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Business Spends Simplified! – Initiate with LONG

* Zaggle Prepaid Ocean Services (ZAGGLE) is a leading SaaS-based spends management and analytics platform. Its offerings cover (a) employee reimbursements and tax benefits, (b) rewards and incentives for channel partners/employees, and (c) vendor payments.

* The domestic market opportunity size is estimated to be Rs 139bn by FY27E.

* We believe ZAGGLE is in the initial phase of its lifecycle with multiple legs of growth ahead like (a) new customer acquisition, (b) increased cross-selling of products to existing customers, (c) global expansion, and (d) new product offerings.

* We build in FY24-FY27E revenue (net)/EBITDA/PAT CAGR of ~47%/40%/45% aided by ~32%/50% gross/net revenues by FY27E coming from a recently launched vendor payments solution (Zoyer). However, a high growth in Zoyer will result in incentives and cashbacks (~68% of program revenues in FY27E) to stay elevated in the near term.

* Initiate coverage with LONG and a FCFF-based Mar’25 TP of Rs 400 as we build in FY24-26E/FY26-34E revenue CAGR at ~49%/22% with improving EBITDA margins

Leading player in spends management with diverse offerings: Incorporated in 2011, ZAGGLE has largely been a bootstrapped start-up. It is a leading player in spends management with three product offerings: (a) Propel – A corporate SaaS platform for rewards, and incentives and recognition for channel partners (dealers/distributors/retailers) and employees, (b) Save – an employee reimbursement and tax benefits solution, and (c) Zoyer – an integrated data-driven business spends management/accounts payable platform. ZAGGLE’s spends management system allows for real-time visibility of company spending across departments, aids in risk management, establishes and implements internal controls, and develops expense-related policies. This helps companies reduce the time and effort spent on low-value add but relevant/compliance-linked activities.

Diverse revenue sources: ZAGGLE has diverse revenue streams: (a) SaaS/subscription fees: This is the software fees charged monthly/annually to corporates for using the platform. (b) Program/interchange fees: Banking partners share a proportion of the interchange earned on spends done using ZAGGLE co-branded cards. (c) Propel platform/gift card fees: This is recognized on redemption of the allocated Propel reward points to employees/ distributors/channel partners.

Initiate with LONG: ZAGGLE has a unique business model wherein it earns only 10-20% of its revenues directly from corporates who are beneficiaries of the product – a win-win for both parties. Rest of the revenues come from merchants where card spends happen or where reward vouchers are redeemed. Additionally, ZAGGLE does not have any meaningful competitor with a presence in all three of its product segments. Other business moats are (a) a sub-2% customer churn rate, and (b) a B2B2C model containing customer onboarding costs. We believe ZAGGLE is a unique profitable fintech. Initiate coverage with LONG and a FCFF-based Mar’25 TP at Rs 400.

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