DMI group acquires BNPL startup ZestMoney in a distress sale deal

DMI Group, a pan-India financial services platform, on Wednesday night, said it has acquired the beleaguered ‘buy now pay later’ (BNPL) ZestMoney (Zest) platform. DMI, which has raised over $1.5 billion of equity investment and is supported by global institutional investors and international banks, didn’t reveal the value of the transaction.

This development comes more than a month after Bengaluru-based ZestMoney, shut down amid an unsuccessful attempt to revive its business under new management and regulatory uncertainty.

DMI Finance, the NBFC arm of DMI, will be a preferred lender on the ZestMoney platform. Through this acquisition, DMI will have the exclusive right to the use of all ZestMoney brands.

“ZestMoney has been a pioneering provider of checkout finance in India. We are always looking for best-in-class solutions to enhance both the engagement with - and the experience of - our customer and merchant base,” said Shivashish Chatterjee, co-founder and joint managing director of DMI. “We have been partnered with ZestMoney for over 8 years in various capacities. We firmly believe that this acquisition will be an important step in our journey to provide digital financial inclusion at scale across India.”

DMI has core businesses in digital finance, housing finance and asset management. This acquisition will enable DMI to widen its engagement with current and potential customers by adding the ZestMoney checkout financing platform to its product suite. DMI will also bring its customer base, balance-sheet strength and significant risk-management experience to drive growth across ZestMoney’s online and offline merchant network.

ZestMoney is a fully automated digital customer onboarding and servicing system. It enables customers to apply for and receive digital credit instantly at the point of sale. It has more than 80,000 merchants across India including Amazon, Flipkart, Myntra, MakeMyTrip, Nykaa, Samsung, Apple, Vivo, Croma, and Reliance Digital.

"DMI has been at the forefront of digital lending in India. They bring strong capital support and deep expertise," said Mandar Satpute, chief operating officer of Zest. "DMI has been an early supporter of ZestMoney and we are very excited to take our partnership to a whole new level."

ZestMoney, founded by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman in 2015, allowed customers to pay for products over time, but use them right away.
Last year in May, ZestMoney’s founders resigned, several weeks after fintech giant PhonePe decided to halt its proposed acquisition of the company. This left the employees at the firm facing an uncertain future. The deal with PhonePe, was to fetch between $150 million and $300 million, but it collapsed. The firm had been finding it challenging to raise fresh capital amid a funding winter, according to the sources. In April, ZestMoney had also laid off 100 employees, or about 20 per cent of its workforce.

After three co-founders of ZestMoney stepped down, the Goldman Sachs-backed fintech startup created a new leadership team to lead the firm. Abhishek Sharma, head of growth; Mandar Satupte, chief banking officer; and Mohit Chhajer, vice-president of finance and financial operations (FinOps) assumed responsibility for leading ZestMoney.

At its peak, ZestMoney had a registered user base of 17 million and was live at 85,000 retail touchpoints across India. It had a valuation of $470 million.
However, many lenders or non-banking financial corporations who worked with ZestMoney slowly stopped their engagement with the company after RBI tightened rules for digital lending and norms for personal loans, according to people familiar with the matter.

In a town hall meeting on December 5, the new management told employees that the firm was winding down and laying off the remaining 130 employees. A very small team was retained to undertake the company closing down process.