In a development that has sent ripples across India’s burgeoning electric mobility sector, the Securities and Exchange Board of India (SEBI) has initiated a preliminary investigation into alleged financial irregularities at BluSmart, a prominent electric ride-hailing start-up that has gained traction as a green alternative to traditional cab aggregators. The regulator is reportedly scrutinising inconsistencies in the company's revenue recognition practices, potential overstatement of ride volumes, and opaque related-party transactions.
Founded in 2019, BluSmart has positioned itself as India’s answer to Uber and Ola, boasting a 100% electric fleet and a vision aligned with India’s climate goals. It promised to offer a clean, efficient alternative to fossil-fuel-based taxis and has since expanded across Delhi NCR, Bengaluru, and other metros, gaining immense popularity amongst the masses. The company has raised significant capital from domestic and global investors, including climate-focused funds and development finance institutions. Its sustainability narrative, combined with rapid metro expansion, has earned it both media spotlight and regulatory goodwill.
However, the company’s meteoric rise may now be undercut by serious allegations. SEBI receives whistleblower complaints flagging discrepancies in BluSmart’s financial statements and disclosures that include:
Inflated revenue figures, by counting non-ride transactions or projecting future contracts as current earnings
Unclear disclosures around related-party transactions, including preferential contracts awarded to vendors linked with company executives
Discrepancies in asset valuations, particularly in fleet and charging infrastructure reported in financials submitted to investors
Improper use of ESG branding to secure concessional or climate-linked capital
While BluSmart has denied any wrongdoing, stating it follows “strict internal audit protocols” and is “committed to transparency,” the initiation of SEBI’s probe underscores rising regulatory unease about how aggressively some start-ups present their financial health. And how, behind the polished decks and green promises, the numbers may tell a different story.
The case has reignited a larger debate on start-up governance in India. While SEBI has been tightening compliance norms for listed firms, many unicorns and high-growth start-ups still operate in a regulatory grey area, especially those yet to go public. Experts believe that the BluSmart episode could serve as a turning point for regulatory reforms focused on private equity-backed ventures. As India bets big on a green future, SEBI’s probe into BluSmart could determine whether the road to sustainability is being paved with genuine impact—or just clever accounting.
SEBI Back to Action
SEBI has issued an interim order on BluSmart, citing financial irregularities and governance lapses related to its parent company, Gensol Engineering Ltd., and its promoters. It has barred them from accessing the securities market and holding managerial positions in Gensol or any other listed company. This action was taken after an investigation revealed that loan funds meant for EV procurement were allegedly diverted for personal use. SEBI noted that company funds were routed to related parties and used for unconnected expenses, essentially acting as a "promoters' piggy bank". The investigation revealed that around $78 million in loans taken by Gensol had been diverted for non-business purposes. SEBI is also looking into whether the company failed to adequately disclose transactions with entities linked to senior management—a potential breach of corporate governance norms.
The BluSmart case may become a precedent-setting moment in how SEBI handles financial opacity in high-growth, VC-backed companies. SEBI’s investigation into BluSmart, while yet to reach a conclusion, marks a watershed moment. It shows that even as it evolves with market complexity, the regulator remains focused on three principles: transparency, fairness, and investor protection.
A Way Forward
The BluSmart episode is not just a story about one company under scrutiny—it’s a stress test for how India’s regulatory architecture handles the intersection of innovation, capital, and accountability.
To safeguard investor trust and market integrity, a three-dimensional approach can be adopted:
Regulatory Framework for Startups: A dedicated disclosure and governance framework for private firms above a certain valuation threshold or with large-scale funding from public-linked entities (e.g., pension funds, mutual funds).
ESG Reporting Standards: Given BluSmart’s positioning as a green mobility leader, this case highlights the need for mandatory ESG audits for companies accessing climate-linked capital.
Whistleblower Protection and Follow-through: SEBI’s responsiveness to whistleblower complaints is commendable, but experts argue that the system must offer stronger protection and a formal route for internal redressal within private firms.
Whether BluSmart is guilty of misreporting or not, the message is clear—startups can no longer fly under the regulatory radar simply because they are not yet listed.
Views are personal.
Rath is an Assistant Professor at the Xavier Institute of Management, Bhubaneswar.