Bhasin also confirmed that the firm will sack 70% of its employees as its investors including the likes of Sequoia, Tiger Global, Chiratae Ventures, have initiated a financial audit of the firm.
Also in this letter:
■ Tata Tech looks to raise Rs 3,500-4,000 crore through IPO
■ Govt. open to more than a single self-regulatory body for e-gaming
■ SC to hear Google’s responses on NCLAT-CCI order
How GoMechanic unravelled after SoftBank-Khazanah funding round collapsed
In December last year, SoftBank and Khazanah pulled out from investing in car servicing startup GoMechanic after a due diligence (DD) report from EY brought to light glaring loopholes in the company’s financial reporting and overall business, people aware of the matter told us.
With the funding round falling through and many questions being raised by incoming investors, the company was left with no other option but to admit to these lapses.
Red flags galore: The investment DD by EY India flagged discrepancies like fictitious garages, selective payments to certain garage units and overall inflated revenue and user metrics in the Sequoia Capital and Tiger Global-backed startup.
Two weeks ago, after the funding round did not go through, the present investors took note of the gaps in the company’s financial reporting. Sources close to the matter said they further questioned the company about these red flags.
What happened next? Sources close to the matter told ETtech that GoMechanic founders confessed to their investors about reporting inflated financials. “The GoMechanic team said whatever numbers they had so far disclosed to the board is not true and they were inflated,” one of the persons briefed on the matter said.
The ongoing forensic audit, which too is being handled by EY, is expected to arrive at the depth and nature of irregularities at the company.
Founder responds: Taking to LinkedIn, GoMechanic cofounder Amit Bhasin admitted to grave errors in the company’s financial reporting. He confirmed that the company would fire roughly 70% of its employees in restructuring amid a fund crunch.
Bhasin said that the founders got “carried away” in their bid “to survive the intrinsic challenges of this sector, and manage capital”. “We made errors in judgment as we followed growth at all costs, including in regard to financial reporting, which we deeply regret,” he wrote.
Investors speak: Meanwhile, major investors in the company – Sequoia Capital, Tiger Global, Chiratae Ventures and Orios Venture Partners – put out a statement saying they were “recently made aware by the company’s founders of the serious inaccuracies in the company’s financial reporting.”
“We will be working together to determine the next steps for the company,” the investors said in a joint statement. The company had last raised $42 million in Series-C funding from Tiger Global, Sequoia Capital India, and others and is valued at around $300 million.
Tata Tech starts work on IPO to raise up to Rs 4,000 crore
N Chandrasekaran-led Tata group has initiated the process to list Tata Technologies through an initial public offering (IPO). The Tata Motors subsidiary is working with two advisors and is in the process of appointing another, to help it raise Rs 3,500 crore-4,000 crore, valuing it at Rs 16,200 crore–20,000 crore ($2 billion-2.5 billion).
Tata Motors holds 74.42% in Tata Technologies, according to the company’s 2022 annual report.
Catch up quick: In December, the Tata Motors board approved a partial divestment of its stake in Tata Tech through a public float. The parent had said in an exchange filing that the IPO would come “at an opportune time, subject to market conditions, applicable approvals, regulatory clearances,” but hadn’t provided schedule details.
What’s the objective: Tata Tech is planning a mix of primary and secondary sale of equity that will offer a liquidity event for financial and small investors. This will also provide access to primary growth equity for funding expansion in India and overseas.
Quote unquote: “Active work has commenced on preparing the DRHP (draft red herring prospectus). While the primary objective is to give existing shareholders an exit opportunity, the move also helps Tata Motors — which has a 74.43% stake — to plough funds into its growth businesses, especially EVs,” said a senior group official.
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Centre open to more than a single self-regulating body for e-gaming
After floating the idea of an industry-regulated self-regulating organisation (SRO) to certify all the games that can be played in India, the government is now open to the idea of more than one SRO for certifying and managing online gaming companies, sources told us.
It may, however, put in place strict rules and regulations regarding the legal responsibilities of SROs, the do’s and don’ts, along with other norms for who can form an SRO, the sources added.
