Walmart-backed Phonepe cancels deal with BNPL startup ZestMoney

Walmart-owned digital payments app Phonepe has canceled its plan to acquire BNPL (buy now pay later) platform ZestMoney over due diligence concerns, according to an Economic Times report.

“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,” ET wrote citing a person aware of the development.

Sources further informed 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.

ZestMoney was founded in 2015 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman. The platform aims to provide modest loans to underprivileged customers in India. According to the company's 'The India Buy Now, Pay Later Report 2021', during the pandemic there was a tremendous increase in transactions, which increased by 300 per cent in 2021 over 2020.

In FY 22, the company reported revenue of Rs 145 crore in comparison with Rs 89 crore in FY21. However, it had a loss of Rs 398.8 crore which increased from Rs 125.8 crore a year ago.

The Phonepe-ZestMoney deal was reportedly pegged at $200 million. Although ZestMoney was anticipated to operate independently, it would offer PhonePe a foot in the door of the expanding NBFC industry.

ZestMoney is backed by the investors like Zip, Ribbit Capital, Quona Capital, Xiaomi, and Omidyar Network, and has raised around $140 million till date.

Digital payments and financial services unicorn PhonePe recently raised $200 million in additional funding from Walmart at a pre-money valuation of $12 billion. The company expects to raise further funding which will be announced in due course.

PhonePe, one of India's largest fintech platforms, will utilise the money to build and scale new businesses like insurance, wealth management, lending, stockbroking, ONDC-based shopping and account aggregators. The company competes with Google Pay and Paytm.

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