When ZestMoney raised $50 million from Proses-owned PayU and Australian fintech Zip Co in September 2021, the buy-now-pay-later (BNPL) segment was booming thanks to a pandemic-induced spike in online shopping.
More than a year later the sector is in turmoil, with Zip Co’s market cap down 93% since February 2021. Now, sources have told us Walmart-owned PhonePe is on the verge of acquiring ZestMoney in what is a distress sale. More details in a packed edition of ETtech Morning Dispatch
Walmart-backed leading online payment unicorn Phonepe could soon acquire buy-now-pay-later (BNPL) platform ZestMoney, which has been looking for a buyer for some time now to generate some fresh funding.
PhonePe, majority owned by Walmart, is closing to acquiring Buy Now Pay later Platform ZestMoney amid a global reset in the sector owing to interest rate hikes and a squeeze in consumer spending, two sources told us.
If the transaction goes through, it will be the biggest consolidation in the new-age lending sector, which has of late faced major regulatory roadblocks in India. In September, the Reserve Bank of India introduced a set of rules for online leaders.
Moreover, the BNPL sector has been facing serious regulatory scrutiny during the last few months as the Reserve bank of India introduced a set of rules affecting these businesses.
While the size of the PhonePe-ZestMoney deal couldn’t be determined, it is likely to be a “distress sale”, according to several people in the know of it. The sale could potentially value ZestMoney much lower than its previous financing round last year. Its valuation was then pegged at around $400 million. Reacting to the news of the potential buy, a ZestMoney spokesperson told ET that the “story is purely speculative.
Another person close to the developments, meanwhile, maintained that the talks are fairly serious and likely to close in a few weeks. “Negotiations are on about the price, keeping in mind the extremely cautious state of the markets, especially in the fintech space,” the person added. A person aware of the PhonePe-ZestMoney deal has further shared that the BNPL platform will likely function as an independent entity post the acquisition.
Bengaluru-based ZestMoney was founded in 2015 by Lizzie Chapman Priya Sharma and Ashish Anantharaman. It raised $50 million from Proses-owned PayU and Australian fintech Zip Co in September last year.
ZestMoney has picked up around $142 million in equity funding. Its other backers include Goldman Sachs, Ribbit Capital, and Xiaomi. Unlike Simpl and PayU’s LazyPay, which provides BNPL services for smaller, everyday purchases, Zest and Axio have focused on large-ticket items.