PhonePe, a renowned finance firm that offers EMI financing options to online buyers and is supported by Walmart, has opted to abandon its acquisition intentions for ZestMoney. The sudden action was taken in response to worries about risk management and due diligence procedures that were discovered throughout the acquisition process.
With the combination of ZestMoney’s cutting-edge technology and lending know-how and PhonePe‘s sizable user base, the proposed acquisition, which had been in the works for some months, was ready to transform the Indian fintech industry. Nevertheless, as more details of ZestMoney’s business model and financial performance were uncovered during the due diligence procedure, the management team of PhonePe grew more concerned.
It is believed that ZestMoney’s exposure to subprime loans and its ability to successfully manage credit risk may have been a significant contributing factor, even if the specifics of the issues have not been made public. Concerns about credit risk and the regulatory framework for online lending platforms have recently been more serious as the COVID-19 pandemic continues to have a detrimental impact on the Indian economy.
One of India’s most promising fintech companies, ZestMoney, has raised more than $100 million from reputable investors such as Ribbit Capital, Matrix Partners, and PayU. The Indian startup ecosystem has been shaken by this announcement.
Despite the disappointment of the failed purchase, Lizzie Chapman, CEO of ZestMoney, remains faithful in her quest to democratize access to credit in India. She has stated that despite the failure of the PhonePe agreement, they will continue to focus on their objective of providing accessible credit to impoverished individuals across the country.
Reiterating their commitment to ensuring that digital payments are available to all Indians, PhonePe has also issued a statement regarding the termination of the agreement. Lately, they made a number of fresh announcements about collaborations and projects focused on enhancing the user experience on their platform. They collaborate with SBI Mutual Fund to offer investment products on their site, as well as ICICI Bank to launch a co-branded credit card. These are just two examples.
The collapse of the acquisition serves as a reminder that, even in the hectic world of startup transactions, careful planning and careful due diligence can occasionally be the wisest course of action. Even if this might have an effect on the Indian fintech market, it also presents a chance for entrepreneurs to assess and improve their risk management procedures in order to create long-lasting companies that are advantageous to all parties involved.
