In recent months, the electric cab-hailing platform BluSmart has come under scrutiny as its operations have stalled, leaving retail investors and high-net-worth individuals (HNIs) uncertain about the repayment of nearly Rs 100 crore worth of bonds. These financial instruments were syndicated through various fintech platforms such as Yubi, Centricity, and Klub. The concerns are exacerbated by BluSmart's inability to secure a fresh round of funding worth $50 million and an ongoing investigation by Sebi into Gensol Engineering, co-founded by Anmol Singh Jaggi, one of BluSmart’s cofounders. Regulatory filings indicate that significant amounts were distributed among these platforms, with Yubi acquiring bonds worth approximately Rs 62 crore, while Centricity and Klub purchased bonds valued at Rs 2.5 crore and Rs 8 crore respectively.
The challenges facing bondholders stem from multiple fronts. In June 2024, complaints were lodged with Sebi regarding potential stock manipulation involving Gensol Engineering, leading to an in-depth regulatory probe. This investigation revealed that funds intended for purchasing electric vehicles were allegedly diverted for personal use by Jaggi and his brother Puneet Singh Jaggi. Meanwhile, despite timely interest payments up until recently, a substantial sum of Rs 80-85 crore is now due for redemption over the next couple of years. Investors who had trusted these fintech platforms to conduct rigorous due diligence before distributing the bonds are beginning to lose confidence.
Further complicating matters, BluSmart has begun transitioning its fleet to Uber amid operational disruptions, including delays in employee salaries for March. A default on Rs 30 crore worth of bonds in February 2025 triggered cross-default clauses managed by the trustee overseeing its non-convertible debentures. Concerned investors engaged in discussions with BluSmart founder Anmol Singh Jaggi via conference calls but remain skeptical about assurances that the business will recover.
Beyond traditional debentures, industry insiders highlight the existence of other financial instruments like pass-through certificates (PTCs), which BluSmart utilized to raise additional capital. On March 7, Care Ratings downgraded one such PTC valued at Rs 6 crore to ‘C’, indicating a heightened risk of default. These certificates represent underlying assets where issuers pay interest to certificate holders. Typically, bond issuing platforms acquire these PTCs and distribute them to clients. Annually, BluSmart faces NCD repayments totaling around Rs 150-160 crore, placing debenture holders in a precarious position akin to lenders such as Power Finance Corporation (PFC) and Indian Renewable Energy Development Agency (Ireda).
In the event of default, recovery prospects hinge on seizing vehicles hypothecated to lenders, yet clear documentation affirming these assets as collateral remains elusive. Questions persist regarding whether the platforms selling these instruments can assume control of the vehicles and subsequently sell them to fleet managers, with uncertainties surrounding the potential recovery amounts. Legal actions pursued by PFC and Ireda to protect their loan exposure further underscore the gravity of the situation.
As the saga unfolds, the plight of bondholders highlights the importance of stringent due diligence processes within the fintech sector. With mounting doubts about the basis of these debentures—whether rooted in tangible assets or merely projected business cash flows—the path forward for both investors and regulators grows increasingly complex. The interplay between financial innovation and regulatory oversight continues to shape this evolving narrative, impacting stakeholders across the spectrum.
