Car-servicing startup GoMechanic has been acquired by a consortium led by auto component manufacturer and e-commerce firm Lifelong Group, the company said in a statement on Wednesday.
The sale was led by GoMechanic’s venture debt investor Stride Ventures. Financial details of the deal were not disclosed.
“Due to the recent financial difficulties at GoMechanic, the board and shareholders with support from Stride Ventures initiated a speedy and widely publicised sale process to ensure the continuity of business,” the statement said.
Incorporated in 1985, Lifelong Group is a private Indian company which has been looking to expand its operations in the automotive service and repair industry. It diversified into auto component manufacturing in 1995, medical devices in 2005, and e-commerce in 2015. The business has grown from an annual revenue of $500,000 in 1995 to over $175 million now and caters to major customers in the automotive industry such as Hero MotoCorp, General Motors, Arvin Meritor, Stanley Black & Decker, etc.
The new consortium termed Servizzy, to be led by Lifelong, emerged as the strongest bidder in the acquisition process of GoMechanic in accordance with the terms and conditions contained in the agreement.
“The core value proposition offered by GoMechanic was quickly recognised by the buyers, GoMechanic’s technology-driven approach, competitive pricing and strong brand recognition have allowed it to remain a market leader in the underdeveloped and disorganised automotive service and repair industry,” the company said.
As reported earlier, GoMechanic has been on the block since the last month or so with multiple competitors, including CarTrade, Spinny and Cars24 evincing interest in acquiring it, but these talks did not materialise over differences in valuation.
The talks to sell GoMechanic began around two months after the founders admitted to fudging accounts. In January, founder Amit Bhasin admitted to financial reporting errors like inflating revenues, a move that forced the company to fire around 70% of its staff. The tech-based car maintenance provider also agreed to have its accounts audited by a third party.
Even before these talks, GoMechanic’s key investors had begun writing off their investments. On January 20, Orios Venture Partners, which owns 17.1% in the firm, had written down the value of its investment. While the value was not mentioned, sources said the markdown could erode about 60% of Orios’ investment value, subject to findings from the forensic audit that EY was carrying out.
Financial irregularities at GoMechanic were discovered when SoftBank was weighing an investment of about $40 million at a valuation of $700 million late last year. According to a Bloomberg report, EY’s research suggested that 60 of the more than 1,000 GoMechanic service centres may have violated accounting standards to overstate revenue and divert funds.
All of GoMechanic’s major investors like Sequoia Capital India, Tiger Global, Chiratae Ventures and others had said they were kept in the dark about the startup fudging its financials till the founders confessed to it. That was despite the Gurugram-based company regularly holding board meetings and giving monthly updates, leaving no scope for any suspicion.
GoMechanic reported that its revenue had doubled from `47.2 crore in FY21 to `96.8 crore in FY22, while its losses jumped over 4X from `27.4 crore in FY21 to `114.3 crore in FY22. Those financials were signed off by auditors like PwC and KPMG.
Founded in 2016, GoMechanic was run by Amit Bhasin, Kushal Karwa, Nitin Rana and Rishabh Karwa.
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