Beleaguered Fintech ZestMoney Secures Funding From Existing Investors To Keep Afloat

Troubled fintech startup ZestMoney has reportedly raised $5-7 Mn from a group of investors, including existing backer Quona Capital.

Zip, Omidyar Network India, Flourish VC and Scarlet Digital also participated in the latest funding round, ET reported.

The funding comes close on the heels of PayU writing off its investment in the company. PayU’s close to 15% stake in ZestMoney was valued at $38 Mn in FY23.

Also, Netherlands-based investment firm Prosus NV had written off its investment in the fintech startup ZestMoney recently. Prosus had virtually written off its investment in its FY23 annual report, stating that it has lost ‘significant influence’ during the year.

Clearly as the BNPL startup has been struggling with a slew of factors including PhonePe’s failed acquisition deal, this $5-7 Mn equity infusion may help keep it on track in its efforts to turnaround its business, a senior executive said as quoted in the report.

After ZestMoney’s dream of a $300 Mn PhonePe acquisition fell apart and senior management quit, the overall situation did not bring good news for employees as well. The current management has offered 15-20% increase in salary to some of its key employees to keep them motivated, as per the report.

Following the resignation of its three cofounders and top executives – Lizzie Chapman, Priya Sharma and Ashish Anantharaman, ZestMoney did set up a new leadership team to steer the fintech startup. Mohit Chhajer, Mandar Satpute and Abhishek Sharma took up the leadership roles at the BNPL startup.

At the time of the announcement of new leadership, the troubled fintech startup also said that it is finalising a funding round from its existing shareholders, including the likes of Quona Capital, Zip, Omidyar Network India, Flourish VC and Scarlet Digital.

Further, ZestMoney had to scale down its loan disbursals to somewhere around INR 200 Cr annual run rate from a high of INR 600 Cr. However, this has gone down to around INR 50 Cr over the last few months.

While lenders have mostly stayed away as of now, the company needs to show its lending partners that its business fundamentals are solid and it will be able to manage their credit lines properly, a source said as quoted in the report.

Founded by Chapman, Sharma and Anantharaman in 2015, Bengaluru-based ZestMoney offers BNPL services. It allows its users to pay their shopping bills in three instalments at 0% interest rate. It competes against the likes of Simpl, LazyPay, and ePayLater in the BNPL space in the country.

ZestMoney saw its loss widen 3X year-on-year (YoY) to INR 398.8 Cr in the financial year ending March 31, 2022. The fintech startup’s loss surged 216% from INR 125.8 Cr reported in the financial year 2020-21 (FY21).

Total revenue grew 1.6X to INR 145 Cr in FY22 from INR 89.3 Cr in FY21, while revenue from operations rose 68.6% to INR 138.4 Cr from INR 82 Cr in the previous fiscal year.