New Delhi (India), 27th April 2023: PhonePe, a Walmart-owned digital payments leader, is looking to strike a commercial agreement with the lending startup in lieu of the $18 million loan it had provided to the cash-strapped business after ZestMoney, a lending startup, withdrew from the acquisition process citing issues discovered during due diligence.
On the condition of anonymity, some persons indicated that ZestMoney is also reportedly in conversations to raise more equity capital from some of its current investors. However, these discussions are still in their early stages.
According to three people with knowledge of the recent developments, PhonePe’s decision to buy ZestMoney’s technology stack and hire 150 employees from the firm will hasten the launch of its own loan operation. As it works to expand its credit business, Bengaluru-based PhonePe has also applied for a non-banking finance company (NBFC) license.
According to reports, in order to leverage ZestMoney’s tech stack, PhonePe has entered into a licensing agreement worth an additional $8 million. Although the liquidity position at the BNPL startup is still questionable, PhonePe’s decision also provides short-term assistance to ZestMoney, according to an ET article.
With this, ZestMoney will change its business model to one of lending SaaS while it seeks equity funding to support the transition.
The choice was made after negotiations to buy the company outright fell through.
With the transition to a loan SaaS business model, ZestMoney may gain some B2B clients. The Reserve Bank of India (RBI) has emphasised stringent regulations for digital lending and is hesitant to grant NBFC licences to internet entrepreneurs.
With the BNPL platform’s current tech stack, which complies with the lending standards, many businesses may be able to accelerate their go-to-market while still adhering to RBI regulations.
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