BluSmart Secures $30M Funding to Compete with Uber

BluSmart Receives Potential $30 Million Lifeline, Tied to Founder’s Departure

A potential injection of $30 million is being considered by a consortium of investors to revitalize BluSmart, the Indian ride-hailing service that unexpectedly ceased operations the previous month, as reported by TechCrunch. However, this investment is predicated on a key condition: the resignation of BluSmart co-founder, Anmol Singh Jaggi.

Investment Details and Purpose

The proposed funding would take the form of unsecured debt. Its primary objective is to address the startup’s outstanding financial obligations, encompassing unpaid dues and employee salaries, according to two sources familiar with the matter.

Discussions regarding this resolution were initiated last week among BluSmart’s investors who hold pro rata rights, including BP Ventures and ResponsAbility, a Switzerland-based investment firm. Both BP Ventures and ResponsAbility declined to provide comment when contacted on Monday.

Founder’s Agreement and Legal Concerns

While a formal resignation has not yet been submitted by Jaggi, sources indicate he has verbally agreed to step down from the board. This agreement is contingent upon receiving assurances of immunity from any future legal repercussions from BluSmart’s investors.

Attempts to reach both Jaggi and Punit K. Goyal, BluSmart’s other co-founder, for comment earlier this week were unsuccessful.

Operational Halt and Financial Strain

BluSmart suspended its services last month following an investigation into Gensol Engineering, its principal EV leasing partner and a company also co-founded by Jaggi. This suspension impacted both customers reliant on electric vehicles and the company’s 600 employees, many of whom had not received their salaries as of March.

Outstanding Liabilities

The Gurugram-based startup is facing approximately 2.5 billion Indian rupees (roughly $30 million) in pending dues. A significant portion of this, between 500 and 600 million Indian rupees, represents overdue payments to employees, sources reveal.

Furthermore, around 8,700 electric vehicles within BluSmart’s fleet are currently inactive due to the service suspension. Prolonged inactivity could potentially degrade the batteries and other vital components of these vehicles.

Impact on Drivers and Emerging Alternatives

The suspension has also led to protests from BluSmart drivers in New Delhi. However, some drivers may find opportunities with Evera Cabs, a Delhi-based EV ride-hailing service that recently acquired 500 cabs leased from BluSmart lenders. Evera Cabs also intends to incorporate 1,000 additional EV cabs currently associated with BluSmart and its drivers.

BluSmart’s existing investors are determined to preserve the company’s brand identity and prevent its fleet from being utilized by competing services like Evera or Uber.

Restart Plans and Corporate Governance Issues

Sources suggest that investors are aiming to resume service within the next three weeks. However, BluSmart’s potential comeback is not without its challenges. Concerns regarding corporate governance, in addition to issues at Gensol, pose obstacles.

Regulatory Scrutiny

The Indian corporate affairs ministry has initiated a probe into both Gensol and BluSmart regarding these governance concerns.

Jaggi’s resignation is not entirely assured. While the Indian stock exchange regulator mandated his and his brother’s resignation from the publicly listed Gensol during the investigation, this directive does not extend to BluSmart, which remains a private entity.

Potential Acquisition Offers and Valuation Discrepancies

Climate investment fund Eversource Capital, backed by Britain’s BP, expressed interest in acquiring BluSmart through a slump sale last month. Their proposal involved merging the startup with Lithium Urban, its B2B fleet operator. However, the BluSmart board rejected the offer due to a proposed valuation representing a 60% reduction from its previous $300 million assessment.

Lithium Urban’s Challenges

Lithium Urban is currently facing financial difficulties and experiencing the end-of-life for a significant portion of its vehicle fleet. The company’s original founder, Sanjay Krishnan, has also departed. Neither Eversource Capital nor Lithium Urban responded to requests for comment.

Adani Group’s Interest

Indian conglomerate Adani Group also explored the possibility of acquiring BluSmart to integrate its fleet into operations at its airports. The company engaged in preliminary discussions with the BluSmart board, as it already partners with Uber for fleet services.

Adani Group did not provide a response to a request for comment.

Future Prospects

BluSmart’s investors are optimistic that a successful restart could position the company to attract further investment from strategic partners such as Eversource Capital, Uber, or Adani Group.