Goldman Sachs-backed ZestMoney will lay off close to 20 percent of its workforce or 100 employees as part of its business continuity and survival plan, weeks after its talks with PhonePe for a sale fell through.
The founders and top leadership team of ZestMoney held a Townhall on April 6 to inform the layoffs to employees. The company had about 450 employees and is planning to lay off across departments.
"As part of its business continuity plan, the company is laying off 100 people. The company has promised to pay a month's salary as severance and other benefits like insurance and mental health assistance," said an employee on the condition of anonymity.
Moneycontrol was the first to report on March 31 ZestMoney is staring at multiple layoffs post-PhonePe deal collapse. In fact, Priya Sharma, co-founder of the BNPL platform, sent out a message to a few startups seeking help for outplacing ZestMoney employees.
ZestMoney did not comment on the development.
Sources also said that PhonePe is looking to absorb as many as 200 employees from ZestMoney. "There are talks happening regarding hiring some talent from ZestMoney by PhonePe but nothing has been decided yet," said a source close to the development.
PhonePe’s decision to pull out from the ZestMoney acquisition deal highlighted the stress in the BNPL sector that was hit by the Reserve Bank of India (RBI)’s crackdown on digital lending last year.
The RBI issued a notification forbidding operating non-bank institutions or fintech companies, including many of the 'buy now, pay later' services, from loading credit lines onto Prepaid Payment Instruments (PPI) such as wallets and prepaid cards.
However, PhonePe's co-founder and CEO Sameer Nigam said that there were a few due diligence lapses in the deal.
"The due diligence that PhonePe carried for nearly six months while evaluating the much-anticipated acquisition of ZestMoney did not meet its bar", said Sameer Nigam, co-founder, and CEO of the fintech decacorn, commenting on the deal for the first time on record.
When asked if PhonePe was looking to hire any of ZestMoney’s employees, Nigam said, “There are discussions happening in the background,” declining to comment on it in more detail.
In November 2022, PhonePe was in talks to acquire lending platform ZestMoney, a move that would have marked the Unified Payments Interface (UPI) leader's foray into digital lending. As per reports, the deal size was pegged at around $200-$300 million.
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