Gensol fast-charged Blu-Smart. But their ties are a governance puzzle

In Gensol’s EV financing enterprise, the corporate buys automobiles after which leases them to different corporations. Gensol acknowledges that it owns 2,997 EVs that are a part of Blu-Sensible’s fleet. But that’s not the whole story—Blu-Sensible’s fleet consists of 8,000 automobiles and Gensol, in keeping with folks Mint spoke to, owns a meaty share of this quantity.

Whereas Gensol didn’t disclose the general variety of automobiles it owns, and the quantity it leased to Blu-Sensible, a spokesperson for Blu-Sensible said that a number of lessors lease out autos to the experience hailing firm.

Based on two buyers courted by Blu-Sensible, two board members, and one proxy advisory agency government, Gensol’s lack of transparency about its shut ties with the cab-hailing firm, significantly across the cash spent on automobiles and loans granted, raises questions round Gensol’s company governance practices. Important particulars, together with the phrases of lease partnerships, stay shrouded in thriller.

Above all, a Mint investigation reveals that Gensol’s steadiness sheet has been used to construct Blu-Sensible’s enterprise even because the cab-hailing firm continues to be a privately owned one.

Mint reviewed Gensol and Blu-Sensible’s financials, together with an funding proposal made by the electrical cab-hailing service to potential buyers in October final 12 months. We additionally spoke with seven executives to piece collectively this story.

Rising collectively

Jaggi based Gensol in 2012 as a strategic advisory agency. By 2017, he began a photo voltaic engineering and procurement enterprise. Two years later, in 2019, Gensol went public. The identical 12 months, Jaggi began a new enterprise division, Gensol EV Lease Pvt. Ltd, to finance EVs. Exterior of Gensol, in 2019, Jaggi additionally arrange Blu-Sensible Mobility Ltd.

View Full Picture

First, allow us to look at Gensol’s EV lease enterprise and Blu-Sensible’s journey to know the ties between the 2 corporations higher.

Up till 2022, Gensol’s EV lease enterprise was nearly a non-starter. Based on Gensol’s investor shows, the enterprise reported ₹4 crore in income in FY20; ₹3 crore in FY21, and ₹5 crore in FY22. By the tip of March 2022, the EV enterprise owned a little over 700 automobiles, in keeping with a former Gensol government who didn’t wish to be recognized.

Based on the identical government, Blu-Sensible began with 70 automobiles in 2019. In its early days, it acquired a $3 million funding from angel buyers. By March 2021, it had 400 automobiles and hit an annual recurring income (ARR) of $1 million. The variety of automobiles on its platform greater than doubled to 900 in FY22, when its ARR touched $8 million.

Gensol’s EV enterprise confirmed its first actual progress in FY23 when it reported ₹41 crore in income, adopted by ₹134 crore in FY24.

Progress at Blu-Sensible additionally picked up throughout this time. It ended FY23 with 3,100 automobiles and an annual income fee of $29 million, whereas the variety of automobiles greater than doubled to 7,300 final 12 months. Its ARR totalled $60 million.

In April-December 2024, 72.3%, or ₹764 crore, of Gensol’s ₹1,056 crore income was generated from the photo voltaic EPC enterprise. The remaining 27.7%, or ₹294, got here from the EV leasing arm, in keeping with the corporate’s newest investor presentation.

Gensol was, and continues to be, Blu-Sensible’s largest automotive provider, accounting for over 87% of its 8,000 fleet, in keeping with a former Gensol government who didn’t wish to be recognized. Consequently, Blu-Sensible has emerged as Gensol’s largest buyer for its EV lease enterprise, accounting for over 90% of the ₹294 crore enterprise it acquired within the first 9 months of the present monetary 12 months, the manager additional talked about.

The gas

So, the place did Gensol get the cash from to broaden its EV leasing enterprise, which, in flip, fuelled Jaggi’s privately held electrical cab enterprise?

In 2021, Gensol first acquired ₹35.55 crore from the Indian Renewable Power Improvement Company Ltd (Ireda), a state-owned firm, for its EV lease enterprise. In August 2022, Gensol informed buyers that it had acquired Ireda’s nod to purchase 3,000 EVs. In January final 12 months, Gensol mentioned that Ireda had sanctioned a fatter mortgage— ₹513 crore—one that will enable the corporate to finance 3,800 EVs.

An Ireda spokesperson informed Mint that Gensol has utilized the loans given to finance automobiles for Blu-Sensible Mobility. This means that Ireda knew Gensol was constructing an EV ride-hailing enterprise by Blu-Sensible.

