The Importance of Due Diligence: Reflections on the BluSmart Saga
Rohit Gupta
Rohit Gupta is a seasoned Chartered Accountant with over 13 years of experience spanning corporate, Big 4, and startup ecosystems. He is the founder of Aashvasan Advisors, an investment banking firm specializing in fundraising, cross-border business structuring, and virtual CFO (vCFO) services. Through his deep financial expertise and strategic insight, Rohit has been instrumental in guiding businesses through complex financial landscapes and scaling their operations both in India and globally.
The electric mobility sector in India has been buzzing with innovations and new-age startups. Among them, BluSmart created a niche for itself as a promising electric vehicle (EV) ride-hailing platform. Touting sustainability and tech-driven efficiency, the company gained traction in metropolitan areas with its all-electric fleet and eco-conscious model. However, the recent controversies surrounding its operations have raised serious questions about internal governance and the broader issue of due diligence in fast-growing startups.
What Happened: A Quick Recap
BluSmart, launched with the aim of offering zero-emission transport solutions, scaled rapidly with significant investments and partnerships. From deploying thousands of EVs to establishing a vast charging infrastructure, it was seen as a poster child for green mobility in India.
However, in April 2025, a major controversy erupted when the Securities and Exchange Board of India (SEBI) began investigating allegations of fund misuse involving BluSmart’s co-founder. According to reports, significant sums that were earmarked for electric vehicle procurement via the related firm, Gensol Engineering Ltd., were allegedly siphoned off for personal acquisitions, including luxury real estate and other non-corporate expenses. This alleged financial misappropriation not only sparked regulatory scrutiny but also triggered a chain reaction, leading to the suspension of services and unrest among investors, drivers, and end-users.
The Governance Breakdown
The crisis exposed deeper issues than just financial irregularities. Several stakeholders, including investors and independent board members, pointed to a culture of opacity and sidelining of critical voices within the company. Concerns raised internally about irregular spending, restructuring debts, and transparency in fund usage reportedly went unheard.
Such disregard for standard governance practices raises a fundamental concern: the lack of robust due diligence processes both at the investment and operational levels.
Understanding Due Diligence
Due diligence refers to the comprehensive assessment of a company before entering into any financial transaction or business relationship. This includes evaluating financial statements, assessing governance practices, checking regulatory compliance, analyzing ownership structures, identifying risk exposure, and reviewing operational integrity.
Had deeper due diligence been conducted regularly, red flags might have emerged earlier in BluSmart’s journey. Investors could have sought clarification on fund flow, the relationship between the company and associated entities like Gensol, and the company’s accountability mechanisms. In the absence of these checks, financial mismanagement found room to grow, eroding stakeholder trust.
For Investors: Mitigating Risk Through Scrutiny
Investors are the first line of defence against corporate failures. Beyond looking at profitability and potential market share, it is vital to investigate how a company utilizes its capital. In startups, where the founder’s vision is often central to operations, there is an even greater need to scrutinize leadership integrity and transparency.
The BluSmart case underlines the importance of asking tough questions: Are independent audits conducted? What is the chain of control over spending? Are there effective grievance mechanisms for stakeholders? If such steps had been taken earlier, there might have been room to course-correct before the damage became irreversible.
For Startups: Embedding Governance from Day One
While innovation often demands agility, it should not come at the cost of ethics or accountability. As startups scale, implementing governance systems becomes non-negotiable. This includes setting up internal audit systems, having a diverse and active board, creating transparent reporting structures, and being receptive to stakeholder feedback.
Founders must also realize that being answerable is not a liability, but a strength—it builds long-term trust and sustainability.
Lessons for the Ecosystem
The BluSmart episode is not just a company-specific issue — it sends ripples across the entire startup ecosystem. It reinforces the idea that unchecked growth, no matter how innovative, can be a double-edged sword. While India’s startup environment continues to evolve, lessons from such incidents must prompt a shift toward more diligent practices.
Startups need to be held to higher standards, especially those operating in sensitive or capital-heavy sectors like transport, fintech, or healthcare. Regulatory bodies must also develop proactive frameworks that emphasize not only post-incident penalties but also preventive monitoring through structured audits and disclosures.
Conclusion
The BluSmart saga stands as a potent reminder that due diligence isn’t just a formality — it is a necessity. For stakeholders, whether investors, regulators, or users, ensuring that businesses operate transparently and responsibly must be a shared duty. As India continues to chase its vision of a sustainable and digital economy, embedding strong due diligence practices in the entrepreneurial DNA will be key to building resilient and trustworthy enterprises.
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