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PhonePe Cancels ZestMoney Acquisition Deal: Report

The development comes as a blow to ZestMoney, a buy-now-pay-later platform, which has been trying to raise funds for a while

PhonePe Cancels ZestMoney Acquisition Deal: Report
POSTED ON March 30, 2023 11:53 AM

Walmart-backed Indian fintech firm PhonePe has reportedly put on hold its plans to acquire Bengaluru-based Indian BNPL (buy now pay later) platform ZestMoney.

According to a report by the Economic Times (ET), the fintech decacron cancelled the deal following months of discussions with ZestMoney. 

“The deal is off, the company's board and investors were made privy to the development over the last few days. PhonePe is not going ahead with the acquisition after months of due diligence,” a person aware of the development, told ET.

Sources stated that the development came as a blow to ZestMoney, as it battles a funding crunch in an ecosystem where venture capitalists and investors have become extra cautious while signing big checks. 

Reports about the acquisition pegged at around $200 million, started doing the rounds in November 2022. It would give PhonePe a foot into the door of the growing non-banking financial company (NBFC) sector, even as ZestMoney was expected to function as a separate entity. 

Lizzie Chapman, Priya Sharma and Ashish Anantharaman founded ZestMoney in 2015 as a BNPL platform targeting India's under-served small loans clientele. The company saw a massive surge in transactions during the pandemic, which jumped by 300 per cent in 2021 compared to 2020, according to its 'The India Buy Now, Pay Later Report 2021'.  

This surge was reflected in its balance sheet, and in FY 2021-2022, its revenues rose to Rs 145 crore from Rs 89 crore in FY21. However, its losses also increased from Rs 125.8 crore a year ago to Rs 398.8 crore. 

The BNPL start-up has raised about $140 million to date from investors like PayU, Zip, Ribbit Capital, Quona Capital, Xiaomi, Omidyar Network and Goldman Sachs. It was trying to raise more capital. However, it faced challenges in this endeavor due to the ongoing funding winter, which was one of the reasons ZestMoney started scouting for a potential buyer.

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