BluSmart, Medikabazaar’s Mess: Will The Ghost Of Corporate Governance Return?

If there’s one consistent theme in business, it’s that everything moves in cycles. We have a funding and growth boom followed by a slump in the markets, and then a new inflection point starts the cycle anew. But between these ups and downs, we can spot another pattern — corporate governance lapses, allegations of fraud against founders.

The past two weeks have thrown up two such incidents which have been boiling away for some time. The first one is the widely publicised troubles for BluSmart in connection with allegations of embezzlement against its founders in their other company, publicly listed Gensol.

The second equally big story is Medikabazaar, another B2B startup that has been weighed down by allegations such as inflation of revenue, inventory round-tripping and more, and its former CEO is accused of being involved in the lapses.

Even as the major BYJU’S saga continues to unfold inch by inch, corporate governance red flags are being seen in other large companies, just like we did in late 2021 and 2022. But before we dive into the BluSmart and Medikabazaar controversies, here’s a look at the top stories from our newsroom this week:

• Escaping The Deeptech Maze: After Piyush Goyal’s contentious speech at the Startup Mahakumbh, it’s been two weeks of finger-pointing and blame game, but now India needs collective action to solve the deeptech puzzle and spur innovation at every level
• End Of UPI’s Free Reign: Fintech startups and banks are looking to end the free run for UPI and the RBI might just do them a favour by revoking the zero MDR rules and unlocking the revenue machines
• Whatfix’s AI Mission: SaaS giant Whatfix’s tryst with AI began only a few years ago in 2019. Six years later, all its products are going AI-first as the Khadim Batti-led company eyes $150 Mn milestone in revenue this year

BluSmart Tangled In Gensol’s Web

BluSmart has come under the hammer of market forces after SEBI laid bare the allegations against Gensol promoters Anmol Singh Jaggi and Puneet Singh Jaggi, who are also cofounders of BluSmart.

The Jaggi brothers are alleged to have embezzled funds for personal spending and other investments from Gensol, and potentially even funds raised for leasing cars to BluSmart.

Gensol availed term loans to the tune of INR 977.75 Cr between FY22 and FY24. Of this, INR 663.89 Cr was recorded on the books for 6,400 EVs to be leased to BluSmart.

But further records show that Gensol only purchased 4,704 vehicles for INR 567.73 Cr. SEBI claims the remaining amount of INR 262.13 Cr is unaccounted for and was likely used for personal expenses and the benefit of related entities.

Further, Gensol and its subsidiaries and promoters are alleged to have indulged in insider trading through Wellray, which took loans from Gensol to make these investments.

While at the moment BluSmart is not directly implicated in these allegations, there are indications that these issues at Gensol have led to the collapse of BluSmart, including the fact that its services have been halted.

Further, in recent public statements, cofounder Punit K Goyal has distanced himself from the Jaggi brothers. All indications are that BluSmart will either have to find fresh funding soon, or it would have to be sold in a fire sale.

Already, the company has failed in its salary obligations, which indicates that perhaps a cash crunch has already consumed the EV hailing business.

Like we wrote in our in-depth coverage, BluSmart’s biggest strength was its relationship with Gensol, which should have ideally given the company a wide moat in terms of unit economics and advantage in scaling up. Unfortunately, this strength and close association turned out to be the weakest link as well.

As Inc42 reported yesterday, climate-focussed PE firm Eversource Capital is in talks to acquire BluSmart and could add it to its portfolio of climate tech startups. Eversource has offered to acquire the EV ride-hailing startup for around INR 800 Cr to INR 1,000 Cr ($90 Mn to $120 Mn), 60% lower than BluSmart’s last known valuation of $300 Mn.

Medikabazaar’s Promise Crumbles 

BluSmart is the latest issue pertaining to fraud involving founders, but as the other big controversy this week shows, it can take years to resolve these situations.

Medikabazaar’s troubles epitomise the opacity of operations in the B2B ecommerce and supply chain space. This is a segment that’s fraught with examples of unscrupulous books, fudging of numbers and inventory round-tripping, which has derailed the likes of Zilingo, Broker Network, Mojocare, ReshaMandi, Accel-backed Mooofarm and several others.

