GoMechanic acquired by Delhi-based auto parts maker Lifelong Group
The deal brings some respite to the Sequoia Capital and Tiger Global-backed car servicing startup as it battles the consequences of financial misreporting, insolvency pleas, and mistrust among employees and vendors.
Just two months after car servicing startup admitted to financial irregularities and received a notice to initiate insolvency proceedings, the company has found an unlikely buyer.
Delhi-based Lifelong India Pvt Ltd is acquiring GoMechanic as the majority shareholder under its Servizzy entity, Lifelong confirmed to YourStory in response to enquiries emailed Tuesday evening.
The deal is likely to provide some relief to the beleaguered car repair startup that has been facing a turbulent time lately.
“Acquisition of the GoMechanic business, aligns with our strategic vision of synergising the Lifelong Group’s proven expertise in the automotive industry. We are focused on building upon GoMechanic's business," a Lifelong spokesperson said.
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 spokesperson added.
The Tiger Global Management- and Sequoia Capital India-backed firm, along with Lifelong India's Managing Director Atul Raheja, announced the development to employees on Monday in an event in Gurugram, according to two sources aware of the developments.
Most of GoMechanic's employees will be laid off, while a few are likely to be absorbed into Lifelong, these persons said.
GoMechanic did not reply to queries emailed on Tuesday.
The Morning Context reported earlier in March that used-car company CarTrade was in talks to buy GoMechanic and that GoMechanic had another buyer in the mix. Co-founder Amit Bhasin is reportedly looking for a sale price of up to Rs 250 crore, according to the report.
Business Today reported last week that the sale may be structured so CarTrade acquires a portion of GoMechanic’s assets, including its network of service stations and associated technologies, while other parts would be sold to another entity.
The details of the deal with Lifelong India are unclear. It is likely, however, that Lifelong India will take over GoMechanic's spare parts division to complement its own core area of business.
"Lifelong India has a long list of automotive clients including Hero, Exide, General Motors, and Magna. The only logical explanation to the deal is the synergy between the auto parts businesses of both companies," an investor in the mobility industry said, asking not to be named.
Established in 1985 by Atul Raheja, Lifelong India is a Delhi-based supplier of automotive components, plastics, and casting components, having a turnover of $10 million, according to its website.
The company has been looking to expand its footprint in the automotive service and repair industry.
In January, Bhasin admitted to financial misreporting in a LinkedIn post, stating that the company got carried away trying to solve problems in the car repair experience.
"Our passion to survive the intrinsic challenges of this sector, and manage capital, took the better of us and we made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret. We take full responsibility for this current situation and unanimously have decided to restructure the business while we look for capital solutions," Bhasin had said.
YourStory had reported that the company had been raising funds from investors by misleading investors about its sales numbers and costs.
GoMechanic inflated its sales numbers and showed lesser expenses than it actually incurred in a pitch to SoftBank, which was interested in funding the startup, one of the sources had said. In its due diligence, SoftBank found inconsistencies and flagged those to the company's existing investors.
GoMechanic was later subject to forensic audit by Sequoia and a third party. Running out of money, it eventually let go of 70% of its workforce, with several of them being asked to resign.
The firm has also been served a notice by the National Company Law Tribunal (NCLT) to initiate bankruptcy proceedings, per a report by The Morning Context.
Founded in 2016, GoMechanic had last raised $42 million in a Series C round led by Tiger Global Management, with existing investors Sequoia Capital India, Orios Venture Partners and Chiratae Ventures also participating. The company had sought to be valued at about $500 million at the time, per media reports.