Zaggle Prepaid Ocean Services Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Revenue beat, guidance raised: Highest-ever quarterly revenue of INR302.6 crores, up 64% YoY, prompting management to narrow FY25 growth guidance to 50%–55% and express confidence in doubling FY24 revenues within two years.
• Competitor distress is an accelerant: A funding winter is forcing fintech peers to abandon growth or shut down, which management frames as a customer pool acquisition opportunity that strengthens its hand on pricing and cashbacks.
• Propel margin dip is temporary, not structural: Margins compressed this quarter on high Amazon/Flipkart brand usage and a year-end overriding commission; normalization to 7%–9% is promised from H2.
• New products are still green shoots: Fleet, ZatiX, and international payments carry exponential potential but sit where Zoyer did two years ago: nascent revenue, no hard numbers given, and dependent on embedding into customer workflows.
• What to watch next quarter: Whether Propel margins actually normalize to 7%–9%, the pace of large-enterprise user additions per corporate, and any concrete deployment of the INR950 crore fundraise provision.

Revenue Performance & Drivers

• Broad-based top-line strength: Revenue of INR302.6 crores was the highest ever, with strong growth across both program fees and Propel Points revenue lines.
• Incentive optimization taking hold: Incentives and cashbacks were lower in Q2 vs Q1 as sales teams were pushed to keep cashbacks low, marquee names adopted the platform, and penetration of existing customers reduced the need for aggressive upfront spend.
• Festival season drove some spend: A substantial increase in incentive and cashback was still recorded, driven by festival season matching requirements that encouraged customers to spend using Zaggle offerings.
• Employee costs spiked on one-time items: Employee cost increased due to one-time incentives paid to employees during the quarter, not a structural reset.
• Trade receivables reflect billing cycle, not stress: The increase in receivables was driven by business growth and invoicing to banks in September, the last month of the quarter, with money received in the current month.

Raj Narayanam: "there is no better time than today to expand as fast as possible, because the markets are very, very good for our kind of business. While a lot of other sectors are slowing down, when other sectors slow down, what happens is to do their sales, they have to do a lot of incentives to their channels, that also helps us, they also need to control costs, wherever expense management and our accounts payable systems and the product comes in. So, overall, it is slowly, slowly turning out to be a beautiful market to dive in."

Competitive Landscape & Pricing Power

• Funding winter clearing the field: Fintech and private-company competitors are abandoning fast-growth plans to focus on profitability, and some are closing down entirely, which management sees as an opportunity to capture their customer pools.
• Cashback intensity declining: The combination of competitor retreat and deeper penetration of existing marquee accounts is reducing the need for high cashbacks, a trend management is actively encouraging its sales force to sustain.
• Cross-usage by design limits transparency: The same card is used across Save, Zoyer, and expense management, making a precise GTV or program-fee breakup by product impossible, a deliberate architecture choice that also makes competitive comparisons harder.

Raj Narayanam: "What we see is that a lot of those companies are abandoning or getting closed down which gives us another beautiful opportunity to bite into their customer pool."

Propel Margins: The Dip & the Promise

• What compressed margins: Propel contribution margins fell in Q2 due to high usage of low-margin brands (Amazon and Flipkart) and a year-end disruption from an overriding commission earned on hitting volume thresholds.
• The normalization commitment: Management expects Propel margins to return to a normalized 7%–9% range from H2 onward, with the overriding commission effect being non-recurring and brand mix expected to improve.
• Overall margin posture: Management committed to protecting and growing margins over time as the top line grows rapidly, with EBITDA margins held near current levels in the near term and significant expansion expected from operating leverage and cross-sell in coming years.

New Product Vectors: Fleet, ZatiX, International

• Fleet solution goes live, pipeline builds: The first fleet solution for Torrent Gas went live this quarter, large customers are signing LOIs and running pilots beyond Torrent, and OEMs are showing interest in partnering.
• International payments (ZIP) groundwork laid: Zaggle has tied up card networks and partners for its forex business, targeting market share in forex and remittances on the back of high overseas travel demand.
• Revenue contribution is nascent: Management declined to give a pinpointed revenue share for ZatiX, fleet, or international payments, describing them as akin to Zoyer a couple of years ago with significant revenues expected only as systems embed in customer workflows.
• ONDC partnership signed, card awaited: The ONDC partnership is signed but the card has not yet launched; management had hoped to tap the Diwali season but noted programs take time, with corporates, PSUs, and government expected to drive rewards gifting on ONDC in coming years.

Avinash Godkhindi: "this can potentially grow exponentially for us in Zaggle. And this is, again, a space where globally there are a lot of mature players. India also, this has become very much relevant... And this is an unorganized space in terms of fleet management, largely it's untapped. We are one of the few players who are offering a solution here today."

M&A, Fundraise & Strategic Optionality

• TaxSpanner acquisition closed: The strategic acquisition of TaxSpanner was completed during the quarter, adding comprehensive tax services to the spend management suite.
• Mobileware Technologies investment approved: The board approved an investment in Mobileware Technologies, a payment infrastructure company working closely with NPCI.
• INR950 crore fundraise provision: The board approved a fund raise of up to INR950 crores, subject to shareholder approval, valid for one year and earmarked for organic growth, international expansion, and inorganic opportunities.
• Backward integration not ruled out: When asked about acquiring an NBFC to become an issuer of payment instruments, management said it is "not averse to it" and that profit pools, customer demand, and sustained growth will drive the decision, though it called the question premature.
• M&A strategy is dual-track: Management is actively seeking both small tuck-in acquisitions and larger investments in fintech (NBFC, payments, SaaS), targeting deals that boost EBITDA, expand the product portfolio, or open new markets.

Avinash Godkhindi: "We are not averse to it, to be a issuer of a payment instrument or an instrument which is regulated. For us, what matters is where are the profit pools, what's the demand from our customers and where is our sustained growth going to come from."

Customer & Platform Metrics

• Marquee additions continue: New onboardings included Big Basket, Can Fin Homes, HDFC Ergo, Baroda BNP Paribas AMC, Equinox India, Pirelli Tyre, and Blue Star, among others.
• Cross-sell engine producing proof points: Zoyer Petty Cash with QR payments was deployed for Subway to reduce cash payments across outlets, and Zoyer was cross-sold to Dr. Batra's Positive Health Clinic (an existing Zaggle SAVE customer with ~1,000 employees) to manage accounts payable and petty cash for 130 stores.
• BBPS solution gaining traction: Berkowits Health and Skin Clinic signed up for the Zoyer BBPS solution, which is live with NPCI through Yes Bank and allows companies to centrally pay utility bills via a business credit card.
• Users per corporate expected to grow: Management expects users per corporate to increase over the next 2–3 quarters as existing large-enterprise customers add users, though new customer additions have a dampening effect on this metric.
• Card count dismissed as a metric: Management deflected a question on the number of credit cards issued, stating that spends per card and overall spends are what matter, and declined to provide payment volume splits on the call.

Guidance & Commitments

Key Metrics