A consortium led by auto component maker Lifelong India Pvt. Ltd has bought beleaguered car care platform GoMechanic in a slump sale, nearly two months after the latter’s co-founders admitted to falsifying financial figures to investors.
The financial details of the deal were not disclosed.
GoMechanic’s equity investors got close to nothing with the transaction as the equity component was written off, said a person with knowledge of the development, asking to remain anonymous. It counted Sequoia Capital, Tiger Global, Orios Venture Partners, Brand Capital, Chiratae Ventures and Elina Investments as its equity investors.
Sequoia, Tiger Global, Orios, and Chiratae didn’t respond to VCCircle’s queries till the time of publishing.
Sequoia Capital owned the largest stake at 26.89%, followed by Orios Venture Partners at 17.1%, Tiger Global at 10.03%, and other investors with a combined 11.2% stake. Early-stage investor Orios has already written down its investment in the company.
“Being a venture debt firm, Stride Ventures is getting some of its capital back now while it will get more money over the next few months. It had invested around Rs 100 to Rs 150 crore in venture debt in GoMechanic,” said the person quoted above.
Stride Ventures didn’t respond to VCCircle’s queries.
GoMechanic was last valued at $285 million after it raised $42 million in a round led by Tiger Global Management in June 2021, according to estimates by VCCedge, the data intelligence platform of VCCircle.
Previously, GoMechanic was reported to be in talks with several companies in the online used-car space, including Spinny, Cars24, and CarTrade, to sell the firm after discrepancies appeared in its business.
Delhi-headquartered Lifelong Group, which was set up in 1985, will become the majority shareholder under Gurugram-based car care startup Servizzy. The acquisition aligns with the group's strategic vision of synergizing its proven expertise in the automotive industry, said Lifelong, which caters to major players such as Hero Moto Corp, General Motors, Arvin Meritor, and Stanley Black & Decker.
The sale was initiated by the board and shareholders of GoMechanic, with support from venture debt investor Stride Ventures, in response to recent financial difficulties at the Gurgaon-based company. The Servizzy consortium, led by the Lifelong Group, emerged as the strongest bidder in the sale process.
Founded in 2016, GoMechanic connects car owners with repair service providers locally to provide a range of services, including regular maintenance, repairs, and car cleaning. It had 1,100-1,200 employees before it laid off nearly 70% of its staff.
Late last year, Japanese marquee investor SoftBank found irregularities in the five-year-old firm’s growth and revenue numbers while inspecting financial accounts ahead of a potential investment. The startup was looking to raise fresh capital from SoftBank and Khazanah Nasional at a valuation of over $800 million.
The founders of GoMechanic admitted to falsifying figures in January. Following this, GoMechanic’s investors ordered a forensic audit of its accounts by EY to examine claims of fraud and financial misreporting. “We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to the inflation of revenue, which the founders have acknowledged. All of this was kept from investors,” major investors of the company said in a joint statement.
Post admitting to the financial irregularities, GoMechanic continued operations across 800 workshops and serviced 30,000 vehicles in January, Lifelong added. However, the company continued to face financial difficulties as last month, it was issued a notice from the National Company Law Tribunal (NCLT) to initiate insolvency proceedings after it failed to pay the dues of Gurugram-based digital marketing firm DigiRovers.
