Startup Deep Dive : ZestMoney — why a $445 million BNPL lender collapsed into a fire sale

In September 2021, ZestMoney was worth about $445 million and told the world it had pushed a billion dollars of credit into the hands of Indians who had never held a credit card. Twenty-seven months later it was worth close to nothing, sold in a distress deal to DMI in which, by TechCrunch’s account, every investor lost money.

The company that shut its doors in December 2023 was not a failing idea. Revenue from operations had risen every year, reaching ₹243.7 crore ($25.4 million) in FY23 as per its MCA filing reported by Inc42. The problem was the other side of the ledger: losses of ₹412.4 crore in the same year, a regulator that pulled the rug from under the business model in June 2022, and a rescue acquisition by PhonePe that collapsed in due diligence. This is how a lender that solved a real problem still ran out of road.

Quick facts

What ZestMoney did

ZestMoney sold instant, small-ticket credit to Indians who could not get a credit card. At a merchant checkout, online or in-store, a shopper could split a purchase into no-cost or low-cost EMIs after a quick digital KYC and an algorithmic credit decision, without a traditional credit history. ZestMoney itself was not the lender of record: it ran the customer-facing platform, underwriting layer and collections, and routed the actual loans to a panel of regulated non-banking finance companies and banks. Its customers were young, first-time borrowers in tier-2 and tier-3 India; its partners on the sell side were e-commerce and electronics brands, and on the money side, licensed lenders.

The origin

The founding insight came from a gap the three founders had seen up close: fewer than one in twenty Indian adults held a credit card, yet a fast-growing online-shopping class wanted to pay in instalments. Lizzie Chapman had moved from London to India in 2012 to build the local arm of the British payday lender Wonga, after earlier stints investing for the Wellcome Trust and at Goldman Sachs, and had gone on to help launch DBS’s digital-only bank Digibank in India. She founded ZestMoney in 2015 with two ex-Wonga colleagues, Priya Sharma and Ashish Anantharaman, splitting the roles into chief executive, finance and operations, and technology. The bet was that thin-file borrowers were not un-creditworthy, only unmeasured, and that checkout was the cheapest place to acquire them. It was a genuinely new answer to a genuinely large problem, and for a while the market agreed: ZestMoney was named a World Economic Forum Technology Pioneer in 2020 and, per StartupTalky, ranked second among Deloitte’s 50 fastest-growing Indian tech firms in 2021 on three-year growth of 2,706%.

The struggle years

ZestMoney never had a quiet year. The losses were baked into the model from early on, because the biggest single cost was not salaries or marketing but “service deficiency charges” — the money ZestMoney owed its lending partners when borrowers defaulted. As per Entrackr’s reading of the FY20 filing, those charges hit ₹70.7 crore in FY20, roughly 27.6% of total costs, and they only grew: ₹63.3 crore in FY21, ₹233.4 crore in FY22 and ₹175.2 crore in FY23, as reported by Inc42. Every rupee of growth carried a rising tail of bad loans behind it.

Then came the regulatory shocks, each with a date. In June 2022 the Reserve Bank of India barred non-bank prepaid instrument issuers from loading credit lines onto wallets and cards, a move that, as Entrackr reported, cut directly into the plumbing many BNPL players relied on. The RBI’s digital-lending guidelines that followed capped first-loss default guarantees (FLDG) at 5% of the loan portfolio, limiting how much risk a platform like ZestMoney could absorb on behalf of lenders and making partners warier. Funding, which had flowed freely in 2021, dried up through the 2022 winter. By early 2023 the company was cutting staff — Entrackr reported more than 100 employees let go around April 2023 — and taking a small emergency top-up of up to $7 million from existing backers including Quona Capital. Prosus, a shareholder, wrote off a $38 million investment, per Entrackr.

The turning point

The one event that decided ZestMoney’s fate was the PhonePe acquisition that did not happen. Through late 2022 and early 2023, Walmart-owned PhonePe was in advanced talks to buy ZestMoney in a deal that Business Today reported at roughly $200 million to $300 million, with Business Standard and Inc42 citing a wider reported range of about $150 million to $300 million. For a company burning cash and unable to raise a fresh priced round, this was the exit that would have made investors and founders whole and given the lending business a deep-pocketed parent.

It fell apart in March 2023. As Business Standard and Inc42 reported, PhonePe walked away in the final stretch of due diligence over disagreements on valuation, the sustainability of the business, ZestMoney’s shareholding structure, and high default or non-performing-asset levels flagged at around 10-12% in due diligence per Business Today. The gap between the two sides of that deal is the whole story: a business that had raised on a $445 million valuation in 2021 could not be bought at even half that eighteen months later. Within weeks the outcome cascaded — all three founders resigned in May 2023, a new management team tried to relaunch as “ZestMoney 2.0,” and when that failed to raise, the company told its remaining roughly 150 employees at a 5 December 2023 town hall that it would wind down by the end of the month, as reported by YourStory and TechCrunch.

