ZestMoney, a once-promising fintech startup, has announced its unfortunate decision to cease operations. After unsuccessful attempts to revive its business under new management and amidst regulatory uncertainties, the company has declared its closure. In a recent town hall meeting held on December 5, ZestMoney management informed its remaining 130 employees about the shutdown. A small team will oversee the closure process, while the rest of the employees will be laid off, though they will receive their December salaries and support in finding new job opportunities.
Earlier this year, ZestMoney faced challenges when three of its co-founders stepped down, followed by the cancellation of an acquisition deal by fintech giant PhonePe. The departure of its founders left the Bengaluru-based firm in a state of uncertainty, compounded by difficulties in securing fresh capital amidst a funding downturn in the industry.
Also read/watch - Market Opening: Sensex, Nifty open at record high for third day
The collapse of the acquisition deal with PhonePe, which was anticipated to bring in between $150 million to $300 million, was attributed to various factors including discrepancies in due diligence, disagreements over valuation and sustainability, and complications regarding ZestMoney's ownership structure. This setback occurred amid a broader slowdown in the fintech sector due to regulatory complexities and macroeconomic uncertainties.
ZestMoney had previously laid off around 100 employees, approximately 20% of its workforce, in April. The company, backed by investors like Goldman Sachs and Xiaomi, faced further challenges after the cancellation of the acquisition deal, leaving only a fraction of its workforce in limbo.
Also read/watch - Byju's Crisis: Founder Byju Raveendran assures executives of company's turnaround initiatives
PhonePe had extended financial support to ZestMoney during the acquisition evaluation phase, providing approximately $18 million as a loan. Initially, all 450 employees at ZestMoney were expected to transition to PhonePe if the acquisition had gone through, but now, the company faces closure, leaving its remaining employees seeking new opportunities in a challenging market environment.