Car servicing startup GoMechanic acquired by Lifelong India’s Servizzy entity after financial struggles
- ByStartupStory | March 29, 2023
GoMechanic, a startup that provides car servicing, acknowledged financial irregularities and received a notice to begin insolvency proceedings. However, within two months, the company has managed to secure an unexpected buyer.
Lifelong India Pvt Ltd, based in Delhi, has confirmed that it will acquire GoMechanic as a majority shareholder through its Servizzy entity. This was in response to enquiries sent on Tuesday evening to which Lifelong India Pvt Ltd confirmed the acquisition.
The troubled car repair startup is expected to receive some respite from the deal. The Lifelong Group spokesperson stated that the acquisition of GoMechanic is in line with their strategic vision to combine their automotive industry knowledge with GoMechanic’s business. They are determined to enhance GoMechanic’s operations.
As a result of GoMechanic’s recent financial struggles, the board and shareholders, with the backing of Stride Ventures, initiated a quick and highly publicized sale process to ensure the company’s operations continue. According to two sources familiar with the matter, the firm, which received funding from Tiger Global Management and Sequoia Capital India, along with Lifelong India’s Managing Director Atul Raheja, informed its employees of the acquisition during an event in Gurugram on Monday.
According to sources, a majority of GoMechanic’s workforce will be terminated, while only a small number may be hired by Lifelong. GoMechanic has not responded to requests for comment as of Tuesday. In March, The Morning Context stated that CarTrade, a used-car firm, was in discussions to acquire GoMechanic and that there was another potential buyer. The report also mentioned that Co-founder Amit Bhasin is seeking a sale price of up to Rs 250 crore.
Last week, Business Today stated that the sale of GoMechanic may involve CarTrade acquiring a portion of the company’s assets, such as its service station network and related technologies, while other sections will be sold to a different buyer. The terms of the agreement with Lifelong India are uncertain, but it is possible that they will acquire GoMechanic’s spare parts division to supplement their core business.
An investor in the mobility industry, who wished to remain anonymous, stated that Lifelong India has a significant client base in the automotive sector, which includes notable companies like Hero, Exide, General Motors, and Magna. The acquisition of GoMechanic is likely due to the synergies between the two firms’ auto parts businesses. Lifelong India, founded by Atul Raheja in 1985, is a Delhi-based supplier of automotive components, plastics, and casting components, with a reported turnover of $10 million as per its website.
The company had been seeking opportunities to expand its presence in the automotive service and repair industry. In January, GoMechanic’s co-founder, Amit Bhasin, acknowledged financial misreporting in a LinkedIn post. He explained that the company became too focused on solving problems in the car repair experience and was overly enthusiastic about growth at all costs, which led to errors in judgment, including in financial reporting. Bhasin expressed regret over the situation and took full responsibility for it. The company has since decided to restructure its business while searching for capital solutions.
According to YourStory, GoMechanic had been misleading investors by providing inflated sales numbers and underreported expenses during its fundraising efforts. One source claimed that the company had presented misrepresented data to SoftBank, which had expressed an interest in investing in the startup. SoftBank discovered discrepancies during its due diligence and brought them to the attention of GoMechanic’s existing investors. Subsequently, Sequoia and a third party conducted a forensic audit of the company. With funds running low, GoMechanic had to lay off 70% of its workforce, with some employees asked to resign.
According to The Morning Context, GoMechanic has received a notice from the National Company Law Tribunal (NCLT) to begin bankruptcy proceedings. The startup, which was founded in 2016, had raised $42 million in its Series C funding round, with Tiger Global Management leading the investment and existing investors such as Sequoia Capital India, Orios Venture Partners, and Chiratae Ventures participating. Reports in the media at the time indicated that the company aimed to achieve a valuation of around $500 million.
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