GoMechanic founder Amit Bhasin has admitted to financial reporting errors at the car repair startup and will have its accounts audited by a third party.
Nearly two years after it raised a mammoth $42 million in funding, it emerged that GoMechanic cooked its financial books by inflating revenues.
A forensic audit has been ordered to gauge the magnitude of the financial misreporting.
Sequoia India-backed automobile after-service startup GoMechanic has become the latest Indian startup to issue pink slips to its employees. What is worse is that, after firing 70 per cent of its employees, the company has asked remaining of the employees to work without pay for three months, according to a report on The Morning Context.
Earlier today, Economic Times quoted sources who said SoftBank has pulled out from investing in the startup after due diligence brought to light glaring loopholes in the company’s accounts and matters. Meanwhile, after the news about layoffs was out to the public, the company’s co-founder Amit Bhasin admitted to errors in financial reporting in seemingly, the most casual way he could. Read the full statement by Amit Bhasin below.
“We founded GoMechanic in 2016 to bridge the gap between process-oriented authorized service centers and cost-effective local workshops for people who were looking for a better car repair experience. In a short span of time, we were able to create a startup that provided a ‘network of technology-enabled car service centers, offering its services at the convenience of just a tap.’ It was our conscious commitment to facilitate a convenient, affordable, and reliable experience that helped us win the trust and hearts of our customers. We were fortunate to get support from a large number of investors in this journey. We came a long way, from starting out with a few hundred customers to expanding our business exponentially to serving more than 7 Lac customers thus far.
As entrepreneurs, we identify problems, come up with solutions, and explore every opportunity to grow those solutions to meet unmet needs. But in this instance, we got carried away. Our passion to survive the intrinsic challenges of this sector, and manage capital, took the better of us and we made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret.
We take full responsibility for this current situation and unanimously have decided to restructure the business while we look for capital solutions. This restructuring is going to be painful and we will, unfortunately, need to let go of approx. 70% of the workforce. In addition, a third party firm will be conducting an audit of the business.
While the situation is far from anything we could have ever imagined for Go Mechanic, we are working on a plan which would be most viable under the circumstances.
Need the support of our well wishers more than ever.”
In the carefully crafted statement, Amit Bhasin says they “deeply regret” the errors in judgment they made while following “growth at all costs”, and with regard to financial reporting. He further went on to confirm that “a third party firm” will be conducting an audit of the company.
The Morning Context also reported that GoMechanic’s biggest investor Sequoia Capital has launched a forensic audit at the Gurugram-based firm. Citing financial irregularities, a source told the publication that GoMechanic has total loans of INR 120 Cr and a ‘market pendency’ of INR 40 Cr which is ‘pressuring’ the startup currently.
Employees across departments including on-ground staff members were impacted by the layoffs. However, the startup also told the laid-off employees that they would be ‘called again if things get back to normal’.