On the finish of December 2024, Ireda had unpaid loans of ₹470 crore from Gensol, in keeping with Icra, the rankings company.

The mannequin

Why couldn’t Ireda give loans to Blu-Sensible immediately?

In all probability as a result of Blu-Sensible all the time wished to stay an asset-light enterprise.

“No Asset Possession Burden—Firm Managed Automobiles”, Blu-Sensible claims on the third web page of its 25-page funding deck despatched to potential buyers in October 2024. Mint reviewed a copy of this doc. The privately-held agency is but to file its financials with the ministry of company affairs for the 12 months ending March 2024.

Based on this investor presentation, Blu-Sensible had 8,000 automobiles as on 31 September 2024.

Gensol, in the meantime, didn’t inform Mint what number of automobiles it owns general, limiting its commentary to the transaction it inked with Refex in January this 12 months.

“Gensol is the proprietor of those 2,997 automobiles and publish the transaction, Refex could be leasing the identical autos to BluSmart,” mentioned a spokesperson for Blu-Sensible. “Gensol Engineering Ltd (GEL), was an early supporter of BluSmart’s EV mission and as BluSmart has elevated its presence, a number of extra lessors have now leased autos to BluSmart,” the spokesperson added.

Other than Gensol (which owns over 87% or about 7,000 of Blu-Sensible’s fleet), different leasers embody state-owned Power Effectivity Providers Ltd and Quiklyz, the automobile leasing and subscription enterprise of Mahindra & Mahindra Monetary Providers Ltd.

View Full Picture

The loans

Gensol buys automobiles, leases them to Blu-Sensible, and tops it up with extra loans to the non-public cab-hailing firm.

The vital factor which has not been reported till now could be that Gensol spent ₹568 crore within the three years to March 2024 to purchase electrical automobiles, in keeping with a overview of the corporate’s annual experiences by Mint. In FY24 alone, Gensol spent ₹352.14 crore to purchase automobiles.

Gensol granted ₹148.33 crore as loans to a few Blu-Sensible subsidiaries within the 12 months ended March 2024: Blu-Sensible Fleet Pvt. Ltd acquired ₹138.87 crore whereas Blu-Sensible Mobility Pvt. Ltd and Blu-Sensible Mobility Tech Pvt. Ltd acquired ₹9.19 crore and ₹0.27 crore, respectively.

Merely put, Gensol spent over ₹500 crore final 12 months to construct Blu-Sensible, contemplating that a lot of the automobiles purchased by the agency in 2024 ( ₹352.14 crore) had been additionally leased to the experience hailing agency.

This isn’t a small quantity contemplating that on 3 March, Care Rankings Ltd downgraded Gensol’s ₹716 crore financial institution mortgage to default, citing delays in “servicing of time period mortgage obligations”.

Subsequently, Gensol termed it a non permanent monetary crunch and warranted buyers it could tide over these issues. The corporate’s shares closed at ₹262.25 on 13 March, down 67% from a 12 months in the past.

The questions

The shut ties between the 2 corporations have raised questions over company governance.

“What’s the nature of those loans given to Blu-Sensible (by Gensol)? Are these loans secured or unsecured? What’s the underlying safety backing these loans?” requested Nitin Mangal, a Mumbai-based analyst who runs Trudence Capital Advisors Pvt. Ltd, a Sebi-registered analysis agency.

Gensol didn’t reply Mint’s questions on the character of the loans given to Blu-Sensible.

“All materials relationships between Gensol and BluSmart have been appropriately disclosed to each the Boards, the statutory auditors, lenders and the shareholders,” mentioned a spokesperson for Blu-Sensible.

Nonetheless, some giant buyers seem like preserving a distance from the 2 corporations given their shut ties.

“In our due diligence of Gensol, we noticed the shut ties. This was one of many the reason why we determined to not put money into the corporate,” mentioned the pinnacle of a Mumbai-based portfolio administration providers agency who didn’t wish to be recognized. The chief met with Anmol Jaggi and the senior administration group in July 2021.

What’s the nature of those loans given to Blu-Sensible (by Gensol)? Are these loans secured or unsecured?
—Nitin Mangal

Jaggi and his household owned 62.65% of Gensol (on the finish of December 2024). Retail buyers or people proudly owning lower than ₹2 lakh price of shares owned about a fourth or 23.44%, whereas people proudly owning greater than ₹2 lakh price of shares personal 7.1% within the firm. Non-resident Indians, company our bodies and household places of work personal 5.44%. No international institutional investor, mutual fund or insurance coverage firm is an investor in Gensol.

