Zip (ASX:Z1P) share price higher on India BNPL investment news

Zip has made a key investment in India…

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The Zip Co Ltd (ASX: Z1P) share price is rising on Wednesday morning.

At the time of writing, the buy now pay later (BNPL) provider’s shares are up 1.5% to $6.33.

Why is the Zip share price rising?

The Zip share price is pushing higher this morning after investors responded positively to an announcement.

According to the release, the company has agreed to make a strategic US$50 million investment in India-based BNPL operator ZestMoney.

The release notes that ZestMoney was founded in 2015 and is now one of the largest and fastest growing BNPL platforms in India. It currently has 11 million registered users, over 10,000 online merchants on the platform, and a point of presence in over 75,000 physical stores.

Management advised that this investment is consistent with its strategy to build a truly global BNPL business. And one that supports regional and global partners in multiple markets, providing everyone, everywhere with access to fair and transparent payment products.

The India market

The company highlights that the India market is poised for consumption driven boom. This could potentially make it one of the largest markets globally one day.

In fact, the release reveals that the India market is forecast to have US$300 billion+ in BNPL payment volume by FY 2026.

This is expected to be driven by changing consumer spending trends, increased penetration of online shopping, population age demographics, a large underuse of credit, an emerging middle class, and transformation in the digital payment ecosystem.

Overall, the company sees the potential for the overall Indian BNPL user base to reach ~80 to 100 million users by FY 2026. This is more than the estimated 73 million unique credit card users in India at present.

The investment

The release explains that Zip will acquire a minority shareholding in ZestMoney. This will be by investing US$50 million to subscribe for Series C Preference Shares.

Zip has also negotiated terms to increase its shareholding over time, with specific reserved matters requiring Zip approval and a board seat as part of the investment.

It also notes that the investment has been executed using a similar strategy to the one that ultimately led to the acquisition of Quadpay.

Zip’s Co-founder and Chief Executive Officer, Larry Diamond, commented: “We are excited to partner with ZestMoney to drive fair and responsible payment solutions in India. 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,” he added.

The Zip share price is now up 13.5% in 2021.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended ZIPCOLTD FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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