If PhonePe's acquisition of ZestMoney is completed, it would become a consolidation move in the new-age lending sector. The BNPL platform has been on the lookout for a buyer as it struggled to raise fresh funds from tech investors, people in the of the development shared with Economic Times. The BNPL sector has also been facing serious regulatory scrutiny 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, but it is likely to be a ‘distress sale’ according to sources cited by Times Now. The sale could potentially value ZestMoney much lower than its previous financing round in 2021. It’s valuation was then pegged at around USD 400 million.
Negotiations about the price are ongoing, keeping in mind the extremely cautious state of the markets, especially in the fintech space. It is also cited that PhonePe-ZestMoney deal has further shared that the BNPL platform will likely function as an independent entity post the acquisition.
ZestMoney was founded in 2015. It raised USD 50 million from Prosus-owned PayU and Australian fintech Zip Co in September 2021.
ZestMoney has picked up around USD 142 million in equity funding. Its other backers include Goldman Sachs, Ribbit Capital, and Xiaomi. Unlike Simpl and PayU’s LazyPay, which provide BNPL services for smaller, everyday purchases, Zest and Axio have focused on large-ticket items.
Even as it had a merchant network of over 10,000 online partners and 75,000 physical stores and a registered user base of 17 million merchants, ZestMoney’s losses widened threefold to USD 48.8 million for the financial year ended in March 31, 2022, compared to USD 15 million for the previous fiscal year.
If the acquisition goes through, it will open up new use cases for both PhonePe and ZestMoney. On one hand, PhonePe can finally monetise payments by allowing users to pay everyday bills through credit and open Zest’s applicability to even offline payments. For Zest, it will expand to a much wider offline base of merchants and can become an everyday solution than just being a checkout provider for large ticket buys.
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