Beleaguered car servicing startup GoMechanic has been acquired by a consortium led by Delhi-based Lifelong Group.
The acquisition comes two months after the Sequoia India-backed startup fired around 70% of its workforce and admitted that it "made errors" in financial reporting.
"Due to the recent financial difficulties at GoMechanic, the board and shareholders with support from Stride Ventures initiated a speedy and widely publicized sale process to ensure the continuity of business. The Servizzy consortium, to be led by the Lifelong Group, emerged as the strongest bid in this process for the acquisition of the GoMechanic Business in accordance with the terms and conditions contained in the agreement," Lifelong Group said in a statement.
Lifelong Group said the transaction will assist in "preserving the ecosystem" at large and also enable providing "continued livelihood" to the employees at GoMechanic.
The acquisition also offers a new lease of life for GoMechanic, which continued to operate 800 workshops and service 30,000 vehicles in January despite challenges, the auto components maker said.
"Acquisition of the GoMechanic business, aligns with our strategic vision of synergizing the Lifelong Group's proven expertise in the automotive industry. We are focused on building upon GoMechanic's business journey, and will continue revolutionizing the Indian automotive service and repair industry," says the official spokesperson of Lifelong Group.
In a LinkedIn post in January, GoMechanic co-founder Amit Bhasin had said the startup "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. This restructuring is going to be painful and we will unfortunately need to let go of approx. 70 percent of the workforce," Bhasin wrote.
The Gurugram-based startup had failed to raise funds from investors amid reports that it inflated revenue. Audit firm EY had conducted due diligence of the Sequoia-backed car repair company. GoMechanic had last raised $42 million in a Series C funding round led by Tiger Global Management in June 2021.
"The investors of GoMechanic were recently made aware by the company's founders of the serious inaccuracies in the company's financial reporting. We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to inflation of revenue, which the founders have acknowledged," GoMechanic investors said in a joint statement in January.