Companies
Orios writes down GoMechanic investment
Summary
The Gurugram-based firm was looking to raise a new funding round led by SoftBank and Khazanah Nasional and was commanding a valuation of over $800 million.NEW DELHI : Venture capital firm Orios Venture Partners, which owns about 17.1% of troubled car servicing startup GoMechanic, in an internal mail to its limited partners (LP) said it has written down its investment in the startup, a copy of which has been reviewed by Mint.
“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," stated the mail. Orios Venture Partners had raised a total commitment of $75 million towards its second fund, its past filings show.
GoMechanic was last valued at $285 million after raising $42 million, according to VCCedge data. The Gurugram-based firm was looking to raise a new funding round led by SoftBank and Khazanah Nasional and was commanding a valuation of over $800 million.
Orios in its letter said that GoMechanic had been inflating sales and underreporting costs with the aim of securing a higher valuation for their company. “It is shocking to us that 2 boys who came from humble families and studied at IIM Ahmedabad would resort to such measures when their business was already worth 100s of millions of dollars," the mail said.
The mail also makes a note that other investors in GoMechanic have commissioned a forensic audit to investigate allegations of financial fraud and misreporting.
“Surprisingly, KPMG and PWC, past auditors of the company, did not disclose any issues in their reports either," the mail notes.
Emailed queries to spokespersons of GoMechanic, Orios Venture Partners, KPMG and PwC did not elicit any response.
Tracxn data shows Sequoia Capital owns the largest stake in GoMechanic at 26.89%, followed by Orios Venture Partners at 17.1%, Tiger Global at 10.03%, and other investors with a combined 11.2% stake. The company’s founders, Amit Bhasin, Kushal Karwa, Nitin Rana and Rishabh Karwa, together own 25.5% of the company.
GoMechanic on Wednesday, in a Linkedin post by co-founder Amit Bhasin admitted to falsifying figures to investors after SoftBank found irregularities in the five-year-old firm’s growth and revenue numbers while inspecting accounts before a potential investment.
The firm also announced the dismissal of 70% of its staff, numbering between 1,100 and 1,200.
