The archive · Money & Fintech · Financial decision · 2015–2024
ZestMoney's $125M BNPL bet ends in shutdown and DMI distress sale
India's BNPL poster child raised $125M+ at a $455M peak valuation, shut down December 2023 after regulation and a failed PhonePe deal, then sold to DMI.
ZestMoney
What the business is
Buy-now-pay-later lender offering digital EMIs and personal loans at ecommerce and offline checkout points across India, backed by Prosus, Quona, Zip, and Omidyar.
Starting capital：$125M+ in debt and equity
How it started
Lizzie Chapman, Priya Sharma, and Ashish Anantharaman founded ZestMoney in 2015 to offer buy-now-pay-later loans at ecommerce and offline checkout points in India. By September 2021 it had raised more than $125M in debt and equity — including a $50M round at a $455M valuation — from investors including Prosus, Quona Capital, Zip, Omidyar Network, and Ribbit Capital.
What happened
India's BNPL wave broke when the RBI tightened digital-lending rules, capped first-loss default guarantees at 5%, and raised risk weights on unsecured consumer credit. ZestMoney's biggest partner, Prosus-owned PayU, stopped powering its digital EMI; acquisition talks with PhonePe failed; and the founders quit in May 2023 after the company cut 20% of staff in April. A $4M–5M round from existing investors did not materialize.
How it ended up
At a town hall on December 5, 2023, employees were told operations would wind down by the end of the month and to stay home from December 7. A few weeks later, DMI Group acquired ZestMoney in a distress sale, taking exclusive rights to the Zest brands and making DMI Finance the preferred lender on the BNPL platform.
Background
ZestMoney was India's best-known buy-now-pay-later startup, founded in 2015 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman to put digital EMIs at ecommerce and offline checkout points. It raised more than $125M in debt and equity, closing a $50M round at a $455M valuation in September 2021 with backing from Prosus, Quona, Zip, Omidyar Network, and Ribbit Capital.
The business was built on partnerships with banks, NBFCs, and payment aggregators, and those partnerships broke as the RBI tightened digital lending: stricter underwriting rules, a 5% cap on first-loss default guarantees, and higher risk weights for unsecured consumer credit made small-ticket BNPL loans more expensive for lenders. Prosus-owned PayU, ZestMoney's biggest partner, pulled its digital EMI support on ecommerce marketplaces.
The founders quit in May 2023 after the company laid off 20% of staff in April, acquisition talks with PhonePe failed, and a $4M–5M rescue round from existing investors never closed. New leaders tried to refocus on digital EMI and personal loans, but the economics had turned. At a December 5, 2023 town hall, employees were told the startup would shut down by month-end and to stay home from December 7.
A few weeks later DMI Group bought ZestMoney in a distress sale, taking exclusive rights to the Zest brands with DMI Finance as preferred lender on the BNPL platform. In FY23, ZestMoney's operating revenue had risen 76% to ₹243.7 crore while its loss grew 3% to ₹412.4 crore.
What has to be true
- Regulation changed the unit economics of unsecured digital lending, making banks and NBFCs unwilling to partner on small-ticket BNPL.
- Dependence on a few partners — especially PayU for checkout EMI — left the core product exposed when the biggest one pulled out.
- A failed PhonePe acquisition and a rescue round that never closed left no buyer or backstop when the business model broke.
- High growth at a $455M valuation hid that losses were growing too: FY23 revenue was ₹243.7 crore against a ₹412.4 crore loss.
What can be applied
A hot category and big valuation don't protect a credit business from its regulator: when risk-weight rules changed unsecured-lending economics, partners and investors both walked away.
Aftermath
DMI Group acquired ZestMoney in January 2024 in what Inc42 described as a distress sale, taking exclusive rights to all Zest brands and naming DMI Finance preferred lender on the BNPL platform. The company had told employees in December 2023 that operations would end by month's close. Former cofounders moved on — sources said Chapman and Anantharaman were starting a new fintech venture while Sharma turned to investing. The shutdown became a cautionary tale for Indian fintech as regulators scrutinized digital lending across the sector.
Sources
- Last Days Of ZestMoney: Why India's BNPL Poster Child Shut Shop
- DMI Group Acquires Troubled ZestMoney In A Distressed Sale
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