There are many aspects which make GoMechanic’s financials look unreliable. For instance, in its FY21 financials, the startup reported a loss of INR 27.4 Cr. However, the same loss increased to INR 74 Cr in FY22 financials and the startup did not offer any explanations for the readjustment. Similarly, more than half of the startup’s expenses in FY22, or INR 108 Cr, were chalked up as ‘other expenses’, without any explanation as to what qualifies as other expenses.
Orios Venture Partners has reportedly written down its investment in the beleaguered car servicing startup GoMechanic, in which it is the second-largest institutional stakeholder. The VC firm, which holds about a 17.14% stake in the startup, informed its limited partners (LPs) of its decision. “While our exposure from Fund II was 7.79% of the committed corpus, at last round’s valuation, the assets represented around 1.27x of the fund’s multiple on invested capital (MOIC). We are writing down this value,” the firm said.
Orios Venture Partners first invested in GoMechanic during the latter’s Series A round worth $4.9 Mn in January 2019. In the startup’s $42 Mn Series B round led by Tiger Global, Orios raised its stake further to 17.14%. The development comes after GoMechanic cofounder Amit Bhasin publicly admitted to committing “errors in judgment” in financial reporting while trying to pursue growth in a chain of events which started with the startup firing 70% of its staff.
Orios added that GoMechanic had been inflating sales and underreporting costs incurred to secure a higher valuation. Incidentally, Sequoia India has already launched a forensic audit in the startup’s books to control the fallout of one of the most promising startups imploding like this. It is also important to mention that both KPMG and PwC had conducted audits in the startup before, but did not report any discrepancies.
There are many aspects which make GoMechanic’s financials look unreliable. For instance, in its FY21 financials, the startup reported a loss of INR 27.4 Cr. However, the same loss increased to INR 74 Cr in FY22 financials and the startup did not offer any explanations for the readjustment. Similarly, more than half of the startup’s expenses in FY22, or INR 108 Cr, were chalked up as ‘other expenses’, without any explanation as to what qualifies as other expenses.
As such, the group of investors in GoMechanic, which includes Sequoia India, Orios, Tiger Global, Chiratae Ventures, and others, have appointed EY to audit GoMechanic’s financials as the founders recently informed them of inaccuracies in financial reporting. The investors said that the investors were unaware of the fact that the founders knowingly misstated facts, including but not limited to the inflation of revenue.
