BluSmart Allegations Will Erode Investor Trust, Warns Former BSE Chairman Sethurathnam Ravi
Sethurathnam Ravi, former chairman of the Bombay Stock Exchange (BSE), has voiced significant concerns regarding the recent allegations surrounding BluSmart. He warns that such incidents could harm investor trust and negatively affect the general perception of startups.
Ravi, who also founded Ravi Rajan & Co., emphasizes that these actions could undermine investor confidence in emerging ventures, damaging the credibility of well-established startups as well.
The Securities and Exchange Board of India (SEBI) recently flagged issues concerning alleged fund diversion and document falsification against Gensol Engineering Limited, impacting BluSmart and resulting in the cessation of the company’s services. Following SEBI’s notice, co-founders Anmol Singh Jaggi and Puneet Singh Jaggi have stepped down as directors of Gensol Engineering, an Ahmedabad-based solar engineering and services firm.
“This situation is detrimental for two main reasons,” Ravi stated. “Firstly, new companies and investors may find it challenging to secure funding in the future, as investors will become wary of funding initiatives that seem driven by personal gains and inflated valuations. It’s a very negative development.”
He continued, “Secondly, BluSmart is no minor entity; it is a well-established brand. This kind of conduct compromises its integrity for personal gains—while they might have secured financial benefits, such shortcuts are not ethical.”
The former BSE chairman highlighted allegations of insider trading, mismanagement, and fund diversion. Insider trading involves trading a company’s stock based on confidential, non-public information. Ravi noted, “There were two trigger points: the issue around the share pricing and a series of complaints regarding insider trading. Additionally, there was a whistleblower and complaints against the company, leading SEBI to conduct an investigation and issue an interim order, which unearthed several deficiencies related to fund diversion and misstatements.”
Looking ahead, Ravi suggested that startups and their promotors improve their communication and foster transparency to prevent such issues. “The startup community must initiate open communication with lenders and stakeholders, demonstrating their commitment to a governance structure that ensures confidence among all parties,” he advised. He stressed the importance of promotors providing accurate information, which would facilitate better disclosures by independent directors and auditors.
