Following cancellation of PhonePe acquisition, Zestmoney laid-off employees
A day after Walmart-backed PhonePe decided to abandon the buy-now-pay-later (BNPL) platform, leaving the company in distress, sources told that on March 31 that ZestMoney faced multiple layoffs and that its founders are looking for outplacements for the affected employees.
According to the sources, the founders of the Goldman Sachs-backed ZestMoney, which employs about 450 people, held a town hall on March 30 evening and informed staff about departmental layoffs. Early in the day, the deal between PhonePe and the company fell through.
“The company has to work on a business continuity plan or a survival plan and layoffs will be a part of it. The employees across the organisation will be affected due to this. However, the magnitude of the impact is not clear yet,” said one of the sources on condition of anonymity.
Priya Sharma, a co-founder of the BNPL platform, also emailed a few startups on March 31 asking for assistance in finding replacements for ZestMoney staff members.
“Hi All – I am Priya (Co-founder, ZestMoney), without getting into specifics as we are not commenting into what is being written about, I would like to reach out to the group to ask for help with outplacements for our teams,” she said in the message as per reports.
When ZestMoney was considering the acquisition, PhonePe provided a loan to the company in the amount of about $18 million. One of the sources claims that PhonePe might offer the BNPL platform a similar loan to help the business get through its current liquidity crisis.
The Unified Payments Interface (UPI) leader, PhonePe, was in negotiations to acquire lending platform ZestMoney in November 2022. This would have been the company’s entry into the world of online lending. The reported deal size was between $200 million and $300 million.
When the Reserve Bank of India issued a notification prohibiting operating non-bank institutions or FinTech companies, including many of the “buy now, pay later” services, from loading credit lines onto Prepaid Payment Instruments (PPI) like wallets and prepaid cards, the buy now, pay later sector encountered regulatory challenges.
LazyPay, one of the major BNPL players, temporarily stopped providing support for its BNPL payment product LazyPlus UPI.
Sezzle, a US-based BNPL company, closed its operations in India as of April 9 as part of a restructuring effort coordinated with its parent company.
According to sources, ZestMoney has been searching for a buyer for more than eight months as it struggles to raise money.
