Zaggle Prepaid Ocean Services Limited
Q1 FY26
Call date · August 14, 2025
1 · Management Commentary
Key Positives
- Revenue grew 31.4% YoY to INR331 crores, marking the company’s best-ever Q1.
- Adjusted EBITDA rose 27.9% YoY to INR33 crores; PAT surged 54.8% YoY to INR26 crores.
- Strong client base with over 3,500 customers and churn rate below 1.5%.
- Successful integration and performance of recent acquisitions/investments (e.g., Mobileware, TaxSpanner).
- AI-driven product innovation leading to significant efficiency gains (e.g., 80%+ reduction in bill processing TAT).
- Multiple marquee client wins and expansion of cross-selling across platforms.
- Strategic alliances with Grant Thornton and Mastercard; new partnerships with Tata Capital and OneAssist.
- Recognition through multiple industry awards.
Key Negatives
- Program fees grew only 15% YoY in Q1, below full-year guidance due to seasonality and geopolitical impacts.
- Depreciation and amortization expenses increased to INR7 crores (from INR2 crores YoY) due to higher investments in intangibles.
- No specific guidance yet on ESOP costs for FY27 due to ongoing acquisitions.
Forward Guidance
- Revenue growth guidance maintained at 35–40% for FY26, with potential for upward revision post-Q2.
- Program fees also guided at 35–40% growth for the year.
- Targeting 100 bps annual EBITDA margin expansion over the next 3 years, driven by efficiency and AI-led operating leverage.
- Incentive costs as a percentage of program fees expected to decline to 50–60% over 2–3 years.
- Ongoing and upcoming acquisitions (2 completed, 4 in progress, 1 large deal close to finalization); focus on EBITDA/product accretive targets in spend management and adjacent SaaS fintech.
- Continued international expansion, especially in MENA and US, via targeted acquisitions and VC fund investments.
- Capex of INR40 crores in FY25 for tech development; ongoing consolidation of tech and engineering teams.
2 · Q&A Highlights
Q 1 (Composite): Why did program fees grow only 15% in Q1, and what is the outlook for the rest of the year?
A (Management):
• Q1 is seasonally slow; full-year program fees growth guidance remains 35–40%.
• Growth expected to pick up as spends recover and seasonality abates.
Q 2 (Composite): What is the expected incremental growth from inorganic acquisitions, and how will they impact margins and costs?
A (Management):
• Too early to quantify revenue from pending acquisitions; Mobileware investment already showing strong results.
• Acquisitions expected to be EBITDA or product accretive; integration to drive INR25 crores in cost savings over 1 year.
Q 3 (Composite): What are the drivers and targets for EBITDA margin improvement and incentive cost reduction?
A (Management):
• Margin expansion to come from efficiency, operating leverage, and AI adoption.
• Incentive costs targeted at 50–60% of program fees over 2–3 years.
Q 4 (Composite): How do margins and economics differ for customers acquired via partners like Grant Thornton or banks?
A (Management):
• Margins largely unchanged; banks do not earn on non-banking services, while partners like GT monetize implementation services.
Q 5 (Composite): What is the international expansion strategy and rationale for VC fund investments?
A (Management):
• Focused on MENA and US; VC fund investments provide market insights and potential acquisition targets with minimal upfront investment.
Q 6 (Composite): What is the rationale and expected benefit from the Dice acquisition?
A (Management):
• Dice brings strong AI and SaaS capabilities in spend management; acquired at ~6x forward revenue.
• Opportunity to bundle Zaggle’s payment solutions with Dice’s SaaS base.
Q 7 (Composite): What is the capex for tech development and are AI initiatives in-house?
A (Management):
• INR40 crores invested in FY25 for tech development, largely in-house across consolidated tech teams.
Q 8 (Composite): What is the cash flow outlook and EBITDA-to-cash conversion guidance?
A (Management):
• Turned positive operational cash flow in FY25; expect to maintain positive momentum in FY26.
• Specific EBITDA conversion guidance to be provided post-Q2.
3 · Other Key Numbers
- Revenue: INR331 crores (Q1 FY26)
- Adjusted EBITDA: INR33 crores (Q1 FY26)
- PAT: INR26 crores (Q1 FY26)
- Cash PAT: INR35 crores (Q1 FY26)
- Depreciation & Amortization: INR7 crores (Q1 FY26), INR2 crores (Q1 FY25)
- Propel platform revenue growth: 50.6% YoY
- SaaS fee growth: 19.8% YoY
- Mobileware Q1 FY26 PBT: INR2 crores (surpassed FY25 full-year PBT)
- Mobileware Q1 FY26 revenue: INR17 crores (vs INR33 crores for FY25 full year)
- Platform fee: INR10 crores (Q1 FY26)
- Program fees: INR145 crores (Q1 FY26)
- Propel points: INR176 crores (Q1 FY26)
- Capex for tech development (FY25): INR40 crores
- Client base: 3,500+ customers; 3.4 million users
- Churn rate: <1.5%
- Cost savings from integration: INR25 crores expected over next 1 year
- Number of acquisitions: 2 completed, 4 in progress, 1 large deal near closure
- Workforce addition from acquisitions: 600–700 people
- Dice acquisition revenue: INR20–22 crores (expected FY26)
- SaaS revenue (FY25): INR35 crores
- CARE Ratings credit rating: A- stable
If management references a number without disclosing it:
- Payments transaction volume through Dice: Not disclosed
- Take rate for Dice payments: Not disclosed
- ESOP cost guidance for FY27: Not disclosed
- Cash flow conversion % guidance: Not disclosed