“The deal is off, the company boards 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,” said a person in the know of the matter.
An announcement of the acquisition falling through is likely to be made to the ZestMoney employees soon.
Queries sent to spokespersons at ZestMoney and PhonePe by ETtech did not elicit a response.
According to sources privy to the developments, lapses in due diligence, disagreements over valuation, sustainability of the business and shareholding structure of ZestMoney – were some of the reasons for the talks not fructifying.
ET had first reported on November 25, last year that PhonePe was close to acquiring ZestMoney, as the Walmart-owned digital payments firm was charting plans to enter the lending space to push monetisation on its platform.
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There have also been questions around the role of the parent company Primrose Hill Ventures, which is the Singapore-parent to India-registered Camden Town Technologies, the entity which owns and operates the ZestMoney platform. Primrose owns Nahar Credits, which is the non-banking finance arm (NBFC) arm of ZestMoney. Online publication The Morning Context reported in February that the NBFC business isn’t part of the transaction. The high delinquency rates on loans provided by ZestMoney have also come under the scanner, we had reported in November while breaking the news on the potential acquisition of the lending startup.
Industry insiders said the $200-$300 million valuation which ZestMoney was expecting also scuppered the deal talks.
Founded in 2015, Bengaluru-and Mumbai-based ZestMoney claims to have 17 million registered users and sports a network of 85,000 online and offline touchpoints. It was backed by the likes of PayU, Australian BNPL strategic, Zip, Ribbit Capital, Goldman Sachs among others.
Unlike its Indian counterparts such as Simpl and PayU’s LazyPay, it focuses on large-ticket items and sits at the checkout of various ecommerce websites and points-of-sale of various offline retail partners. It competes with the likes of Axio (formerly CapitalFloat).
ET had reported in November, citing sources, that ZestMoney was holding talks with potential buyers as it was unable to raise more funds. In September 2021, the company had raised $50 million from Zip and was expected to raise $100 million in total equity as a part of the round.
However, it couldn’t shore up the funds, as the market weakened for BNPL players with global slowdown.