The Delhi High Court has ordered the seizure of 129 electric vehicles leased by Gensol Engineering to BluSmart, following a petition from STCI Finance Ltd to recover an unpaid loan of 11.25 crore rupee (US$1.32 million).

The vehicles, purchased with a loan of 15 crore rupee (US$1.76 million) in 2023, are valued at 11.19 crore rupee (US$1.31 million) after depreciation.

The court also instructed ICICI Bank to prevent the liquidation of a fixed deposit, which serves as collateral for the loan.

This ruling follows a previous court order restricting Gensol and BluSmart from establishing third-party rights over 220 other electric vehicles.

Gensol is also facing allegations of corporate governance failures, with SEBI investigating misuse of 262.13 crore rupee (US$30.69 million) meant for vehicle procurement.

🔗 Source: Inc42

🧠 Food for thought

1️⃣ Capital-intensive EV leasing models expose financial vulnerabilities

Gensol Engineering’s default on an INR 15 crore loan for just 129 electric vehicles highlights the significant capital requirements in the EV fleet business.

The court-ordered seizure of these vehicles represents a small fraction of Gensol’s larger financial troubles, as the company reported total debt of ₹11.46 billion (~$131.6 million) against reserves of ₹5.89 billion, resulting in a concerning debt-equity ratio of 1.951.

This case demonstrates how capital-intensive EV leasing operations require substantial upfront investment long before generating returns, creating cash flow challenges that even established players struggle to manage.

In contrast to Gensol’s financial difficulties, alternative models like Alt Mobility’s Drive-to-Own approach have shown more stability by connecting leasing directly to future ownership, helping deploy over 10,000 electric vehicles while saving ₹200 crore in fuel costs2.

The financial structure of EV leasing businesses remains particularly vulnerable to governance issues and operational inefficiencies, as evidenced by Gensol’s inability to meet its payment obligations despite reporting revenue growth of 105% year-over-year to ₹2.97 billion in Q1 FY20253.

2️⃣ Corporate governance failures undermine India’s EV transition

The SEBI order revealing that Gensol’s founders misappropriated funds meant for EV procurement demonstrates how governance failures can derail critical infrastructure projects.

According to SEBI’s findings, the Jaggi brothers diverted INR 262.13 crore after taking loans of INR 977 crore intended to purchase 6,400 EVs for BluSmart, ultimately acquiring only 4,704 vehicles while allegedly using company funds for personal luxury items and investments.