GoMechanic, an auto service company, has to raise funding quickly if it is to survive. Following many weeks of scouting, it may be close to a deal with one or two possible purchasers, including a publicly traded car-tech firm.
GoMechanic, an auto repair company based in Delhi-NCR, has had a difficult year. Or perhaps a difficult two years.
After its inability to acquire financing since the last investment round in June 2021, the firm admitted to financial problems in January, following which it lay off 70% of its 1,000-person workforce. Given the scarcity of free-flowing venture money, this naturally raised questions about GoMechanic’s capacity to stay afloat.
GoMechanic also contended with insolvency petitions, vendor mistrust, consumer unhappiness over unfulfilled demands, and staff resentment over underpaid wages. To make matters worse, one of its main owners, Orios Venture Partners, is said to have written off its entire stake in the damaged vehicle servicing firm. Emails submitted to Rehan Yar Khan, who oversaw the GoMechanic deal on behalf of Orios VP, went unanswered. But, everything is not lost.
GoMechanic’s purchase discussions with used automobile marketplace CarTrade are nearing completion, and both firms might reach an agreement within the next two weeks. Perhaps even before the conclusion of fiscal year 23. In addition to CarTrade, there is an unnamed secondary buyer in the mix. “The proposed transaction is expected to be structured in such a way that CarTrade acquires a portion of GoMechanic’s assets, including its network of service stations and associated technologies, while other parts are sold to the second entity,” said the source.
Since admitting to fraud, GoMechanic has been looking for new purchasers for the last 1-2 months. According to rumors, in addition to CarTrade, the firm has undertaken preliminary conversations with Spinny and Cars24.
Nevertheless, such discussions are claimed to have fallen through due to “discrepancies” in valuation and other financial indicators. According to Tracxn, GoMechanic was last valued at $30 million on March 11, 2023. This is a significant decrease from its Series C funding valuation of $285 million in June 2021.
When GoMechanic was contacted for comment on its conversations with CarTrade, the founding team stated that it is “working on a way forward that will be beneficial to all stakeholders.” In an email, the firm stated, “Closing [down] the business is an unsubstantiated speculation, and is not true,” allaying concerns about its likely closure if it fails to find a buyer.
The startup’s investors, meanwhile, have been tight-lipped about recent developments. Besides Orios VP, GoMechanic also counts Tiger Global, Sequoia Capital, Chiratae Ventures, and Snapdeal founders Rohit Bansal and Kunal Bahl among its investors. It has raised a total of $62 million across seven funding rounds, per Tracxn. Emails sent to Sequoia India, which is still GoMechanic’s largest shareholder, remained unanswered.
