GoMechanic, Backed by Sequoia, to Cut 70% of Staff After Inflating Revenue

EY Conducted a Thorough Investigation for Potential Investors in GoMechanic and Discovered That the Indian Auto-services Company had Exaggerated its Revenue, Causing a New Problem For its Backer Sequoia Capital in India.

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According to sources with knowledge of the situation, EY's investigation suggested that around 60 of the over 1,000 GoMechanic service centers may have broken accounting regulations to inflate revenue and misdirect funds. These individuals requested to remain anonymous due to the confidential nature of the information.
Investors of GoMechanic have expressed their distress over the founders' misrepresentation of facts, including the exaggeration of revenue. This information was not disclosed to the investors. Sequoia and Chiratae Ventures released a joint statement on Wednesday to confirm this.

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A comment was made by one of the founders of GoMechanic on Wednesday, which was followed by this statement.

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Amit Bhasin, one of the founders, expressed regret on LinkedIn for the mistakes made in pursuit of growth, particularly in terms of financial reporting, without providing specifics. All involved have taken responsibility for the current state of affairs and have unanimously decided to restructure the business while seeking capital solutions.
The consortium of investors, headed by SoftBank Group Corp and Khazanah Nasional Bhd., that had employed EY to assess GoMechanic, has withdrawn from negotiations and notified Sequoia of the irregularities, according to sources. Neither SoftBank nor Khazanah have responded to requests for comment via email.
Sequoia's India business has been facing another challenge after the founders of Zilingo Pte and BharatPe left in 2020, with claims of financial misconduct.

GoMechanic's largest investor is the US-based Sequoia, and they have a representative on the company's board.
A representative from EY declined to provide a statement, and GoMechanic did not answer emails or phone calls from Bloomberg News requesting a comment.
Carmine Di Sibio, the CEO of EY, expressed his strong support for doing the necessary research and making sure that any investments have the proper infrastructure, governance, and personnel during an interview at Davos on Wednesday. He also emphasized that investors should be more focused on this than ever before.

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GoMechanic, a mobile application that provides a range of services from mechanics to carwashing, claims to have the largest auto service center network in India. However, the startup is now facing a cash flow problem due to its funding round being in jeopardy, according to sources.