BluSmart Faces a Critical Moment: Investors Propose $30M to Revive Operations
BluSmart, the Indian electric vehicle (EV) ride-hailing startup that halted operations last month, is on the brink of a possible revival. A group of investors, including BP Ventures and Switzerland-based ResponsAbility, are considering a $30 million funding plan to help reboot the company. The proposed funding would be aimed at addressing BluSmart's operational liabilities, including overdue employee salaries and pending dues. However, this new investment comes with one major condition: BluSmart co-founder Anmol Singh Jaggi must step down from his role within the company.
This potential investment, which would take the form of unsecured debt, signals a crucial turning point for BluSmart, which has faced significant operational challenges and financial strain. Sources familiar with the situation have confirmed that while Jaggi has verbally agreed to resign from the company’s board, the details of his resignation remain uncertain. The investors’ proposal has made it clear that Jaggi's departure is necessary to move forward, though he has requested assurances that he will not face legal repercussions from BluSmart’s investors.
Challenges and Financial Woes for BluSmart
The troubles facing BluSmart run deep. Last month, the startup was forced to suspend operations after a probe was launched into Gensol Engineering, its primary EV lessor, which shares Jaggi as a co-founder. The suspension impacted not only BluSmart’s customers who rely on its EV fleet but also its employees. By March, many employees had yet to receive their salaries, contributing to mounting dissatisfaction. According to TechCrunch, BluSmart is facing approximately 2.5 billion Indian rupees (~$30 million) in pending liabilities, which includes overdue payments to employees.
Additionally, around 8,700 electric vehicles in BluSmart's fleet have been abandoned, potentially damaging the vehicles’ batteries and other components due to prolonged inactivity. If the startup does not restart its operations soon, these issues could severely impact the viability of its fleet and operations.
Drivers and Competitors Seek Relief Amid Suspension
The suspension of BluSmart has not only affected the company’s finances but also its drivers. Many of BluSmart's drivers have gone on strike in New Delhi, protesting the suspension and looking for alternative work opportunities. Some relief may be on the horizon, however. Evera Cabs, a rival Delhi-based EV cab service, has announced that it will lease 500 vehicles from BluSmart's lenders and is looking to incorporate additional BluSmart vehicles into its fleet.
While BluSmart’s investors are eager to revive the company, they are also working hard to ensure that its branding and fleet are not overtaken by rival services like Evera or even global giants such as Uber. The investors remain committed to restarting operations within the next three weeks, though significant hurdles remain.
Corporate Governance and Legal Challenges Loom
One of the major obstacles to BluSmart's recovery is its corporate governance issues, which have been exacerbated by the ongoing investigation into Gensol. The Indian corporate affairs ministry recently initiated a probe into both Gensol and BluSmart, further complicating the situation. As part of the investigation, Jaggi has been ordered to resign from Gensol, though this order does not apply to BluSmart, a private company. This distinction adds another layer of complexity to the proposed leadership changes within BluSmart.
A Potential Future for BluSmart
Despite these challenges, BluSmart’s investors are optimistic about the company's future. They believe that the revival of BluSmart could position the startup to attract strategic investments from large players like Eversource Capital, Uber, or even Adani Group. In fact, Eversource Capital, a climate-focused investment firm backed by BP, had shown interest in acquiring BluSmart at a significantly reduced price. However, the BluSmart board rejected the offer, as it would have involved a 60% cut from the company’s previous $300 million valuation.
While the future of BluSmart remains uncertain, its investors are hopeful that the company can return to full operations and regain its position as a major player in the EV ride-hailing market.
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