Founders of ZestMoney Step Down Following the Collapse of PhonePe Deal
- ByStartupStory | May 16, 2023
Following the collapse of an acquisition deal with Walmart-owned PhonePe, the founders of Bangalore’s ZestMoney, a digital lending platform, have tendered their resignations. This development has created uncertainty for the eight-year-old company and its approximately 100 employees.
In an email sent to employees, CEO Lizzie Chapman announced the resignation of all three founders of ZestMoney, the Bangalore-based digital lending platform. Lizzie Chapman, Priya Sharma (CFO and COO), and Ashish Anantharaman (CTO) have made the difficult decision to step down from their respective roles. However, they will continue to be shareholders and remain supportive as the company’s “biggest cheerleaders”.
According to an anonymous source, around 130 employees from ZestMoney have transitioned to PhonePe since March, with expectations of more following suit. This move has significantly reduced ZestMoney’s workforce from approximately 500 employees in December to around 100 currently. Despite emailed queries, there has been no response from spokespeople representing ZestMoney and PhonePe.
ZestMoney, a digital lending platform, operated as a Buy Now, Pay Later service that empowered customers to access instant digital loans. These loans were facilitated through the acquisition of Nahar Credit, a non-banking financial company (NBFC), by ZestMoney in 2019.
In November 2022, discussions regarding a potential deal between PhonePe and ZestMoney commenced. As per reports by Mint, PhonePe had plans to acquire ZestMoney for a sum ranging between $200 million to $300 million. The acquisition would have granted PhonePe access to a coveted non-banking financial company (NBFC), a highly sought-after asset among fintech firms. However, the deal was later called off in March due to concerns surrounding the quality of ZestMoney’s loan portfolio.
According to an interview with an insider, extensive due diligence led to a significant reduction in the valuation of ZestMoney during the acquisition discussions, plummeting to approximately $40 million to $50 million. As a result, PhonePe decided to call off the acquisition. The investigation revealed that ZestMoney’s loan book presented substantial challenges, with credit losses exceeding 1.5 times its revenue. Consequently, PhonePe opted to delay the acquisition and proposed a considerably lower offer than anticipated, even falling below the amount previously raised by ZestMoney.
ZestMoney’s loan book reportedly has exposure to several non-banking financial companies. Since its inception in 2015, the Bengaluru-based fintech startup has raised nearly $140 million from investors, including PayU, Zip, Ribbit Capital, Quona Capital, Xiaomi, Omidyar Network, and Goldman Sachs. The company’s revenue for the fiscal year ended March 31, 2022, surged 63% to ₹145 crore from the previous fiscal year’s ₹89 crore, while losses more than doubled to ₹398.8 crore from ₹125.8 crore.
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