Company Outsider: The Gensol-BluSmart issue is a reminder of the perils of dilettante diworsification

Subscribe to enjoy similar stories. In his book One Up on Wall Street, legendary fund manager Peter Lynch uses the term ‘diworsification’ to describe unbridled and often unrelated diversification by companies or investors into areas or assets they don't fully understand. The result, Lynch says, is mostly substantial capital misallocation and wealth destruction.

A close look at the recent travails of Gensol Engineering, which faced a rating downgrade amid charges of falsifying its financial statements, and the collateral damage to Blu-Smart Mobility, a company with whom it has unexplained ties, shows the consequences of such diworsification. The Blu-Smart business is smart and opportunistic. Set up in 2019 by Anmol Singh Jaggi, Punit Goyal and Puneet Singh Jaggi, it was a pioneer with its all-electric fleet offering an alternative to Uber and Ola.

The company’s founders had just the credentials investors seek. Generous funding followed from the likes of BP Ventures and Mayfield India Fund. And less than a year ago, Zurich-based climate finance firm ResponsAbility Investments and ReNew founder Sumant Sinha added more ammo with a $24 million funding round.

Ignored in all this was Jaggi’s association with Gensol, then a 12-year-old startup which was in the business of building solar farms and leasing out electric cars. You could argue there were some similarities between the two businesses, even some real synergies, since BluSmart leased its cars from Gensol. But these are of the kind that large Indian multi-business conglomerates boasted about in the 1990s till management guru C.K.

Prahalad went on an educational trip through India Inc. preaching the virtues of core competence and strategic intent. Some realized the folly