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PhonePe may acquire BNPL platform ZestMoney in new-age lending sector's biggest consolidation move

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,” according to a person close to the developments. ZestMoney will likely function as an independent entity post the acquisition.

ET Now Digital

Updated Nov 25, 2022, 08:44 IST

Photo : BCCL

New Delhi: 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.

If PhonePe's acquisition of ZestMoney is completed, it would become the biggest 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.

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, but 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. It’s 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 Prosus-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 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 Rs 398.8 crore for the financial year ended March 31, 2022, compared to Rs 125.8 crore 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” a fintech executive opined.

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