The Enforcement Directorate has taken management of the remaining 1.37% shares—they had been beforehand owned by Hari Shankar Tibrewala, together with 13 different corporations. This got here within the aftermath of the monetary crime investigation company probing an alleged small-cap inventory market manipulation fraud.

A puzzling nature of the ties between Gensol and Blu-Sensible is that regardless that Gensol describes transactions with Blu-Sensible as ‘related-party transactions’, Blu-Sensible hasn’t reported its monetary ties with Gensol as ‘transactions with linked events’ in its filings with the ministry of company affairs.

“Gensol is a listed firm. Transparency and belief are extra vital, and the audit committee chair, together with impartial administrators, ought to come clear and supply all info to buyers,” mentioned V. Balakrishnan, a former chief monetary officer at Infosys Ltd and founding father of Exfinity Ventures, a enterprise capital fund.

“All these transactions, together with giving loans to Blu-Sensible and Matrix Gasoline and Renewables ( ₹231.85 crore in mortgage in 2023-24), are paying homage to how Vijay Mallya used the money of the liquor enterprise for the aviation enterprise. The problematic concern in Gensol’s case is that the lease circumstances beneath which Gensol is leasing out its automobiles to Blu-Sensible haven’t been disclosed, and so minority shareholders of Gensol are those shedding out,” mentioned Shriram Subramanian, founder and managing director of InGovern Analysis Providers Pvt. Ltd, a proxy advisory agency.

Itemizing goals

Such disclosures are particularly wanted since Blu-Sensible has itemizing goals.

Starting September 2024, Blu-Sensible has been seeking to increase $50 million ( ₹418 crore) at a pre-money valuation of $335 million. It informed buyers it expects to go public within the second half of subsequent 12 months.

Gensol’s present issues may cripple that plan of going public. You will need to point out that weeks earlier than Gensol’s points surfaced publicly, Blu-Sensible defaulted on ₹30 crore price of bonds—in early February.

This brings us again to the transaction of Refex shopping for 2,997 automobiles from Gensol. Refex Industries is a Chennai-based public firm that trades coal, handles ash, and manufactures and re-fills refrigerant gases. Refex Inexperienced buys 2,997 automobiles and instantly leases them to Blu-Sensible Mobility. Why?

“[W]e have acquired the automobile from Gensol and we will probably be giving it to BluSmart solely. So, for us, it is going to be a month-to-month fee of lease rental for these autos,” Refex’s managing director Anil Jain informed analysts in a post-earnings interplay dated 27 January.

It’s unknown whether or not Blu-Sensible, which defaulted on a ₹30 crore bond final month, can service the contract with Refex.

“This basically is an asset (2,997 automobiles) and legal responsibility ( ₹315 crore mortgage) transaction by which Gensol is seeking to clear up its e book. Gensol may have bought these automobiles to Blu-Sensible. But we don’t know the monetary place of Blu-Sensible, and because of this, Refex steps in,” mentioned Mangal.

A questionnaire despatched to Refex’s chief monetary officer, Dinesh Kumar Agarwal, went unanswered.

Refex mentioned it’s shopping for these 2,997 automobiles at e book worth. At ₹315 crore, the common value of a automotive is ₹10.5 lakh. Guide worth is the distinction between the price of a automotive and the depreciation that has occurred over time. Most new electrical autos promote between ₹10 and ₹15 lakh. Even assuming a 20% depreciation within the first 12 months, it’s unclear how Gensol and Refex arrived at ₹10.5 lakh for the automobiles working beneath the Blu-Sensible model.

As well as, there’s little readability on whose mortgage Refex is taking up. There is no such thing as a money concerned within the transaction—Refex takes on Gensol’s ₹315 crore mortgage.

A spokesperson from Ireda informed Mint that its mortgage to Gensol is just not being transferred. Different collectors embody Energy Finance Corp. Ltd (loans of ₹334.8 crore); HDFC Financial institution Ltd ( ₹26.4 crore); Tata Motors Finance Ltd ( ₹18.3 crore); and Axis Financial institution Ltd ( ₹15 crore).

It’s unclear if Gensol and Refex have acquired approval from the collectors to switch this mortgage.

“The particular transaction is beneath the method of getting all crucial approvals,” mentioned a spokesperson from Blu-Sensible.

Anmol Jaggi’s plans to do issues too quick (tackle Uber and alter the face of India’s cab hailing market) could have landed Gensol in a tough spot for now, Subramanian of InGovern mentioned.