PhonePe May Acquire BNPL Platform ZestMoney in Biggest Consolidation Move in New Age Lending Sector
November 26, 2022: The negotiations are very serious and are likely to close within a few weeks. “Given the extremely cautious state of the markets, particularly in the fintech space, price negotiations are ongoing,” according to a person close to the development.
After the acquisition, ZestMoney will operate as an independent entity. Walmart-backed leading online payments unicorn PhonePay may soon acquire buy-now pay-letter (BNPL) platform ZestMoney, which has been looking for a buyer for some time to generate fresh funds.
If PhonePe’s acquisition of ZestMoney goes through, it will be the biggest consolidation move in the new-age lending space.
BNPL is looking for a platform buyer as it struggles to raise fresh funds from tech investors, the growth guys shared with The Economic Times.
Additionally, the BNPL sector has been facing serious regulatory scrutiny over the past few months as the Reserve Bank of India introduced a set of regulations affecting these businesses.
While the size of the PhonePe-ZestMoney deal could not be determined, it is likely to be a “sorrow sale,” according to several people in the know.
The sale could potentially value ZestMoney at a much lower value than its previous financing round last year.
Its valuation was then estimated at around $400 million. Reacting to the news of the possible purchase, a ZestMoney spokesperson told ET that “the story is purely speculative”.
Another person close to the development, meanwhile, maintained that the talks are very serious and are likely to close in a few weeks.
“Given the extremely cautious state of the markets, negotiations about pricing are ongoing, particularly in the fintech space,” the person added.
A person familiar with the PhonePe-ZestMoney deal further said that the BNPL platform will operate as an independent entity after the acquisition.
Bengaluru-based ZestMoney was founded in 2015 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman.
It raised $50 million in September last year from Process-owned PayU and Australian fintech company Zip. ZestMoney has raised approximately $142 million in equity funding.
Its other backers include Goldman Sachs, Rabbit Capital and Xiaomi. Unlike Simpl and PayU’s LazyPay, which provide BNPL services for small, everyday purchases, Zest and Axio focus on big-ticket items.
Even though it has 10,000 online partners and 75,000 physical stores and a registered user base of 17 million merchants, ZestMoney’s loss for the fiscal year ended March 31, 2022 was Rs. 125.8 crores to triple to Rs. 398.8 crores. previous financial year.
“If the acquisition goes through, it will open up new use cases for both PhonePe and ZestMoney. On one hand, PhonePe can monetize payments by allowing users to pay everyday bills through credit and open up Zest’s applicability to offline payments as well.
For Zest, it will expand to a wider offline base of merchants and can be a day-to-day solution rather than being a checkout provider for big-ticket purchases” opined a fintech executive.
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