[YS Exclusive] BNPL platform ZestMoney raises Rs 20 Cr in debt

Buy Now, Pay Later (BNPL) platform ZestMoney has raised Rs 20 crore in debt by issuing non-convertible debentures (NCDs) through private placement to its existing investor Alteria Capital. 

The company has passed a resolution to approve the allotment of 2,000 Series F2 unlisted, secured, redeemable non-convertible debentures having face value of Rs 1 lakh per debenture to Alteria Capital Fund II –Scheme I on a preferential basis by way of private placement, a regulatory filing assessed by YourStory shows.

The resolution was passed on June 6, 2022. 

The Bengaluru-based startup had raised $50 million from Australian peer Zip Co Ltd. as part of its Series C funding round in September 2021. 

The new round takes the startup’s total funding to about $113 million. It counts Goldman Sachs, Quona Capital, PayU, and Xiaomi among its early backers.

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Insurance play 

Founded in 2015 by Priya Sharma, Ashish Anantharaman, and Lizzie Chapman, ZestMoney offers BNPL plans of ticket sizes Rs 50 to Rs 5 lakh payable over 30 days to 24 months. It claims to have partnered with 25 banks and non-banking lenders, and works with large merchants such as Amazon, Flipkart, Google Pay, Apple, and Xiaomi to offer its BNPL services to customers.

It also provides credit information, financial counselling, and options to help users build a good credit history. Most of ZestMoney's customers (median) are in the 23-26 years group. 

ZestMoney, at present, has over 11 million registered users and a merchant network of 10,000 online and 75,000 physical stores. 

In 2021, the startup had secured the corporate agent licence from Insurance Regulatory and Development Authority of India (IRDAI), allowing it to offer and enable insurance products to users on its platform. The insurance firms will work with ZestMoney to co-create tailor-made insurance schemes to offer alongside its BNPL products. The platform would earn via a distribution fee from the insurance players.

With the insurance licence, Zest Money joins the likes of Lendingkart, PolicyBazaar, Amazon Pay, and Paytm Money that offer insurance online.

Recently, the Reserve Bank of India (RBI) came down heavily on BNPL players, as it barred non-banks from loading credit into Prepaid Payment Instruments (PPIs), typically e-wallets or stored-value cards. The move came after some fintech firms started using credit lines from non-banks (sometimes their own NBFCs) to offer credit services.

Industry stakeholders are reportedly in talks with the central bank to request a one-year grandfathering clause to its new circular barring the loading of wallets with credit lines. The relaxation, if permitted, would allow lenders who have prepaid card-based outstandings to smoothly migrate their existing customers to a different mode of credit issuance.