GoMechanic Mulling Fire Sale, Reaches Out To Cars24, Spinny

Amidst the upheaval at GoMechanic, the automobile after-sales service startup has reportedly reached out to car marketplaces such as Cars24 and Spinny for a potential acquisition. 

The founders of GoMechanic have sent proposals to many other allied startups to sell the company and salvage whatever the auto repairing startup can, Moneycontrol reported citing sources. 

“They have reached out to almost all the players in the ecosystem. They should also reach out to OEMs (original equipment manufacturers) and offline players. Equity investors have mostly written them off,” a source was quoted as saying.

The source noted that the startup’s existing debt investors may ‘salvage something’ out of the fiasco and would likely either ‘hawk the company as a whole or sell it as a sum of parts’.

Noting that the founders have themselves admitted to falsifying financial reports, the source said that it would be difficult to price the startup’s assets at the moment, and added that the company is likely looking at a distress sale at a much lower valuation. 

Inc42’s request for a comment to GoMechanic went unanswered till the time of publication of this story. The article will be updated on receiving a response from the startup. 

Meanwhile, sources close to GoMechanic shareholders told Inc42, “The company is seeing interest from buyers. The current investors will not back the company till the EY forensic audit is released, but GoMechanic has received some offers that are being evaluated.”

Founded in 2016 by Amit Bhasin, Kushal Karwa, Nitin Rana and Rishabh Karwa, GoMechanic connects car owners with repair service providers in their area. Besides, it sells original spare parts and accessories for automobiles on its website. 

The latest development comes days after GoMechanic’s second largest institutional shareholder, Orios Venture Partners, wrote down its investment in the car servicing startup. 

The startup has been in the eye of the storm ever since it emerged that it reported false numbers to its shareholders despite being audited by big names such as KPMG and PwC. 

The issues that have come to light also include the startup categorising over INR 108 Cr as ‘other expenses’, without offering any explanation as to what constituted those expenditures. 

Then, there is the issue of loss reported by the company in FY21, which stood at INR 27.4 Cr. The company readjusted the FY21 loss to INR 74 Cr in its FY22 financial filings. 

After getting a whiff of the alleged fraud, investors including Sequoia India, Orios, Tiger Global, and Chiratae Ventures launched a full blown forensic audit at the company. In the ensuing drama, the startup fired 70% of its staff and its cofounder Amit Bhasin publicly admitted to committing ‘errors in judgment’ with regards to financial reporting. 

The fallout comes four months after it was widely reported that tech investor Softbank and Malaysian sovereign fund Khazanah Nasional were looking to invest in the startup at a valuation of  $600-650 Mn.

The move has put the spotlight on the entire Indian startup ecosystem. On previous occasions, startups like BharatPe, Zilingo, and Trell were in the news for similar allegations of financial frauds.