The Downfall of ZestMoney
ZestMoney, a Bengaluru-based Buy-Now-Pay-Later (BNPL) fintech, has been at the center of a financial scandal, with hundreds of millions of dollars in investor funds unaccounted for. The company, once valued at $450 million, was sold to DMI in a fire-sale, resulting in significant losses for investors.
Financial Irregularities
Alleged financial irregularities include inflated revenue numbers, mis-stated loan-disbursal figures, and service-deficiency charges of ₹244 crore in FY-22. The company’s non-performing assets (NPAs) were reported at 13%, which was later contested by the company.
Recovery Plan
The recovery plan includes the fire-sale to DMI, which will absorb ZestMoney’s technology stack, talent, and NBFC licence, and pay an additional $8 million to ZestMoney. PhonePe extended an $18 million emergency credit line, which is now being pursued for repayment. Lead investors have filed civil suits seeking damages of up to $100 million each.
Legal Consequences
The founders face potential criminal fraud charges, civil liability, and regulatory penalties. The RBI has ordered a forensic audit and frozen accounts, and the Enforcement Directorate has opened a money-laundering case, allowing attachment of personal properties of the founders.
Sources
- Inc42 – What Broke ZestMoney – How India’s BNPL Poster Child Lost Its Zest
- Yahoo Finance – Goldman Sachs-backed ZestMoney, once valued at $450M, sold to DMI in fire sale
- Finshots – ZestMoney, where did it go wrong?