Non-banking finance companies DMI Finance and Aditya Birla Finance are reportedly in discussions to acquire fintech lending startup ZestMoney in a firesale, according to sources familiar with the matter. The talks are ongoing, with a potential deal expected to be finalized soon.
ZestMoney, known for offering buy-now-pay-later (BNPL) loans to customers at ecommerce and offline checkout points, recently informed its employees about plans to shut down by the end of this month. This decision followed the withdrawal of debt lines by its lending partners, which led to financial difficulties for the startup.
With an outstanding loan book of approximately Rs 400 crore sourced for its lending partners, ZestMoney primarily operated as a sourcing platform rather than building its own loan book. Both DMI Finance and Aditya Birla Finance, which have been partners of ZestMoney, are reportedly interested in acquiring the technology platform of ZestMoney and taking over its loan book.
The lenders are particularly concerned about collecting outstanding dues from ZestMoney’s customers, as a shutdown of the fintech could lead to challenges in recovering repayments. ZestMoney’s colending platform, developed after the Reserve Bank of India released digital lending guidelines in 2022, is also a point of interest for the potential acquirers.
Despite its previous success and significant user base, ZestMoney has faced challenges in recent times. Its value has eroded significantly, with a failed acquisition by PhonePe earlier this year and a write-off of investment by PayU, another major investor. The startup received a small equity infusion in July 2023, but it was not sufficient to overcome the broader challenges it faced, including regulatory uncertainty and a slowdown in business.
As the negotiations continue, the exact value of the potential acquisition remains unclear. However, the acquisition could provide DMI Finance and Aditya Birla Finance with access to ZestMoney’s customer base and technology platform, potentially strengthening their positions in the fintech lending space.
