{"id":173336,"date":"2023-03-31T09:37:17","date_gmt":"2023-03-31T09:37:17","guid":{"rendered":"https:\/\/precoinnews.com\/?p=173336"},"modified":"2023-03-31T09:37:17","modified_gmt":"2023-03-31T09:37:17","slug":"walmart-owned-phonepe-calls-off-deal-to-acquire-fintech-startup-zestmoney","status":"publish","type":"post","link":"https:\/\/precoinnews.com\/business\/walmart-owned-phonepe-calls-off-deal-to-acquire-fintech-startup-zestmoney\/","title":{"rendered":"Walmart-owned PhonePe calls off deal to acquire fintech startup ZestMoney"},"content":{"rendered":"
Lapses in due diligence, valuation disagreements, funding winter, tough regulatory environment, fintech slowdown being cited as reasons.<\/strong><\/p>\n Peerzada Abrar reports.<\/strong><\/p>\n <\/p>\n Walmart-owned digital payments firm PhonePe has decided to halt its proposed acquisition of Goldman Sachs- and Xiaomi-backed ZestMoney, a Bengaluru-based buy now, pay later (BNPL) platform.<\/p>\n The deal, which was poised to fetch anywhere between $150-200 million and $300 million, has hit a snag over lapses in due diligence, disagreements over valuation, sustainability of the business, and shareholding structure of ZestMoney, according to people familiar with the matter.<\/p>\n The collapse of the deal is also being attributed to a slowdown in the financial technology (fintech) sector in the midst of a funding winter, difficult regulatory environment, and macroeconomic uncertainty, informed other sources.<\/p>\n The acquisition was expected to help PhonePe strengthen its lending services and compete with Google Pay, Paytm, and Amazon Pay in Indian fintech, expected to be purportedly worth $350 billion by 2026.<\/p>\n “ZestMoney didn’t meet the due diligence cut of PhonePe.<\/p>\n “That is why the deal fell through,” said a person in the know.<\/p>\n “The due diligence at ZestMoney was done for about 10 weeks.<\/p>\n “It has a big robust business. It has multiple investors, a lot of customers, and loan books.<\/p>\n “Everything had to be properly investigated and some parts of its business didn’t quite meet PhonePe’s due diligence standards,” he added.<\/p>\n PhonePe and ZestMoney didn’t respond when asked to comment on the new development.<\/p>\n Founded by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman in 2015, ZestMoney allows customers to pay for products over time, but use them now.<\/p>\n Increasing smartphone penetration, the cheapest data plans in the world, and a boom in online shopping have propelled the demand for pay-later offerings in the country.<\/p>\n The fintech start-up has about 400 employees.<\/p>\n All of them were expected to be absorbed by PhonePe if the acquisition had matured.<\/p>\n Industry sources said ZestMoney was a good acquisition target for PhonePe as it is one of the very few firms that are fully compliant with the lending guidelines of the Reserve Bank of India.<\/p>\n It disburses Rs 400 crore in lending per month.<\/p>\n The platform has onboarded 27 lending partners, 10,000 online brands, and 75,000 offline stores.<\/p>\n ZestMoney has a registered user-base of 17 million and is live at 85,000 retail touchpoints across India.<\/p>\n The company had a valuation of $470 million that it achieved in the last funding round.<\/p>\n ZestMoney raised $50 million in September 2021, which the company had topped with an additional $20 million raise as part of its Series C round.<\/p>\n The firm has raised a total of $140 million from investors such as Australia’s BNPL platform Zip, Goldman Sachs, Quona Capital, and Xiaomi.<\/p>\n ZestMoney’s loss in 2021-22 (FY22) surged 216 per cent to Rs 398 crore, from Rs 125.8 crore in the previous financial year, according to data accessed by business intelligence platform Tofler.<\/p>\n Revenue grew 62 per cent to Rs 145 crore in FY22, from Rs 89.3 crore in 2020-21.<\/p>\n PhonePe, one of India’s largest fintech platforms, recently raised an additional $200 million in primary capital from its parent Walmart, at a pre-money valuation of $12 billion.<\/p>\n This new funding comes as part of PhonePe’s ongoing fundraise of up to $1 billion in capital, following its domicile shift to India last year.<\/p>\n With this tranche, the company has raised $650 million from several global investors.<\/p>\n PhonePe plans to employ these funds to build and scale new businesses like insurance, wealth management, lending, stockbroking, and Open Network for Digital Commerce-based shopping and account aggregators.<\/p>\n The fundraise will also help PhonePe turbo-charge the next wave of growth for Unified Payments Interface (UPI) payments in India, including UPI Lite and Credit Card on UPI.<\/p>\n PhonePe has made a total of five acquisitions to date.<\/p>\n Early last year, PhonePe acquired GigIndia, the country’s leading network for freelance micropreneurs.<\/p>\n In July last year, it completed the acquisition of Indus OS for $60 million after reaching an out-of-court settlement with Affle Global, the majority owner of the India-made content and application discovery platform.<\/p>\n In May last year, it acquired investment platform WealthDesk and wealth management platform OpenQ for a combined $75 million.<\/p>\n In July 2018, it bought Zopper Retail, a hyperlocal point-of-sale marketplace for small and medium businesses.<\/p>\n