India-based BNPL ZestMoney shutting down after failing to find a buyer
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Indian buy now, pay later (BNPL) company called ZestMoney recently announced that it is shutting down. The company was looking for a buyer for some time, and after failing to find one, its only remaining solution was to permanently close down shop.
Buy now pay later platform ZestMoney is shutting down its operations by December end.
➡️ It will also let go of around 150 employees currently working with the company.
A thread 🧵
— Kunal Manchanda (@Kunal_POV) December 6, 2023
ZestMoney fails after a failed acquisition
Despite major demand for BNPL services and the fact that many are prospering right now, this is not the case when it comes to ZestMoney. The company had great potential, and its last funding round saw its valuation go to $450 million. However, the firm has been struggling to find backers ever since a failed acquisition from earlier this year.
The company was supposed to be acquired by PhonePe, a mobile payments giant backed by Walmart. Unfortunately, PhonePe backed out of the acquisition in late March over due diligence concerns.
The deal was supposed to involve an amount somewhere between $200 million and $300 million. If the deal went through, PhonePe would have managed to secure a non-banking finance company license — something that it has been pursuing for a long time. However, it appears that the firm found that the acquisition would be too risky, so it ditched the deal.
It is quite possible that the same issue is the reason why ZestMoney could not attract any other buyer since then, or it might simply be that other potential buyers saw PhonePe backing out, and decided that it would be best not to approach ZestMoney.
ZestMoney’s executives resigned after the failed deal
In any event, this was not the end of troubles for the company. Only a few weeks after the PhonePe deal collapsed, ZestMoney was abandoned by its top officials, including the CEO, Lizzie Chapman, CFO and COO Priya Sharma, as well as its CTO, Ashish Anantharaman. If the company struggled to attract backers or buyers before this, the mass exodus of its top-ranking executives definitely sealed its fate.
➡️ In May 2023, the company’s co-founders, Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, resigned as the firm failed to raise a new round and strike an acquisition deal with the digital payment platform PhonePe.
— Kunal Manchanda (@Kunal_POV) December 6, 2023
The company did get new leadership, but after they failed to make anyone interested enough to acquire the firm, the new executives told their 150 employees that the company would be shutting down. The workforce received the news earlier this week, according to reports.
The firm’s failure is unfortunate, as Indian citizens could have used its services to better their financial situations. The country has a rather low credit card penetration, which led the majority of the population without traditional credit scores. With no credit scores, banks struggled to evaluate the creditworthiness of their clients before issuing loans. As a result, they typically choose not to issue loans in order to avoid risks.
Small loans would still be an option, but they are typically not very profitable for the banks, which disincentivizes them from issuing such financial products. ZestMoney was trying to carve out its own niche, and the conditions were right, but the company’s due diligence issues stood in the way.
