Business News/ Companies / Start-ups/  Lizzie Chapman, other co-founders of Zest Money resign months after PhonePe acquisition deal fails

NEW DELHI : Two months after a deal to be acquired by Walmart-owned PhonePe fell through, all the three founders of the Bangalore-headquartered digital lending platform ZestMoney have resigned, plunging the eight-year-old company and some 100 employees into uncertainty.

“Over the last few weeks, we have done a lot of thinking and it has been hard for us to arrive at this conclusion. We have decided to step down from our roles as CEO (Lizzie), CFO & COO (Priya), and CTO (Ashish) at ZestMoney," CEO Lizzie Chapman wrote in an email to employees Monday evening. Priya Sharma served as the company’s CFO and COO, while Ashish Anantharaman was CTO.

Since March, some 170 Zest employees have moved to PhonePe. The fintech, which had some 500 employees last December, is now left with some 100.

ZestMoney was a Buy Now, Pay Later platform, which effectively permitted customers to avail instant digital loans, which were extended by the non-banking financial company (NBFC) Nahar Credit, which Zest Money acquired in 2019.

Deal talks between PhonePe and ZestMoney began in November 2022. Mint reported then that PhonePe was slated to buy ZestMoney for $200-$300 million. The acquisition of Zest would have given PhonePe access to an NBFC, which all fintechs are coveting.

However, the acquisition was called off in March this year over concerns about the quality of ZestMoney’s loan book.

“After months of due diligence, the valuation dropped to as low as $40-$50 million due to which the acquisition was called off," a person familiar with the developments told Mint then. “PhonePe discovered that ZestMoney’s loanbook was quite problematic. Zest’s credit losses were 1.5x of their revenue numbers. Due to that, PhonePe was delaying and was willing to pay way less than what was expected... even less than what Zest had raised so far," he added.

A number of NBFCs are learnt to have exposure to Zest Money’s loanbook.

Founded in 2015, the fintech startup has raised about $140 million from marquee investors, including PayU, Zip, Ribbit Capital, Quona Capital, Xiaomi, Omidyar Network, Goldman Sachs, and others. During financial year 2022, ZestMoney saw its revenue rise to 145 crore from 89 crore in FY21. Losses jumped to 398.8 crore from 125.8 crore a year ago.

Below is the email Chapman wrote to employees Monday evening:

Dear Zesties

Priya, Ashish, and I started ZestMoney almost 8 years ago with a dream of making life affordable for millions of Indians. We are proud of how far we have come on that journey and the advancement we made in truly democratizing credit availability in the country using our path-breaking technology.

We are also immensely proud of the incredible team and the unique culture we have built at ZestMoney - which was only underlined to us in recent weeks as we saw how everyone came together in supporting each other during one of the hardest times a startup can go through.

Over the last few weeks, we have done a lot of thinking and it has been hard for us to arrive at this conclusion. We have decided to step down from our roles as CEO (Lizzie), CFO & COO (Priya), and CTO (Ashish) at ZestMoney.

We have immense belief and faith in the potential that ZestMoney has. We will also ensure to provide full support to the incoming management team and do everything we can to support them for the next 4 months to ensure a smooth transition.

Myself, Priya, and Ashish will continue to be significant shareholders in the company and therefore we will continue to be your biggest cheerleaders and supporters in every way.

#ZestiesForLife #BiggestLeavingPartyEver

Correction: A previous version of this story incorrectly reported PhonePe has taken over the bad loans of Zest Money.

Arti Singh
Arti Singh has been a business journalist for 15 years. Over the last five years, she has closely tracked India's fintech space and written important deep-dive stores. As deputy editor, she covers the intersection of finance and tech at Mint.
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Updated: 15 May 2023, 10:01 PM IST
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