ZestMoney is on track to hit profitability within 3-6 months and will raise funds through an internal round from existing investors in the next few weeks, a top executive said.
“Once we hit profitability, the need for funds will not arise. We will then be sustainable like any other company and will be completely on our own,” Mandar Satpute, chief banking officer, ZestMoney, told FE. The funding will be purely an equity round and will not have any convertible structures.
The fintech firm is said to be finalising a new investment round from its existing shareholders, including Quona Capital, Zip, Omidyar Network India, Flourish VC and Scarlet Digital.
To ensure business continuity, ZestMoney plans to operate as a lending service provider (LSP) partnering with banks and NBFCs to write out loans rather than lending directly from its balance sheet, Satpute added.
According to the Reserve Bank of India’s (RBI’s) recent digital lending guidelines, an LSP is an agent of a bank or a non-bank lender that carries out one or more of the lender’s functions like customer acquisition, underwriting support, pricing support, servicing, monitoring, recovery of specific loan or loan portfolio on behalf of these lenders.
Satpute pointed out that ZestMoney’s non-performing asset (NPA) rate has always remained at 2.5% or lower, and it will continue to maintain the same level.
“Large banks and non-bank lenders come to us because we are able to give a different kind of customer. We have their backing and support. We believe in the partnership model (LSP model), which has worked very well for us,” he added.
On the cost-control measures, Satpute said that course “corrections” at ZestMoney have been completed and that further expenditure cuts may not be required in the near term.
“We do not see cost to be a problem. Whatever corrections we had to do, we have already done. The employee correction that you see has happened in April. We have been working under the radar for the last eight-nine months, making us leaner, smarter, more profitable. We do not see a problem with costs going ahead,” he added.
In FY22, ZestMoney reported a 68% increase in revenues from operations to `138.4 crore in FY22, up from `82 crore in FY21. However, the BNPL firm also recorded a whopping 216% surge in its net losses to `398.8 crore in FY22 from `125.8 crore in FY21. Net expenses grew to `543.8 crore in FY22, from `89.3 crore in FY21. The company is yet to file the financials for FY23.
For FY23, Satpute said that the absolute top-line would be similar to that of FY22. “While our (loan) disbursements may be similar or slightly more in the current year, we will end up with a much better level because the risks are low and we have cut out all segments that we do not want to do,” he added.
Last week, ZestMoney co-founders Lizzie Chapman, Priya Sharma and Ashish Anantharaman stepped down from their roles as co-founders after the company’s $200-million acquisition deal with PhonePe fell through over valuation disagreements and due-diligence issues. The three co-founders, however, will continue to be shareholders in the company.
Post the exit of the co-founders, a fresh leadership team was appointed at ZestMoney. The BNPL startup also laid off around 100 employees or 20% of its workforce last month after the PhonePe deal failed.
The three co-founders still hold a significant amount of equity and will continue to function as advisors to the BNPL firms, said Chapman during the interaction.
“For the next four months, we are still working full-time with ZestMoney. We are still very involved and are mentors for life,” she added.