Zaggle Prepaid Ocean Services Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Revenue doubled YoY, beat internal expectations: Revenue grew 112.9% YoY, driven by all three revenue lines and the scaling of Zoyer, which contributed ~40% of program fees this quarter versus negligible revenue a year ago.
• Gross margin expanded 500 bps on mix shift: The jump in program fee contribution, led by Zoyer, lifted gross margins by 5 percentage points YoY, a structural tailwind that should persist as Zoyer scales toward 40-50% of total revenue by FY26-27.
• Guidance held despite clear upside bias: Management reiterated 45-55% organic revenue growth for FY25 and doubling of FY24 revenue in two years, but explicitly declined to raise guidance despite being "very tempted," deferring any revision to Q2.
• Product engine is broadening the TAM: New solutions in petty cash management, fleet management, cross-border payments and AI-augmented OCR are expanding the addressable use cases beyond core spend management, with pilots already underway across multiple clients.
• What to watch next quarter: Whether the Q2 guidance revision materializes, the pace of Zoyer's climb toward 40-50% revenue share, and any concrete timeline on US market entry, where management is still assessing product-market fit.

Revenue Growth & Seasonality

• Broad-based growth across all lines: Program fee contributed 50% of total revenue, propelled by Zoyer which was absent in the base quarter; the remaining revenue came from the established SAVE and Propel platforms, with all three growing on strong customer demand.
• Seasonality shapes the quarterly cadence: Historically, 35-40% of annual revenue lands in H1 and 60-65% in H2, driven by year-end tax planning and vendor payments. Zoyer carries milder seasonality, so the overall skew should moderate over time.
• Customer stickiness is a compounding advantage: The bundled suite of SAVE, Propel and Zoyer, combined with multiple payment instruments, is deepening client relationships and making Zaggle the partner of choice, which supports both retention and cross-sell.
• Cross-sell flows both ways: Zoyer is winning both new logos and cross-sell into the existing SAVE/Propel base, while reverse cross-sell is also happening where Zoyer customers subsequently adopt SAVE or Propel.
• Existing card spend is surging but undisclosed: Management declined to share per-card spend growth data, calling it "off the charts" and not educative because the base has shifted from prepaid cards (₹2 lakh limit) to corporate credit cards where spends can run into tens of lakhs or crores.

Raj Narayanam: "Very, very happy and pleased to see that Zaggle has started the Financial Year on a high note, delivering a very strong performance in the 1st Quarter of FY25, and this is higher than what internally we had expected."

Zoyer: The Margin & Growth Engine

• Zoyer is reshaping the P&L: The platform contributed roughly 40% of program fees this quarter, up from negligible levels in Q1 last year, and is the primary driver of the 500 bps gross margin expansion through its higher-margin program fee structure.
• The revenue model is spend-linked: For every ₹100 spent through the platform, Zaggle earns approximately ₹1.70 to ₹1.80, creating a direct linkage between client spend volumes and revenue growth.
• Software fees are deliberately low for now: Management is keeping Zoyer's software fee component low to drive adoption and usage growth, with a stated intent to ramp fees over time as the product gains scale and stickiness.
• The value proposition goes beyond cost: Zoyer saves manpower, prevents fraud and leakage, eliminates manual errors, and drives transparency and ESG goals by going paperless, a bundle that makes the ROI case compelling for enterprises.
• Targeting 40-50% of total revenue by FY26-27: Management projects Zoyer's contribution will rise from the current ~20% of total revenue (50% of program fees × 40% program fee share) to nearly half of Zaggle's overall topline within two to three years.

Avinash Godkhindi: "This saves manpower, this prevents fraud and leakage, this prevents manual errors, and it can be a very significant saving to a Company, not to mention the benefit in terms of driving transparency, driving ESG goals, going paperless, etc., right?"

Product Expansion & New Initiatives

• Petty cash solution targets corporate tailspends: A new generic solution with centralized budget control, reconciliation, and configurable organizational hierarchy mapping, deployable across FMCG, manufacturing and financial services, and clubbable with prepaid cards, corporate cards and UPI.
• Fleet management is scaling beyond the pilot client: Developed initially for a single customer, the solution is now in pilots with multiple other clients in what management sees as an attractive, untapped domestic market.
• Cross-border payments via Skydo partnership: Zaggle is entering forex payments by integrating with Skydo Technologies to help export-focused corporate customers receive international payments seamlessly and at lower cost, targeting mid-market firms that struggle with friction and high fees.
• Travel partnerships expand the spend wallet: New tie-ups with EaseMyTrip, Riya and Yatra position Zaggle to capture corporate travel spend, broadening the use cases beyond procurement and expense management.
• AI investments are augmenting the core platform: RazBot, an NLP-powered chatbot, auto-detects intent from user queries, while AI-augmented OCR modules are moving beyond digitization to contextualization, with computer vision algorithms targeting >95% accuracy and sub-35-second processing times to detect duplication and tampering.

Competitive Position & Moat

• No like-for-like competitor in India: Management asserts that no other player offers the same integrated suite of spend management solutions bundled with payment instruments across the SAVE, Propel and Zoyer platforms.
• Compliance-first architecture was a deliberate choice: Zaggle integrated directly with banks and networks rather than using third-party systems, a conservative route that management believes has become a structural advantage as competitors who took shortcuts face regulatory friction.
• The bundled suite drives stickiness: Customers who adopt multiple products become harder to displace, and the cross-sell engine is working in both directions between Zoyer and the legacy platforms, deepening the moat with every additional module adopted.

Avinash Godkhindi: "Overall, there is, in our view, no like-for-like competition for Zaggle in the spend management space in India."

Margins & Cost Structure

• Gross margin expanded 500 bps YoY: The shift in revenue mix toward higher-margin program fees, driven by Zoyer's scaling, is the primary structural driver, and this tailwind should persist as Zoyer grows toward its 40-50% revenue target.
• Adjusted EBITDA held around 10%: Management expects this level to remain steady in the near term, with a medium-term aspiration to expand to 15-16% by FY27-28 as operating leverage kicks in and Zoyer's software fees ramp.
• Cost growth is tracking revenue growth: Employee costs rose 35.1% YoY and OPEX grew 13.4% YoY, both in line with business expansion, as the company added high-quality talent across engineering, product, sales and marketing.
• Headcount investment is broad-based: Capacity was increased across all levels and departments to support the growing business, with no indication of cost-cutting or margin optimization at the expense of growth.

US Entry & Inorganic Strategy

• US market entry is in early exploration: Management is actively working on go-to-market strategy and assessing product-market fit, with extensive background work underway, but no timeline has been set and no material revenue is expected this year.
• Both organic and inorganic routes are on the table: The company is exploring both paths for US expansion, with the focus on getting the product-market fit and ideal customer profile right before committing significant resources.
• M&A pipeline is active but disciplined: Management is in discussions with players across payments, B2B SaaS and NBFCs, targeting deals that add to the product portfolio, are EBITDA-accretive, or provide geographic access, with a preference to close something in H2, preferably Q3.
• Guidance is purely organic: The 45-55% FY25 growth guidance and the commitment to double FY24 revenue in two years exclude any inorganic contribution; any M&A would be additive.
• Valuation discipline is a constraint: EBITDA-accretive opportunities in the spend management space are not easily available, and larger deals take more time to assess, which may slow the pace of deal closure.

Raj Narayanam: "I am tempted to say that FY25 will be higher than our old guidance, but do not want to revise it now, but will definitely revisit after the Q2 Results."

Guidance & Commitments

Key Metrics