DMI Group Acquires Troubled ZestMoney In A Distressed Sale

Delhi NCR-based DMI Group has acquired troubled fintech startup ZestMoney in what appears to be a distress sale. 

The development comes a few weeks after the BNPL startup’s top brass internally told its employees that ZestMoney would shut down operations by the end of December 2023. 

As part of the deal, the DMI Group will have the exclusive right to use all Zest brands and the company’s NBFC arm, DMI Finance, will be the preferred lender on the BNPL platform.

In a statement, DMI said that the acquisition will enable it to deploy ZestMoney’s checkout financing platform to its product suite to widen engagement with current and potential customers. 

DMI also said it will leverage its customer base, balance-sheet strength and significant risk-management experience to drive growth across ZestMoney’s online and offline merchant network. 

“… We have been partnered with ZestMoney for 8+ years in various capacities. We firmly believe that this acquisition will be an important step in our journey to provide digital financial inclusion at scale across India,” said DMI cofounder and joint managing director Shivashish Chatterjee.

Commenting on the announcement, ZestMoney’s chief operating officer (CEO) Mandar Satpute added, “DMI has been at the forefront of digital lending in India. They bring strong capital support and deep expertise. DMI has been an early supporter of ZestMoney and we are very excited to take our partnership to a whole new level.”

DMI Group is the parent of pure-play digital lender DMI Finance. Founded in 2008 by Chatterjee and Yuvraja C Singh, DMI Finance caters to categories such as personal and MSME loans. It sources and services customers through digital channels.

On the other hand, ZestMoney was founded in 2015 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman. The BNPL startup has raised more than $125 Mn in debt and equity funding since its inception, and was valued at $455 Mn during its last funding round in September 2021.

However, a series of regulatory changes and a flawed business model proved to be fatal for ZestMoney. After the startup failed to raise a follow-on round and find a buyer, ZestMoney began a massive restructuring exercise. 

The aftermath saw the company laying off more than 30% of its workforce last year even as potential acquisition talks with fintech major PhonePe failed. Later on, ZestMoney cofounders Chapman, Sharma and Anantharaman quit the startup in May 2023 amid outcry from its investors and stakeholders. 

Subsequently, the new leadership of Mohit Chhajer, Mandar Satpute and Abhishek Sharma took charge of ZestMoney and attempted to find the future course for the startup. As plans for further fundraise went awry, the new leadership’s attempts to get the startup back on track failed. 

Eventually, late last year, reports surfaced that ZestMoney’s top brass informed its employees that the company would shut down operations by the end of December 2023. Afterwards, it also emerged that DMI Finance and Aditya Birla Finance were reportedly in talks to acquire the Bengaluru-based fintech startup in a potential firesale.

Backed by names such as Prosus, Quona, Zip, Omidyar Network and Ribbit Capital, ZestMoney’s loss grew 3% YoY to INR 412.4 Cr in the financial year 2022-23 (FY23) and operating revenue rose 76% YoY to INR 243.7.