Zaggle Prepaid

Zaggle Prepaid delivered a milestone quarter, reporting its highest-ever performance in Q3 FY25. Revenue surged by 69% year-on-year to INR 336.4 crores, while adjusted EBITDA grew 38% to INR 31.5 crores. Profit After Tax (PAT) increased 33% year-on-year to INR 20.2 crores. For the nine months ended December 31, 2024, revenue reached INR 891.2 crores (up 77% YoY), and PAT more than doubled, growing 123% YoY to INR 55.5 crores.

Building on strong performance, the company raised its top-line growth guidance for FY25 to 58-63%, an increase from previous estimates of 45-50% and 50-55%. Zaggle successfully completed a Qualified Institutional Placement (QIP) of INR 595 crores in December 2024, aligning with its inorganic expansion strategy. Management is currently evaluating five targets in the spend management and adjacent spaces, with two at advanced stages and aiming for closure of all three transactions by the end of calendar year 2025.

Zaggle continues to enhance its platform with AI and machine learning, achieving a 60% deflection rate with its AI-driven chatbot, RazBot, with a target of 99%+. The company expanded its travel and expense solutions through partnerships with major travel companies like EaseMyTrip and TBO Paxes. Significant new client wins include Blinkit and Zepto, with Blinkit adopting the new Branch Recurring Operating Monthly Expense (BROME) solution. Strategic partnerships with Mastercard and HDFC Bank are expected to drive significant top-line and bottom-line growth.

While adjusted EBITDA margin for Q3 FY25 stood at 9.4% (down from 11.5% in Q3 FY24), management attributed this to a changing revenue mix with higher growth in lower-margin Propel Points revenue and investments in new capabilities. The company reiterated its long-term goal of achieving 15-16% EBITDA margins within the next 3-4 years, with an expectation of 9-11% for FY25 and FY26. This improvement is anticipated from operating leverage, declining cashbacks, and the EBITDA-accretive nature of planned acquisitions.

In Q3 FY25, Program Fees contributed INR 135 crores (up 54% YoY), and Propel Points revenue was INR 192 crores (57% of total revenue, with the Propel platform growing 87% sequentially). Management noted that Program Fees are expected to grow at the fastest pace over the next 2-3 years. While Propel gross margins were lower in Q3, management expects them to revert to the 7-9% range for the full year due to Q4 seasonality and overriding commissions. The impact of the Union Budget 2025 tax reforms on the SAVE business was deemed minimal, affecting only 0.48% of current revenue.

The software side of the business, though growing at a slower pace due to the sticky nature of enterprise SaaS, is expected to see a 'marked improvement' and 'inflection' in growth rates over the next 2-3 quarters. This is driven by new contracts signed in the last 3-4 quarters going live, particularly the BROME product. Ad hoc expenses related to new product launches, such as fleet solutions in Q3, contributed to a temporary increase in other operating expenses, which are expected to normalize as a percentage of revenue.