In the case of the Mumbai-based startup, the promise began to unravel after a whistleblower complaint in December 2023 raised alarms about a fraud in the company, leading to forensic audits, resignations of both cofounders and ultimately the complete ouster of founder and CEO Vivek Tiwari in 2025.

From a soonicorn (i.e a potential unicorn), Medikabazaar has joined the inevitable list of companies where founders have been removed for fraud and where shareholders are looking to recoup their investments. In the most recent development, Series C investors have triggered an INR 279 Cr indemnity claim, alleging fabrication of numbers and financial performance during the fundraising process. 

These are not small-time investors or angel networks or even micro VC funds. Medikabazaar has raised money from the likes of International Finance Corporation (World Bank Group), Lighthouse India Fund, HealthQuad, Ackermans & van Haaren, and the CDC Group — all of which are globally renowned names.

Just like in the BYJU’S saga, the Medikabazaar issue is likely to taint the Indian experience of VCs and sovereign funds.

A report in The Captable claims that Medikabazaar’s investors are also confident of finding a rescue act — either in the form of distress sale and acquisition or a revival through a complete overhaul in leadership. Either way, there are likely to be layoffs at Medikabazaar.

In a statement to Inc42, Tiwari denied the allegations about his involvement in the alleged fraud at Medikabazaar. “Throughout my leadership, Medikabazaar scaled rapidly, delivering significant impact in the healthcare sector by improving access, driving innovation, and setting new benchmarks in service excellence. These achievements were built on a foundation of vision, commitment, and ethical business practices.”

He added: “I remain dedicated to upholding the integrity of India’s startup ecosystem. Entrepreneurs are a cornerstone of the country’s innovation economy and play a crucial role in building a self-reliant India.

BluSmart: Opportunities Lost To Fraud 

When we look back at some of the most influential such cases — BYJU’S being the most prominent — there’s always a blame game at the end of it.

Employees that lose their jobs blame the founders, who in turn blame investors for setting unachievable growth expectations, and investors blame the founders or the market or in many cases find proof of fraud.

But at the end of the day, startups — BluSmart, MedikaBazaar and even BYJU’s or Zilingo or others before these recent cases — need to look at how their actions corrode the trust in India’s entrepreneurial pool, and how they squandered a major opportunity to actually innovate instead of pushing for growth at all costs.

Take BluSmart, for instance. Coming into the market nearly a decade after Uber or Ola meant that BluSmart had the advantage of some hindsight. It knew exactly what problems plagued ride-hailing and it wanted to solve them through EVs. It also realised that catering to consumers on aspects like convenience, ride quality, driver quality meant asking for a premium.

But this is where BluSmart’s strategy ended. After a point, the company became just another Ola or Uber, saddled with the same heavy losses, having to fight off Rapido and other challengers. At the same time, BluSmart did not innovate for the in-car experience of customers.

The only real differentiation was the policy around zero cancellations, but in recent months, this issue has been addressed by other platforms through zero-commission models.

BluSmart had the best opportunity to become the third app in the ride-hailing bucket for Indians in the metros. But its founders and promoters resorted to potentially illegal measures to grow their personal wealth instead, as per the allegations raised by SEBI.

This is also the first time that a startup associated with a listed company has become the subject of scrutiny and questions — which shows that corporate governance is not just a problem for private limited startups and growth-stage ventures. Even public listed companies have these holes that can come back to bite them later.

If we have to look at the bright side, the BluSmart and MedikaBazaar stories might serve as a lesson for Indian startups that are on the IPO journey today and plan to list in the next couple of years. The time to fix the ship is now — not when it’s too late and sinking.

Sunday Roundup: Startup Funding, Deals & More

• Zepto’s Ad Boom: Zepto claims the company’s ad vertical managed to grow its annualised revenue run-rate (ARR) by 5X in the past year, crossing the $200 Mn ARR milestone

• Trump Tariff Effect? Between April 14 and 19, startups cumulatively raised a meagre $65.3 Mn, a 67% drop from the $195.1 Mn raised by startups in the preceding week
• Clevertap Expands: Amid plans to shift its domicile to India, customer engagement platform Clevertap has acquired promotion automation solutions platform rehook.ai
• Gupshup Layoffs: Conversational AI unicorn Gupshup has laid off around 200 employees in a restructuring exercise earlier this month, its second such step in five months