DMI Finance declared its acquisition of the struggling Buy Now Pay Later enterprise, ZestMoney, in a deal characterised by urgency and necessity.

Prior to DMI Finance’s acquisition, other potential buyers such as Aditya Birla Finance, Piramal, and Hero Fincorp had withdrawn from consideration, primarily due to concerns over substantial financial exposure in the vicinity of Rs 700-800 crore, as revealed by an anonymous source.

ZestMoney had previously engaged in discussions with PhonePe for a possible acquisition in November 2022, a move that could have signified PhonePe’s entry into the digital lending space, with the deal estimated to be worth between $200-$300 million. However, by March, PhonePe, backed by retail giant Walmart, retracted from the agreement citing due diligence issues, leading to a turbulent period for ZestMoney.

The absence of PhonePe’s support significantly impacted ZestMoney, resulting in the company laying off approximately 100 employees, which constituted 20 percent of its workforce. This was part of ZestMoney’s strategy to maintain business continuity, with some staff members being absorbed by PhonePe.

Further exacerbating ZestMoney’s challenges was the decision announced on December 5, 2023, to cease operations. This decision, communicated to employees during a town hall meeting, was influenced by the Reserve Bank of India‘s (RBI) adjustment of credit risk weight on unsecured personal loans, which led to a cessation of lending activities by NBFC lenders on ZestMoney’s platform, thus complicating any potential revival efforts.