zestmoney: ZestMoney to shut ops, lays off 150 employees

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Beleaguered startup ZestMoney is shutting down by the end of this month, employees were informed on Tuesday.

One person in the know told ET that two major non banking finance companies who were supporting ZestMoney through credit lines withdrew them last week citing regulatory restrictions on unsecured lending.

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Earlier this month, the central bank increased the risk weightages by 25% against unsecured lending, which is set to push up the cost of capital for NBFCs and fintechs going forward. Thereby many NBFCs who were bullish on fintechs have gone cautious. ZestMoney is understood to have suffered a similar situation.

“This afternoon, the new CEO informed the tech team that they should start looking for jobs given they will be able to pay salaries till the 31st of this year only,” said the person quoted above.

The company is said to have an estimated 40 to 50 tech and product people left. The company and its investors could not be reached out for a comment immediately.

“The management might try to have a firesale of the product and the customer base going forward, but Zest is left with no business as such,” he added.

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Another person in the know said that Zest will retain a skeletal finance and legal team who will try to sell the remaining parts of the business to a suitable buyer.While no large fintech might show any interest in ZestMoney right now, some traditional NBFC might look at the product and try to buy the technology in a firesale.

ZestMoney over last three yearsETtech

In August, ET had reported that the fintech firm had secured fresh capital from its existing investors including Quona Capital, Omidyar Network India, Flourish Ventures, Zip and Scarlet Capital, to continue operations.

Founded in 2015 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman, ZestMoney began life as a loan sourcing platform to enable quick disbursal of credit at the point of sale, mainly focussed on online merchants.

It worked with ecommerce majors like Flipkart, Amazon, Myntra and Nykaa to offer pay-later as a product and worked with multiple lenders such as Aditya Birla Finance, Tata Capital and Hero Fincorp.

After the talks of a complete acquisition fell-through, ZestMoney tried to change its business model and offer its technology stack for credit as a white-label solution to other fintech lenders and non-banking finance companies (NBFCs).

The process of Zest’s acquisition began in November last year, when the Walmart-owned PhonePe signed a non-binding term sheet to acquire the lending startup. However, by March, this year, PhonePe called off the deal over concerns arising from its due diligence.

PhonePe had also brought on board as many as 150 of ZestMoney’s employees to build its own lending platform, after deal talks fell through between both entities.

PhonePe had also handed over a debt of $18 million to cash-strapped ZestMoney, ET had reported on April 26.

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