Australian buy-now pay-later (BNPL) company Zip Co (ASX: Z1P) is testing the waters in the Indian market via a strategic investment of $69 million in ZestMoney - a leading local operator with 11 million registered users.
The move is consistent with Zip co-founder Larry Diamond’s “coalition-of-founders” model, whereby the company makes small investments to get to know the company and its leaders before consolidating via acquisition.
Founded in 2015 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman, ZestMoney is a fast-growing BNPL player in India, and has more than 10,000 online merchants registered with the platform and a point of presence in more than 75,000 physical stores.
Zip hopes to capitalise upon a market poised for a consumption-driven boom. India has the potential to become one of the largest global markets, and by FY26 is forecast to have US$300bn+ in BNPL payment volume.
The Australian BNPL company says the country’s growth will be driven by aspirational young consumers that are attracted to Zip’s model of interest-free credit, and the current low penetration of online shopping (only 100 million shoppers currently transact online - less than 10 per cent of India’s population).
By 2025, the Indian e-commerce market is set to reach US$120bn, underpinned by strong economic growth and increasing access to the Internet.
According to Zip, ZestMoney has several attractive features: it is the largest fully automated, AI-driven BNPL provider for customers in India; it partners with online merchants including Amazon, Flipkart and Apple; and has a strong management team and innovative culture backed by global fintech investors including PayU, Goldman Sachs and Ribbit Capital.
The strategic investment will see Zip acquire a minority shareholding in ZestMoney for USD$50 million (AUD$69 million) to subscribe for Series C preference shares as well as a seat on the board.
The company notes the investment is part of its “disciplined global investment strategy”, and has been executed using a similar strategy to that which was successful in the US through its investment and eventual acquisition of Quadpay.
“We are excited to partner with ZestMoney to drive fair and responsible payment solutions in India,” Zip co-founder and CEO Larry Diamond said.
“While Buy Now, Pay Later is emerging as a preferred mode of payment globally, in India it also plays a crucial role in driving access to credit. With more people using digital payments and online shopping, ZestMoney can positively impact hundreds of millions of lives in the coming years.
“With deep partnerships with online and offline merchants and lending partners, ZestMoney is poised to accelerate growth as the market develops. We have been incredibly impressed with the founders and leadership team and look forward to the next stage of the ZestMoney journey.”
Shares in Z1P are up 2.72 per cent to $6.41 per share at 12.39pm AEST.
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