The money behind it

ZestMoney was, on paper, a well-funded startup with a blue-chip cap table. The exact lifetime total is reported slightly differently across trackers, which is common for companies that mix equity and debt:

• Total raised: about $120 million across 10 rounds as of August 2023 (Inc42); TechCrunch put the eight-year total at “over $130 million”; Entrackr estimated roughly $125 million including debt.
• Seed and Series A: $2 million seed in August 2015 and a $6.5 million Series A in December 2016, both with Omidyar Network participating (Inc42).
• Xiaomi round: a $13.4 million Series A tranche in August 2018 that brought in the Chinese handset maker Xiaomi, tying ZestMoney to device-financing at checkout (TechCrunch, August 2018).
• Series B: about $20 million in April 2019 and $15 million in December 2019, with Goldman Sachs and Quona among the backers (Inc42, TechCrunch).
• Series C: $50 million in September 2021 led by the Australian BNPL firm Zip per Inc42; Entrackr reported the round at $58 million. This was the peak, valuing the company at about $445 million (TechCrunch, Business Today) or $435 million (Entrackr).
• Emergency capital: an August 2023 venture round of undisclosed size and an earlier top-up of up to $7 million in 2023 as the business faltered (Inc42, Entrackr).

What each backer changed: Omidyar Network anchored the early rounds and stayed to the end; Xiaomi plugged ZestMoney into device financing; Goldman Sachs and Ribbit Capital gave it the growth-stage credibility and balance-sheet heft to scale lending partnerships; and Zip’s 2021 lead set the $445 million high-water mark that the business could never grow back into.

How it made money

ZestMoney sat in the middle of a three-sided flow and clipped a fee at more than one point. As described by StartupTalky, the revenue lines were:

• Lending-partner fees: direct-selling-agent style commissions from NBFCs and banks for sourcing, KYC-verifying and servicing borrowers it routed to them.
• Merchant commissions: a fee from retailers and brands for converting a hesitant shopper into a completed sale via instant EMI.
• Borrower charges: processing and convenience fees, and interest on the non-zero-cost EMI products.

The margin was supposed to sit in the spread between what ZestMoney earned per loan and what it lost to defaults. It never did. The critical, easily-missed cost was the “service deficiency charge” — because ZestMoney effectively guaranteed part of the credit risk to its lending partners, every default flowed back to it as an expense. That single line was the largest cost in multiple years, which meant faster growth mechanically produced faster losses. As per Inc42, the company spent about ₹3.9 to earn ₹1 in FY22 and about ₹2.7 to earn ₹1 in FY23 — an improvement, but nowhere near a rupee.

The numbers

The clearest way to see ZestMoney is its filed accounts. Revenue climbed steadily; losses climbed faster. All figures are from MCA/RoC filings as reported by Entrackr (FY19-FY20) and Inc42 (FY21-FY23), in ₹ crore.

• FY22 losses jumped 216% year-on-year, from ₹125.8 crore in FY21 to ₹398.8 crore, even as operating revenue rose 68.6% (Inc42).
• FY23 operating revenue rose about 76% to ₹243.7 crore, but the net loss still widened about 3% to ₹412.4 crore against total expenses of ₹662.2 crore (Inc42).
• Advertising and promotion cost ₹165 crore in FY23, up 69% from ₹97.8 crore in FY22; employee-benefit expenses were ₹130.4 crore in FY23, up 40% from ₹93.3 crore (Inc42).
• Cash was nearly gone at the end: bank balance of ₹20.3 crore as of 31 March 2023, with cash and equivalents of ₹49.6 lakh (Inc42).

Where the money came from

ZestMoney’s demand came from a specific slice of India and a specific set of merchants:

• Customers: 17 million-plus registered users over its life, concentrated among young, first-time, thin-file borrowers, per company-stated figures reported by StartupTalky.
• Merchants and brands: a network spanning large online marketplaces and electronics brands; StartupTalky cites over 3,000 merchant partnerships, while Entrackr’s coverage referenced a much larger long tail of brand tie-ups, and Inc42 noted acceptance at over 100,000 offline and 15,000 online stores as of FY22.
• Lending partners: a panel of regulated lenders including DMI Finance, Northern Arc and Muthoot Finance among others (StartupTalky).
• Scale claim: ZestMoney said it had cumulatively disbursed about $1 billion in credit and, at its peak, roughly ₹400 crore a month — company-stated figures via StartupTalky, not audited disbursal disclosures.

The surprise in the mix is that the “surface” business — merchants and shoppers — was healthy and growing, which is exactly why revenue kept rising. The rot was underneath, in the credit-risk layer that generated the service-deficiency charges, and in a funnel of first-time borrowers who were the hardest to collect from.

