Goldman Sachs-backed ZestMoney to fire 20% staff: Report

ZestMoney, a fintech start-up backed by investment banking giant Goldman Sachs, is planning on laying off approximately 20 per cent of its workforce or 100 employees, citing its business continuity and survival plan. 

This decision comes shortly after the company's discussions with PhonePe for a sale fell through. The founders and top leadership team of ZestMoney held a Townhall on April 6 to inform employees about the layoffs that will occur across departments, Moneycontrol reported on Friday.

The fintech company has pledged to pay a month's salary as severance and provide other benefits such as insurance and mental health assistance to the affected employees, the report said.

Moreover, the co-founder of the fintech platform, Priya Sharma, sent out a message to several start-ups asking for help outplacing ZestMoney employees. It is being reported that PhonePe may absorb up to 200 employees from ZestMoney, although this has not been confirmed by either of the two companies.

ZestMoney fell into trouble after PhonePe withdrew the offer to acquire the former. 

In November 2022, PhonePe was in talks to acquire ZestMoney for a deal valued at around $200-$300 million.

PhonePe's co-founder and CEO, Sameer Nigam, acknowledged that there were a few due diligence lapses in the deal. He stated that PhonePe's due diligence, which lasted nearly six months, did not meet its standards. 

PhonePe's decision to withdraw from the ZestMoney acquisition deal underlines the strain on the BNPL (buy now, pay later) sector, which was impacted by the Reserve Bank of India's crackdown on digital lending in 2022. Non-bank institutions or fintech firms were prohibited by the RBI from loading credit lines onto Prepaid Payment Instruments (PPI), which included several "buy now, pay later" services.

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