News: End of the road: ZestMoney to shut down, laying off 130 employees

Strategic HR

End of the road: ZestMoney to shut down, laying off 130 employees

The tumultuous journey for ZestMoney commenced earlier this year when the anticipated acquisition by PhonePe fell through, resulting in the dismissal of approximately 100 employees in April, constituting nearly 20 percent of its workforce.
End of the road: ZestMoney to shut down, laying off 130 employees

ZestMoney, the Buy Now Pay Later (BNPL) firm, is set to cease operations amidst endeavours to rejuvenate its business under new management, further complicated by regulatory uncertainties. 

In a recent town hall meeting held on December 5, the company management relayed the decision to wind down operations, signalling the unfortunate termination for the remaining 130 employees. The residual team retained will oversee the company's closure process.

Media reports revealed, "The management had to make this tough decision as the business struggled to expand. Employees were assured December salaries and offered support in securing new job opportunities."

This move follows a significant transition earlier this year when three co-founders resigned from ZestMoney. Post their exit, a revamped leadership team comprising Abhishek Sharma, Mandar Satupte, and Mohit Chhajer was entrusted with steering the company's trajectory, according to Business Standards. 

The founders' departure ensued shortly after fintech giant PhonePe withdrew its intent to acquire ZestMoney. This created an air of uncertainty among the Bengaluru-based firm's employees, particularly amid challenges in securing fresh capital amidst a funding slowdown.

The turbulent course began earlier this year when PhonePe's intended acquisition of ZestMoney collapsed, leading to the layoff of about 100 employees in April, accounting for nearly 20 per cent of its workforce. 

Discrepancies in due diligence, valuation disparities, and concerns over business sustainability and ownership structure contributed to the deal's breakdown. This impasse coincided with a broader slowdown in the fintech sector, precipitated by a challenging regulatory landscape and macroeconomic uncertainties.

ZestMoney, supported by investment entities such as Goldman Sachs and Xiaomi, had around 450 employees, a majority of whom were expected to transition to PhonePe post-acquisition. However, this turn of events left the company with over 100 employees.

Established in 2015 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, ZestMoney introduced a pioneering system allowing customers to pay for products over time while enjoying immediate use. Despite experiencing peak success with a registered user base of 17 million and a presence in 85,000 retail outlets across India, the company faced setbacks as several lenders and Non-Banking Financial Corporations (NBFCs) gradually disengaged post the Reserve Bank of India's (RBI) stringent regulations on digital lending and personal loan norms.

The RBI's directive in June further aggravated the situation by prohibiting non-banking institutions and BNPL services from extending credit lines to Prepaid Payment Instruments (PPI) like wallets and prepaid cards. This action led to the closure of BNPL operations in India for entities like Sezzle and the cessation of PayU India's LazyCard, creating a challenging landscape for BNPL players, including ZestMoney.

Despite having achieved a valuation of $470 million and raising substantial funds, including $50 million in September 2021 followed by an additional $20 million, ZestMoney witnessed a substantial loss of Rs 398 crore in FY22. Although revenue surged by 62 percent to Rs 145 crore, the fiscal year posed significant challenges, contributing to the company's unfortunate closure.

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Topics: Strategic HR, #Layoffs, #HRTech, #HRCommunity

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