ZestMoney, a buy-now-pay-later (BNPL) platform backed by Goldman Sachs, is set to lay off 100 employees or around 20% of its workforce as part of its survival plan following the collapse of its talks with PhonePe for a sale. The layoff decision was announced to the company's employees during a town hall meeting on April 6, with the cuts to be made across departments. The company had about 450 employees before the layoffs.
Severance Package for Laid-Off Employees
An anonymous employee revealed to moneycontrol.com that the company has promised to pay a month's salary as severance and other benefits like insurance and mental health assistance.
PhonePe Looking to Hire ZestMoney Employees
There are media reports that are suggesting that PhonePe is in discussions to hire as many as 200 employees from ZestMoney, although nothing has been confirmed yet. The move comes after PhonePe's decision to pull out of the acquisition deal, citing due diligence lapses.
Stress in the BNPL Sector
The collapse of the deal highlights the stress in the BNPL sector, which has been hit by the Reserve Bank of India's crackdown on digital lending last year. The RBI prohibited non-bank institutions and fintech companies, including many BNPL services, from loading credit lines onto Prepaid Payment Instruments (PPI) such as wallets and prepaid cards.
PhonePe's Failed Acquisition of ZestMoney
In November 2022, PhonePe was reportedly in talks to acquire ZestMoney, a move that would have marked the Unified Payments Interface (UPI) leader's entry into digital lending. The deal was pegged at around $200-$300 million. However, PhonePe's co-founder and CEO Sameer Nigam revealed that the due diligence carried out over six months did not meet its standards.
