Teamcity failing to update a directory on agent machines

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Checkout is failing on feature branches on agent machines. Works fine on default branch. I have checked all agent machines have correct host fingerprints. Teamcity user has full administrative rights on machine but it is still failing to checkout.

Failed to start reason
Error while applying patch: Failed to perform checkout on agent: '"c:\program files\mercurial\hg.exe" --config ui.interactive=False update --config auth.tc.prefix=* --config auth.tc.username=test--config auth.tc.password=****** --config "auth.tc.schemes=http https" -C -r 2240521534ea'
command failed.

Any idea what I am missing here?

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In our team we've choosen to enforce clean checkout after few similar incidents. This is quick solution. Our repository is about 800 Mbytes but fast LAN saves us.