Bengaluru: ZestMoney, a buy now, pay later (BNPL) platform based in Bengaluru, is cutting 100 jobs, around 20% of its workforce, Business Standard reported.
This decision came after fintech company PhonePe abandoned its plan to acquire ZestMoney.
ZestMoney, which is supported by Goldman Sachs and Xiaomi, has around 450 employees, all of whom would have been integrated into PhonePe if the acquisition had gone ahead.
On March 30, ZestMoney's founders informed employees of the job cuts in various departments during a town hall meeting. PhonePe is currently in talks with ZestMoney to hire some of the affected workers.
“The company is working on business continuity or a survival plan and layoffs are part of it,” Business Standard quoted a person familiar with the matter. “PhonePe management is also having conversations with ZestMoney to hire some portion of the 350 employees left at the firm and those discussions are still going on.”
The report said citing sources that the employees who were laid off by ZestMoney will receive a severance package that includes health insurance.
The proposed acquisition of ZestMoney by PhonePe, which was expected to be worth between $150 million and $300 million, fell through due to various issues, such as due diligence shortcomings, disagreements over valuation and business sustainability, and concerns about ZestMoney's ownership structure, the report said citing sources.
According to the report, the deal also collapsed because of an economic slowdown in the financial technology (fintech) sector in the midst of a funding winter, a strict regulatory environment, and macroeconomic uncertainty.
PhonePe, which is backed by Walmart, had hoped the ZestMoney deal would boost its lending services and enable it to compete more effectively with other major players in India's rapidly expanding fintech sector, such as Google Pay, Paytm, and Amazon Pay.
The Indian fintech market is projected to reach a value of $350 billion by 2026.
During the acquisition evaluation process, PhonePe provided ZestMoney with a loan of approximately $18 million.
ZestMoney was established in 2015 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman. Its service enables customers to make purchases and use them immediately while paying for them over time.
The popularity of pay-later solutions in India has grown due to a surge in online shopping, as well as the country's low-cost data plans and widespread use of smartphones.
ZestMoney is presently accessible at 85,000 retail locations across India and has a registered user base of 17 million, according to the report.