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Wednesday, May 31, 2023

Zest Money founders resign after failed PhonePe acquisition deal

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PhonePe has acquired technology assets and non-performing loans of ZestMoney in exchange for a $18 million line of credit.

Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, three cofounders and top executives of fintech startup, ZestMoney, stepped down from their positions on Monday, May 15th.

After weeks of contemplation, arriving at a conclusion has been a challenging feat for us. In an internal email addressed to employees, Chapman, the CEO of ZestMoney, announced that he, along with Sharma, the CFO and COO, and Anantharaman, the CTO, have made the decision to resign from their respective positions at the company.

The lendingtech startup experienced a funding crunch that prevented an acquisition bid by PhonePe from coming to fruition a few months ago. However, the startup has now made headlines with a recent development. PhonePe had reportedly been in talks to acquire ZestMoney for a sum ranging between $200 Mn and $300 Mn last year. However, the plans were eventually put on hold due to concerns over the quality of ZestMoney’s loan book.

According to insider sources, PhonePe has acquired the technology assets and non-performing loans of ZestMoney. This was done in exchange for a $18 million line of credit that PhonePe had previously extended to the struggling lendingtech startup. PhonePe has taken action to write off a loan that was reported a few weeks ago to have been written off late last month.

In addition to the tech stack, ZestMoney has transferred its underwriting code to the digital payments giant.

According to a tweet by Sameer Nigam, the founder of PhonePe, the company has denied acquiring any of ZestMoney’s tech assets, intellectual property, clients, business, NPAs, or NBFCs.

According to a source from Inc42, the majority of ZestMoney’s employees (approximately 100) have already been integrated into the digital payments platform. However, there are still 8-9 employees who remain employed by the lending platform.

According to a recent statement by PhonePe’s CEO Sameer Nigam, the digital payments company has confirmed that it has hired 130 employees separately from the troubled startup. However, Nigam also stated that PhonePe has no intentions of recruiting any additional employees from the aforementioned startup.

In a recent tweet, the individual stated that they had acquired the LSP tech IP from the company and had also brought on board approximately 130 ZM employees.

In a recent tweet, the individual stated that they had acquired the LSP tech IP of the company in question and had also brought on board approximately 130 ZM employees.

The founders have announced their commitment to providing full support to the incoming management team in order to facilitate a seamless transition over the next four months. Nearly 100 current employees are left in a state of uncertainty regarding the future of the company, following the resignations of top executives.

ZestMoney, a Bengaluru-based company established in 2015, provides Buy Now Pay Later (BNPL) services to its customers. This service enables users to pay their shopping bills in three instalments at a 0% interest rate. Following the unsuccessful acquisition of PhonePe, reports have surfaced indicating that the lending platform is set to shift its focus towards a lending SaaS model. As part of this transition, PhonePe has reportedly agreed to pay a licensing fee of $8 million to utilize the technology stack of the Lizzie Chapman-led startup.

In a sudden turn of events, the top brass of the organisation has resigned en masse, leaving the future of the company uncertain. The reason for their departure remains unclear at this time.

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