KEY POINTS
- Bhasin previously wrote there were ‘grave errors’ made in GoMechanic’s financial reporting
- EY found that GoMechanic may have violated accounting processes to inflate revenue
- Investors said they are ‘distressed’ by the insights firm’s findings
Indian smart carwash and repairs company GoMechanic has laid off 70% of its workforce after an insights and research firm found that the company may have inflated revenue in its financial statements. Co-founder Amit Bhasin has since admitted to the said errors and said they take “full responsibility” for the layoffs.
Bhasin confirmed in a LinkedIn post Wednesday that GoMechanic is cutting 70% of its workforce, or about 700 employees, amid the company’s struggles to secure funding and prospective investors discovering that there were misstated facts in financial statements, TechCrunch’s Manish Singh reported.
Singh also tweeted that Bhasin edited his earlier post wherein it was stated that the company “made errors in judgment as we followed growth at all costs, including in regard to financial reporting.” According to Singh, Bhasin previously wrote that GoMechanic committed “grave errors.”
In the edited post, Bhasin said that the company “unanimously” decided to restructure its business while searching for “capital solutions.” He further admitted that the restructuring “is going to be painful,” considering that a huge number of the workforce will be let go.
Insights firm EY found in its research of GoMechanic that about 60 of the auto-services company’s more 1,000 service centers may have violated accounting processes to blow up revenue and divert funds, Bloomberg reported.
The Indian car services company’s investors released a joint statement where they expressed disappointment over EY’s findings.
“We are deeply distressed by the fact that the founders knowingly misstated facts, including but not limited to the inflation of revenue, which the founders have acknowledged. All of this was kept from the investors,” the joint statement read, according to the Times of India.
The investors further revealed that they have appointed a third-party firm to investigate the issue while they determine what steps to take moving forward.
In September, SoftBank, Norwest Venture Partners and Malaysia’s Khazanah Nasional Berhad were revealed to be in talks to lead a $75 million funding round for GoMechanic.
At the time, a person with knowledge of the matter told Business Standard that conversations were still underway and the term sheet has been shared with GoMechanic.
Also earlier last year, sources revealed that Tiger Global was in talks to lead a new financing round for the company that would have valued it at $1.2 billion. It was valued at $325 million in Series C funding in June 2021.
GoMechanic offers repair services and auto accessories through an app. Customers can book car services through the app and track their cars real time.
REUTERS/Rick Wilking
