Investors eyeing asset sale of GoMechanic; decision likely in a week

The investors of GoMechanic could push for asset sales at the country’s largest aftermarket automotive service and maintenance platform, according to the people familiar with the matter. The decision is expected to be finalised in a week’s time, the sources said.

This comes after investors flagged accounting irregularities at the Gurugram-based company, which has now decided to lay off 70 per cent of its workforce as it struggles to raise fresh funds.

“We are looking at multiple options that are in the interests of all the stakeholders. The said option (asset sale) is one on the table,” said the GoMechanic founding team in response to a query. “But as you would appreciate, it would be premature to state anything definitive at this stage.”

According to media reports, the Registrar of Companies (ROC) has sought to examine the books of GoMechanic’s holding entity Targetone Innovations. However, the firm denied that it had received such a communication.

“We have not received any communication in any form from RoC or any related statutory authority,” said the GoMechanic founding team.

The National Company Law Tribunal (NCLT) also reportedly issued a notice to GoMechanic over an insolvency plea filed against the company.

However, GoMechanic on Friday said there was a turnaround in its core business in January. The firm said it serviced 30,000 vehicles last month, which was 70 per cent of the peak sales achieved in July 2022.

The firm said it continues to see strong auto servicing volumes in most markets, with Delhi-NCR contributing the most. GoMechanic said over 800 workshops remain active, and it has added 3,000 members to its miles programme, which currently has 60,000 members.

“The entire founding team remains focused on not just surmounting the formidable challenge before us but in ensuring a sustainable solution and not just a temporary quick fix,” said the GoMechanic. “Besides recalibration on the business strategy front, we took some painful but unavoidable decisions last month. What is really heartening about these numbers is that these have been achieved despite us slashing the marketing costs substantially in January. The real goal we are focused on is achieving operational break-even and profitability at an aggregate, annual P&L level as soon as possible. The January numbers give us the required confidence.”

However, auditors of GoMechanic had raised “red flags” over the company’s accounting standards. In 2020, PwC India, the auditor of Targetone Innovations had issued a qualified opinion, indicating that it could not provide a clean opinion of the accounts.

The firm reportedly did not maintain inventory records for receipts and issuance of goods directly received by the customers.

The company’s co-founder Amit Bhasin recently admitted to errors in financial reporting, following which a forensic audit was ordered. A business restructuring undertaken has been taken which will see 70 per cent of the 1,000-odd workforce being laid off.

GoMechanic’s investors in a joint statement recently said they were deeply distressed by the fact that the founders knowingly misstated facts.

“At this point, there is an ongoing compliance process in progress and it would be premature to comment when something is ongoing,” said the GoMechanic founding team. “As much as other stakeholders, we do look forward to the process being completed at the earliest for clarity to emerge for the benefit of all of us.”

GoMechanic on Friday said it remains committed to the largely underserved workforce of the unorganised Indian automotive service and repair industry. “GoMechanic value proposition for these professionals remains extremely robust and we are confident of continuing to attract new workshops and professionals,” said the spokesperson. “Combined with the strengthening of operations and tuning of the business model, we are confident of steadily moving towards the above-stated goal.”