The risks that killed it

ZestMoney’s collapse was over-determined; several concrete, mechanical risks compounded:

• Credit-risk on someone else’s book: because ZestMoney guaranteed part of the loss on loans it routed to partners, defaults returned as “service deficiency charges” — ₹233.4 crore in FY22 and ₹175.2 crore in FY23 (Inc42). The faster it grew, the more of this it absorbed, capping any path to profit.
• Regulatory dependence: the June 2022 RBI ban on loading credit lines onto prepaid instruments, and the later 5% FLDG cap under the digital-lending guidelines, changed the rules the model was built on and spooked lending partners (Entrackr).
• Single-exit fragility: with priced equity unavailable in the 2022-23 funding winter, the business became dependent on one buyer. When PhonePe walked in March 2023, there was no plan B, and the company could not raise to bridge the gap (Business Standard, Inc42).
• Cash runway: by 31 March 2023 the balance sheet held ₹20.3 crore in the bank against annual losses above ₹400 crore — months, not years, of runway (Inc42).

The takeaway

The transferable lesson from ZestMoney is not “BNPL is bad” or “regulation killed it,” though regulation mattered. It is that a business which grows its top line while its largest cost is the direct output of that same growth has not found a model, only a subsidy. ZestMoney’s revenue rose in every year on record and its losses rose in lockstep, because the thing it was selling — credit to un-scored borrowers — carried a default cost it had partly guaranteed away. A company in that position is solvent only as long as investors keep funding the gap, which makes it a hostage to the funding cycle and, in the end, to a single acquirer’s due-diligence spreadsheet. Growth that is indistinguishable from spending is the most expensive illusion in startup finance, and it is easiest to sustain right up until the moment the cheque stops.

Frequently asked questions

Why did ZestMoney shut down?

ZestMoney ceased operations in December 2023 after the PhonePe acquisition collapsed in March 2023, funding dried up in the 2022-23 winter, RBI rules from June 2022 onward disrupted its model, and a relaunch under new management failed to raise capital. It told its remaining roughly 150 employees at a 5 December 2023 town hall that it would wind down by month-end, as reported by YourStory and TechCrunch.

Who founded ZestMoney and what happened to them?

It was founded in 2015 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman, who had worked together at the British lender Wonga. All three resigned in May 2023. Chapman and Anantharaman later co-founded SwiffyLabs, backed by Reliance’s Jio Platforms, launched in early 2024 (Inc42, Business Standard).

How much money did ZestMoney raise and at what valuation?

It raised about $120 million across 10 rounds per Inc42 (TechCrunch says over $130 million; Entrackr about $125 million including debt). Its peak valuation was about $445 million at the September 2021 Series C per TechCrunch and Business Today, or $435 million per Entrackr.

Who acquired ZestMoney?

DMI Group acquired the ZestMoney platform on 17 January 2024 in what TechCrunch and Business Standard described as a fire sale or distress deal. Terms were not disclosed, and by TechCrunch’s account every investor lost money; the acquisition was largely to retain talent.

Was ZestMoney profitable?

No. It reported net losses every year on record, including ₹398.8 crore in FY22 and ₹412.4 crore in FY23, against revenue from operations of ₹138.4 crore and ₹243.7 crore respectively (Inc42). Its largest cost was defaults on loans it had partly guaranteed to lending partners.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• TechCrunch — “Goldman Sachs-backed ZestMoney, once valued at $450M, to shut down,” December 2023.
• TechCrunch — “Goldman Sachs-backed ZestMoney sold to DMI in fire sale,” January 2024.
• TechCrunch — “ZestMoney founders resign as Goldman Sachs-backed fintech struggles to raise funds,” May 2023; and “Xiaomi backs ZestMoney in $13.4M deal,” August 2018.
• Inc42 — ZestMoney funding profile (10 rounds, ~$120M), 2023; “ZestMoney’s Loss Jumps 3X To INR 399 Cr In FY22,” 2022; “ZestMoney Posts INR 412 Cr Loss In FY23,” 2023-24; “PhonePe Calls Off ZestMoney Acquisition,” March 2023; “Lizzie Chapman Quits As Cofounder Of Jio-Backed SwiffyLabs,” 2024.
• Entrackr — “ZestMoney revenue surges 2.7X to Rs 72 Cr in FY20, bad loans push losses to Rs 181 Cr,” September 2021; “From Series C to Seed: The rise and fall of ZestMoney,” July 2023.
• Business Standard — “Walmart-owned PhonePe calls off deal to acquire ZestMoney,” March 2023; “DMI Group acquires ZestMoney in a distress sale,” January 2024; “ZestMoney founders launch SwiffyLabs, get Jio Platforms backing,” January 2024.
• Business Today — “PhonePe calls off ZestMoney deal over valuation, NPA issues,” March 2023; “BNPL firm ZestMoney once valued at $450 mn to shut down,” December 2023.
• YourStory — “ZestMoney to shut down operations, lay off remaining 150 employees,” December 2023; “ZestMoney co-founders quit after PhonePe deal falls through,” May 2023.
• StartupTalky — ZestMoney company profile (users, merchants, lending partners, revenue model), accessed September 2026.
• Crowdfund Insider — “DMI Group Acquires Goldman Sachs-backed BNPL Firm ZestMoney,” January 2024.
• Ministry of Corporate Affairs / RoC-Bangalore — Camden Town Technologies Private Limited, CIN U72900KA2016PTC098018 (entity, incorporation date), via ZaubaCorp/ClearTax listings, accessed September 2026.

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