ZestMoney will stop its insurance and other affiliate businesses as it looks to streamline its operations to tide over the current crisis at the company triggered by PhonePe's move to walk away from a potential buyout of the buy-now-pay-later (BNPL) platform.
"What ZestMoney has done in the last few months is cut off any of the non-core operations that are distracting. We are stopping doing insurance as a business line," Lizzie Chapman, co-founder and former CEO of ZestMoney told Moneycontrol, in her first public interaction after stepping down from her day-to-day role.
"All kinds of ancillary businesses will be paused. We made money from affiliates, that's going to stop. We will go back to the core traditional products, which is an EMI product, not in the BNPL space," Champan said.
Chapman explained how it was critical for fintech businesses to diversify and have different offerings amid rising competition in the space over the last two years. But she said that most of these companies realised that the core lending business is usually the most profitable.
Chapman also said that after PhonePe called off the deal, the ZestMoney did cost-cutting initiatives such as layoffs to make sure that the company has a longer runway. In April, Sameer Nigam, co-founder and CEO of Walmart-backed PhonePe had told Moneycontrol in an interview that when PhonePe met ZestMoney to explore a merger for the first time, the BNPL platform was 'close to being bankrupt.'
PhonePe also gave ZestMoney a credit line that helped the company mitigate the then-immediate liquidity crunch, Nigam had said.
Earlier this week, Chapman along with her two other co-founders Priya Sharma and Ashish Anantharaman, resigned from their executive roles at the BNPL platform, raising concerns about the survival of the company and its 150 employees. The founders' move to step down came a couple of months after PhonePe called off the deal citing diligence issues.
Chapman declined to comment specifically on these diligence issues and said that there were small concerns. She also said that ZestMoney currently has NPAs (non-performing assets) of under 2 percent.
According to Chapman, the founders sought to entrust the company to "safe hands" as they worked to develop a plan for achieving profitability in the near future. She clarified that the decision was not prompted by any pressure from the board or investors.
Chapman also said that the three founders do not plan on selling their shares in ZestMoney. Collectively, Chapman, Sharma and Anantharaman hold 18.5 percent in ZestMoney.
Founded in 2016 by Chapman, Sharma and Anantharaman, ZestMoney has a total customer base of 17 million and enables loan disbursals of Rs 400 crore per month. The company has 27 lending partners and merchant partnerships with 10,000 online brands and 75,000 offline stores.
ZestMoney in September 2021 had raised $50 million from Australian BNPL fintech Zip Co. This is a part of a larger Series C fundraise which will see participation from existing investors like Goldman Sachs, Quona Capital, Xiaomi and Alteria Capital among others.
However, the company experienced a setback when the Reserve Bank of India (RBI) issued guidelines on digital lending, impacting BNPL companies and making it challenging for fintech startups to offer personal credit lines through cards. Sources had previously told Moneycontrol that ZestMoney had been looking for a buyer, even before PhonePe discussions began as it has struggled to raise funding.
As per RoC (Registrar of Companies) filings, ZestMoney's losses have widened 3X year-on-year (YoY) to Rs 398.8 crore during the financial year ending March 31, 2022. The firm's loss was up 216 percent from Rs 125.8 crore reported in the financial year 2020-21 (FY21).
ZestMoney is now raising a "small" internal round from its existing investors, Moneycontrol reported earlier this week.
"I think the business is in good standing. We did this licensing agreement with PhonePe, so that brought some cash into the business. Also, the business costs have reduced a lot in the last few weeks and months, and the business is actually on the verge of profitability," Chapman said.
"And one of the great things I think that came out of the whole process of going through a merger is we really streamlined the business and got it into great shape. Very, very efficient, very close to profitability. So that the company doesn't need a lot of capital right now," Chapman added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