What are the details? On January 2, the Ministry of Electronics and Information Technology released the draft gaming rules for public consultation. Under the proposed rules, the government floated the idea of such a body. The IT ministry also proposed that games not certified by an SRO would not be allowed to operate in the country.
Quote Unquote: “There will be appropriate mechanisms in place for who can form an SRO, what will be their roles and responsibilities, and what legal backing they have for certifying games. We certainly will not let fly-by-night operators form SROs and become certifying agencies,” a senior government official said.
Yes, but: Minister of State for Electronics and Information Technology Rajeev Chandrasekhar has, however, said gaming companies and intermediaries would not be permitted to dominate the narrative at SROs.
According to sources, industry bodies and gaming intermediaries have also proposed that if a game is denied certification by one SRO no other SRO would do so, to ensure that there is a common code of conduct across the industry.
“That certainly is one possibility. We do not want forum-shopping of certification by gaming companies because there are many smaller and bigger players in the market,” a source said.
Microsoft to lay off 10,000 employees, cut 5% of global workforce
Microsoft said on Wednesday it would cut 10,000 jobs by the end of the third quarter of FY23, the latest sign that layoffs were accelerating in the US technology sector as companies brace for an economic downturn.
The layoffs will result in a charge of $1.2 billion in the second quarter of fiscal 2023, representing a negative impact of 12 cents on per share profit, Microsoft said.
Job cuts continue: Microsoft recently slashed its workforce in October and July, and has paused hiring. In October, news site Axios reported that Microsoft had laid off under 1,000 employees across several divisions. Meanwhile, Insider reported that the company could cut recruiting staff by as much as one-third.
Layoffs in other tech companies: Microsoft joins Amazon, Meta, Salesforce, among other major companies that have sacked thousands of employees in the past few months. Recently, Amazon CEO Andy Jassy announced the e-commerce giant will lay off over 18,000 employees, starting January 18.
Facebook parent Meta Platforms has said it will let go of 13% of its workforce, or more than 11,000 employees, as part of a plan to reduce costs at the social-media platform. IT major Salesforce announced that it was laying off around 10% of its employees, or just under 8,000 people.
Apple remains to be only Big Tech companies to have not announced layoffs yet.
SC to hear Google’s responses on NCLAT-CCI order today
The Supreme Court on Wednesday stopped short of putting a stay on the Competition Commission of India (CCI) order that had asked Google to make changes to its Android ecosystem by January 19.
A bench led by Chief Justice of India DY Chandrachud agreed to hear Google’s appeal at 11.30 AM on Thursday.
Court proceedings: At the outset, the bench wanted to stay the CCI order for two weeks and ask the appellate tribunal to hear the company. However, additional solicitor general N Venkataraman, appearing for the CCI, opposed the CJI’s suggestions on remanding the case to the NCLAT, saying it should be heard by the apex court itself. He told the judges that “there cannot be two innings. This is a matter of national importance. The world is looking at us”.
The CJI later agreed with the ASG, saying, “There should be one inning only.”
What’s Google’s stand: The Alphabet subsidiary has to make changes to the way it markets the Android platform in India by January 19, as per the CCI ruling.
The CII order could stall the growth of the Android ecosystem in India, according to Google. Implementing the directions would mean modifying existing contracts, introducing new license agreements, and altering existing arrangements with more than 1,100 device manufacturers and thousands of app developers, the company has said.
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Delhi HC restrains Grover from creating ‘interest’ on Koladiya’s disputed shares: The Delhi High Court on Wednesday restrained BharatPe cofounder and former managing director Ashneer Grover from creating any third-party rights or interest on shares ‘transferred’ to him by the company’s original cofounder Bhavik Koladiya.
Country-wise negotiations for finalising “trusted geographies” time-consuming, says USIBC: Undertaking country-by-country negotiations for drawing up the whitelist of trusted geographies as proposed in the draft Digital Personal Data Protection Bill, 2022, will be time-consuming, Jay Gullish, Executive Director for Digital Economy in the US India Business Council, told ET.
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