Zestmoney, the buy-now-pay-later (BNPL) fintech platform, will be laying off 100 employees, or 20% of its workforce, across divisions after its deal to get acquired by PhonePe fell through, people aware of the development told FE.
The cost-cutting exercise comes roughly a week after PhonePe, the fintech decacorn called off its deal to buy Zestmoney, for around $250-300 million, after a prolonged due diligence process failed to get clearance, leaving the BNPL firm exploring other options like finding new acquirers and/or a fresh fundraise. The company’s board has said that any/all options that would ensure business continuity were on the table and being considered now that the PhonePe deal was unsuccessful.
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Zestmoney will be paying outgoing employees one month of salary as severance and will also extend other benefits like insurance, as per reports. Several other tech companies have assured to pay around 3-6 months’ salary as part of their outgoing assistance package to the affected employees.
The layoffs at Zestmoney come at a time when the Reserve Bank of India has cracked down on players in the BNPL space, prohibiting them from loading credit lines onto prepaid payment Instruments (PPI) such as wallets and prepaid cards, putting their business model under question.
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Over and above the planned layoffs, sources said that PhonePe will be absorbing some of Zestmoney’s employees and an announcement was likely as early as next week. Through the planned acquisition, PhonePe wanted to enter the digital lending space and was likely to pay around $250-$300 million for Zestmoney, a discount from a valuation of around $450 million that Zestmoney commanded during its last fundraise when it raised $20 million in June 2022.
Zestmoney’s investors include Naspers, Goldman Sachs, Ribbit Capital among several others. When contacted, Zestmoney did not respond to FE’s queries.