retail investors from high-risk investments, emphasizing the need for improved regulatory frameworks.
It’s fair to say that the last month must have felt like one long year for BluSmart and Gensol Engineering’s investors. Ever since the BluSmart-Gensol Engineering fiasco has come to light, it has been wreaking havoc for its investors, who are not just HNIs, but even retail ones like you and me.
Gensol’s Shares Have Crashed 50%
The past month has seen Gensol Engineering’s shares crash more than 50%.
This crash in Gensol’s shares has become a big problem especially for the 13,000 retail investors who had recently bought this stock in the Jan-March 2025 quarter. As per a Mint report, there are over 1 lakh retail investors of Gensol’s stock. The future of their investments seems to be staring at heavy losses.
But the damage is not restricted to just the equity investors of Gensol.
Our Community Member Confirmed BluSmart’s Default
One of ALT Investor community’s members had shared this email which he had received from BluSmart, confirming the default.
What BluSmart’s Bond Investors Are Doing Now?
As you might have read recently as well, BluSmart’s bond investors have been planning to invoke the ‘Event of Default’ provision and seek immediate repayment of their money, thanks to the power investors have to take action in case of such covenant breaches.
With BluSmart being in knee-deep trouble, investors would obviously be worried about their invested money, right?
But what exactly is the case right now? While BluSmart makes desperate attempts to stay afloat by seeking climate funds to revive operations, let us understand whether Gensol & BluSmart have been defaulting on their repayments or its a smooth sail so far for their investors?
Gensol’s Default In Case Of Tap Invest
Last week, Tap Invest had reportedly sent out a communication to investors, wherein it had mentioned that it had been sending payment reminders since March 31st and had even recently in April last week attempted to trigger the NACH mandate, but it was returned due to insufficient balance in Gensol’s account. As a next step, the OBPP had mentioned that it has formally initiated legal proceedings against Gensol by serving a legal notice to them, thus giving them 15 days to propose a resolution mechanism for clearing their dues.
Also, in mid-April 2025, SEBI had banned the founders of Gensol-Anmol Singh Jaggi and Puneet Singh Jaggi, from holding key positions in the company amid allegations of defaulting on debt repayment related to EV purchases for BluSmart.
The Big Question Troubling The Investors
Investors whose money is stuck with BluSmart have a big question-Where was the due diligence? Some members of our ALT Investor community too have been asking the same question.
In the BluSmart case, it was found that the electric cars that the EV-ride hailing startup was operating, were actually bought by Gensole Engineering, and reportedly hypothecated to public sector enterprises Power Finance Corporation (PWFC) and IREDA (Indian Renewable Energy Development Authority).
Hence, investors who had bought these NCDs (Non-convertible debentures) believe that there was a big lapse in terms of due diligence by some of the platforms which sold the debt to them. The platforms had sold these instruments to investors without keeping any hypothecation on the vehicles, and what is worrying even more is that the underlying security against these loans was future cash flow. So, in current circumstances when BluSmart’s business itself has stopped, cashflow is automatically impacted, thus raising concerns on its ability to repay the debt repayments.
Yubi Among Other Platforms That Sold BluSmart’s Bonds
It is noteworthy that one of India’s largest bond houses, Yubi, as well as wealth management startup Centricity and revenue-based financing startup Klub have reportedly been among the platforms which sold BluSmart’s debt instruments to retail investors as well as HNIs. This is as per an ET report which cited documents sourced from regulatory filings done with the MCA.
Note: In January 2025, Refex Green Mobility Limited, a subsidiary of Refex Industries, had entered into a strategic agreement with Gensol Engineering Limited to acquire 2,997 electric four-wheelers (e4Ws). But just a couple of months later, it scrapped its proposed takeover of the 2,997 electric vehicles from Gensol Engineering Limited. As per a report, the decision was announced in a regulatory filing in March 2025, with the reason being the evolving commitments for both the involved parties which eventually made it difficult to complete the transaction within the planned timeframe.
A Warning Sign: Gensol’s Credit Rating Was Downgrade To ‘D’
In early March 2025, credit rating agency ICRA had announced a downgrade in Gensol Engineering’s ratings to ‘D’, following the feedback received from the company’s lenders about the ongoing delays in debt servicing.
ICRA had mentioned that certain documents shared by Gensol, on its debt servicing track record, were apparently falsified, which raises concerns on its corporate governance practices, including its liquidity position.
You can read more about it here-https://www.icra.in/Rationale/ShowRationaleReport?Id=133471
A Wakeup Call For SEBI?
In the wake of the crisis in which BluSmart is after selling over Rs 100 crore of unlisted and unsecured corporate bonds to not just HNIs but also retail investors, India’s market regulator SEBI is reportedly set to scrutinize the unlisted bond market, as per a recent report.
Given that SEBI is generally not in favour of allowing retail investors to have exposure to unlisted and unsecured products, since they are typically high risk ones, the market regulator may seem to now be looking deeper if there was any misselling.
If you remember, in November 2024, SEBI had asked AltGraaf, Tap Invest and Stable Investments to stop selling any unlisted bonds and NCDs (non-convertible debentures) on their platforms. You can check out our detailed take on what that warning mentioned.
And before that, in November 2022, SEBI had clearly issued OBPP (Online Bond Platform Provider) regulations to regulate startups selling fixed income instruments like corporate bonds to retail investors.
So, SEBI has been taking steps to ensure retail investors get exposed only to listed corporate bonds and not the unlisted ones. Now, it remains to be seen if and when SEBI takes any steps in the wake of this whole BluSmart fiasco, and perhaps prevent any such thing from happening in the future.
Conclusion
It’s fair to say that the BluSmart-Gensol fiasco has highlighted significant challenges and risks for retail investors, particularly in the realm of unlisted and unsecured corporate bonds. The situation has underscored the importance of due diligence and the potential consequences of lapses in corporate governance.
With Gensol's credit rating downgraded and legal proceedings initiated, investors face uncertainty and potential losses. This crisis serves as a wake-up call for regulatory bodies like SEBI to scrutinize the unlisted bond market more closely and ensure that retail investors are protected from high-risk investments. As the situation unfolds, it remains crucial for investors to stay informed and for regulatory frameworks to adapt to prevent similar occurrences in the future.
Please note that this is an opinion blog and not an official research or investment advice. This blog aims to help retail investors make an informed decision and get educated around the world of alternative investments. The blog neither encourages nor discourages you from investing in any particular platform or property or any asset class.
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