ZestMoney To Fire About 30% Employees After PhonePe Deal Falls Through

Goldman Sachs-backed fintech ZestMoney is laying off about 30% of its workforce as part of a cost-cutting exercise after PhonePe cancelled its plan to acquire the buy-now-pay-later (BNPL) platform, sources told Inc42.

The number of employees being laid off will surely be over 20% and, most likely, close to 30% of the workforce, one of the sources said. “Certain portion of the workforce has been retained, certain people are going to PhonePe and a third set of people are getting laid off,” the source said.

While PhonePe decided to not go ahead with the deal, it is likely to onboard a sizable chunk of ZestMoney’s workforce, the source added. 

The founders and top leadership of ZestMoney informed the employees about the layoffs in a town hall meeting on Thursday (April 6). While media reports suggest that the company has around 450 employees, its LinkedIn page shows 645 employees.

As such, the number of employees impacted by the layoffs could be about 135-190. Inc42 has reached out to ZestMoney for a comment on the issue. The story will be updated upon receiving a response from the startup.

The development was first reported by Moneycontrol.

ZestMoney will be paying the impacted employees one month’s salary as severance pay and other benefits like insurance and mental health assistance.

The layoffs come about a week after PhonePe pulled the plug on the deal to acquire ZestMoney. Due-diligence issues, disagreements over valuation, sustainability of the business and the shareholding structure were reported to be the key reasons behind the Walmart-owned payments giant’s decision to pull out of the deal.

The move would have marked the UPI leader’s foray into digital lending. As per reports, the deal size was pegged at around $200 Mn-$300 Mn.

ZestMoney was among the many fintech startups impacted by the Reserve Bank of India’s (RBI) crackdown on digital lending over the past few months. In June last year, the RBI banned non-bank institutions from loading prepaid payment instruments (PPIs) with credit lines. Besides, it also came out with digital lending guidelines to stop the unethical practices followed by many digital lending apps.

Founded by Lizzie Chapman, Priya Sharma and Ashish Anantharaman in 2015, Bengaluru-based ZestMoney offers BNPL services, allowing its users to pay their shopping bills in three instalments at a 0% interest rate.

The fintech startup saw its loss widen 3X year-on-year (YoY) to INR 398.8 Cr in the financial year ending March 31, 2022, due to a sharp rise in its expenses.