India’s market regulator launched an investigation on Tuesday into Gensol Engineering due to alleged misuse of electric vehicle loans. BluSmart, a ride-hailing startup associated with Gensol and once considered a potential Uber competitor in the South Asian market, is also being looked into as part of the probe.

The Securities and Exchange Board of India (SEBI) has prohibited Gensol Engineering’s founders, Anmol Singh Jaggi and Puneet Singh Jaggi, from holding key positions in the publicly-listed company and participating in the securities market while the investigation is ongoing. The Jaggi brothers were also co-founders of BluSmart Mobility.

Anmol Singh Jaggi stated that the company is cooperating fully with the Indian regulator and is gathering all necessary documents and information to provide clarification. This is seen as an interim measure, not a final decision, and Jaggi is confident that once all information is reviewed thoroughly, their position will be better understood.

In its interim order, the regulator accused the Jaggi brothers of using significant loan amounts for personal purposes, such as buying luxury real estate. Gensol Engineering had taken term loans of 9.78 billion Indian rupees from state-owned institutions for the purpose of purchasing 6,400 EVs to lease to BluSmart. However, the company only acquired 4,704 EVs for 5.68 billion rupees, according to the regulator.

The regulator stated that some of the funds were diverted for unrelated purposes, including personal expenses of the promoters and benefits to private promoter entities. The order further noted instances of default on debt payments by Gensol, despite the company’s denials.

Meanwhile, BluSmart, which is facing financial challenges and a lack of external capital, has ceased operations in Dubai and is focusing on sustaining its business in India. The startup planned to become a fleet partner for Uber, its rival, as per reports from the Economic Times.

BluSmart, initially known as Gensol Mobility, started as a fleet operator for Uber and transitioned into an all-EV rival to Uber. The startup raised $25 million in 2024 to expand its EV charging infrastructure. Despite a planned fleet size increase to 10,000 EVs by the end of the year, BluSmart faced obstacles in reaching its target.

Gensol Engineering’s stock has experienced a significant decline of over 83% this year, trading at 129 rupees before the market closed on Tuesday.