ZestMoney is staring at multiple layoffs and its founders are seeking outplacements for the impacted employees a day after Walmart-backed PhonePe decided to turn its back on the buy-now-pay-later (BNPL) platform, leaving the company in distress, sources told Moneycontrol on March 31.
Founders of the Goldman Sachs-backed ZestMoney, which has about 450 employees, held a townhall on March 30 evening and informed employees about layoffs across departments, the sources said. The news of PhonePe deal falling through broke earlier in the day.
"The company has to work on a business continuity plan or a survival plan and layoffs will be a part of it. The employees across the organisation will be affected due to this. However the magnitude of the impact is not clear yet," said one of the sources on condition of anonymity.
On March 31, Priya Sharma, co-founder of the BNPL platform, also sent out a message to a few startups seeking help for outplacing ZestMoney employees.
“Hi All - I am Priya (Co-founder, ZestMoney), without getting into specifics as we are not commenting into what is being written about, I would like to reach out to the group to ask for help with outplacements for our teams,” she said in the message. Moneycontrol has reviewed a copy of the message.
Also read: Unacademy sacks another 380 employees in fourth round of layoff in 12 months
Seeking Loan for survival
PhonePe gave a loan of about $18 million to ZestMoney when the company was evaluating the acquisition. According to one of the sources, PhonePe might extend a similar loan to the BNPL platform to help the company tide over the immediate liquidity crisis.
PhonePe and ZestMoney declined to comment for the story.
PhonePe Acquisition Deal Cancelled
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.
The Buy Now Pay Later industry faced regulatory hurdles in 2022 when the Reserve Bank of India 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.
Top BNPL players including LazyPaytemporarily stopped support for its BNPL payment product LazyPlus UPI.
US-based BNPL firm Sezzle also shut down its India operations from April 9 as part of a restructuring exercise in line with its parent company.
ZestMoney had been looking for a buyer for more than eight months now as it struggled to raise funds, sources said.
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