Zaggle Prepaid Ocean Services Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Best-ever quarter, guidance raised: Revenue growth guidance upped to 40–45% as the company delivered its strongest quarterly and half-yearly performance, with program fees accelerating on broad-based use-case expansion.
• Cross-sell is deepening, not just widening: The cross-sell rate moved from 20% to 21%, but the real story is customers adopting three or four products and broadening spend from marketing to vendor and tax payments, a more holistic OpEx play.
• Acquisition engine is active and disciplined: Mobileware generated ~INR 24 crores in Q2 vs INR 33 crores in all of FY25, while one large acquisition was abandoned after diligence raised red flags. Two of three remaining deals are expected to close very soon.
• Retail credit card is the big, zero-revenue bet: The AU Bank co-branded partnership targets INR 500–600 crore annual revenue and INR 50–60 crore EBITDA by year four or five, with contribution currently at zero and full operations starting April 2026.
• What to watch next quarter: Closure of the two pending acquisitions, any quantification of fleet management revenue, and whether the cross-sell rate meaningfully accelerates toward the 50% target.

Revenue Growth & Program Fee Momentum

• Organic growth dominates: Program fee growth is entirely organic, with acquisition impact not yet visible in that line. Acquisitions will split across SaaS (Dice), Propel points (Greenedge), and program fees (others).
• Use-case broadening: Customers are expanding from marketing spend to vendor payments and tax payments, turning the proposition into a holistic OpEx platform. This broadening is showing up in revenues and is expected to drive accelerating program fee growth in coming quarters.
• Propel seasonality plus stickiness: Propel growth benefited from the festive season and includes gift voucher redemptions in its gross number. The platform is sticky and can act as a foot in the door, though Save remains the primary entry product with multi-year relationships.
• Zoyer positioned as the future anchor: Management sees Zoyer's use case as much wider than other products and expects it to eventually overtake all other businesses. A recent client deployment combined Zoyer with an AI-driven policy layer to digitize a manual procure-to-pay process with complex approvals.

Avinash Godkhindi: "We are seeing a lot of customers also broad-base their use cases from earlier, which used to be a lot around your marketing spend, etc. From there, it has broad-based to vendor payments, their tax payments. So, we have broad-based it to a much more holistic OpEx sort of a play, and that is showing in the revenues."

Cross-Sell & Client Penetration

• Rate inched up, depth improved: Cross-sell percentage moved from 20% to 21% (16% at IPO). Customers are taking three or four products, and new customer sales often involve a full bundle rather than a single product. Strong traction in BROME and fleet programs.
• Definition limits the metric: Management attributed the slow rate movement partly to the definition (any customer with more than one product), which means the metric captures breadth of penetration but not depth. No customer-count or product-adoption breakdown was provided when asked.
• Notable cross-sell wins: Apollo Health (existing Propel customer) added Save and Zoyer for employee expenses and procure-to-pay. OfBusiness Group (existing Save customer) adopted Zoyer for procurement efficiency. Bharat Dynamics and Siyaram Silk also added products.
• BROME monetization model: If customers use Zaggle-issued cards, revenue comes from card issuance. If they use a direct current-account solution, Zaggle charges a fee to the corporate because the 20–30% expense savings generated make the fee acceptable.

Acquisitions: Discipline, Progress & Pipeline

• Mobileware outperforming: Generated ~INR 24 crores in Q2 FY26 versus INR 33 crores in all of FY25, validating the acquisition thesis. The partnership with Suryoday Vega Pay launched a credit line on UPI product.
• One large deal abandoned: After diligence revealed something management "did not like," a large acquisition was dropped. Management cited internal and external pressure to do large deals but emphasized discipline over size.
• Three deals in the pipe: Rio Money, Dice, and EffiaSoft are announced but not yet closed. Two are expected to close very soon. Greenedge has already signed transaction documents and is revenue- and margin-accretive, growing 100% year-over-year.
• Rio Money opens B2C: This acquisition steps into retail credit cards via a B2B2C model. Zaggle acts as program manager, co-creating products and handling sales, marketing, and first-level support. Credit risk sits with the bank, not Zaggle. The target segment is the 0.35 crore-plus users and 3,600-plus corporate customers, reaching salaried employees through digital channels and kiosks.
• Pipeline remains active: Management is evaluating another two to three targets after closing the current three, with criteria focused on product-suite fit, high TAM, strategic geography, and EBITDA accretion. Pre-diligence is done before signing term sheets.

Raj Narayanam: "There has been, see, internally also we feel the pressure that we have to do a large acquisition. But when we see, when we look at them, and there are some red flags and some gray zones, we have taken a step back."

New Business Lines: Retail Cards & Fleet

• AU Bank retail co-branded card: First year of full operations begins April 2026 (FY26-27). Target is INR 500–600 crore annual revenue and INR 50–60 crore EBITDA by year four or five, with cumulative revenue of ~INR 1,200 crore and EBITDA of ~INR 120 crore over that period. Current contribution is zero.
• Rio Money retail credit strategy: Targets the salaried segment, which management argues has the lowest delinquency rates. Distribution leverages existing corporate relationships to reach employees digitally and via kiosks.
• Fleet management gaining traction: Tie-ups signed with Adani Total Gas, Mahanagar Gas, and Megha Gas, with expansion underway into OMCs (HPCL, BPCL, IOCL). Revenue has started but is still small; management declined to quantify it, saying a reliable estimate within ±10–15% will take a quarter or two.
• Large retail chain signed: A very small portion of revenue has started; significant revenues are expected in coming quarters.

Raj Narayanam: "India is a very burgeoning market in terms of fleet management, and we are making very, very good inroads into the fleet management... we are probably monopoly out there in terms of our software and our card getting used."

Partnerships & Ecosystem Build-Out

• Bank partnerships scaling: IDFC First Bank will take Zaggle's spend management suite to its corporate base, while Zaggle aims to leverage IDFC First's FOREX solutions. Standard Chartered became the third major international bank partner after HSBC and DBS. A five-year Mastercard agreement was signed for co-branded domestic prepaid cards with launch and spend-linked incentives.
• Product launches: Zaggle GlobalPay FOREX Card launched in co-branded partnership with GlobalPay. A prepaid card with Mastercard and NSDL was launched to simplify channel partner payouts alongside Propel.
• UPI integration complete: Fully integrated with UPI via Mobileware. Revenue comes from software fees charged to corporates, not MDR.
• Partnership predictability caveat: Management declined to provide a stage-by-stage partnership tracker, citing partner dependency as a variable that makes outcomes hard to predict. Some partnerships bring phenomenal success; others are yet to scale.

Financials: Margins, Cash Flow & Investment

• Adjusted EBITDA margin guidance: Maintained at 10–11% for the near term, with a target of 14–15% in the next four to five years.
• Operating cash flow negative in H1: Negative OCF of INR 19 crore driven by high growth, TR recovery timing, and festive-period asset deployment (Dussehra/Diwali). Expected to break even in H2 FY26 and turn positive in FY27. PAT resumption is tied to OCF turning positive.
• Other current assets rose on festive stocking: Prepaid card loading and voucher stock increased from INR 174 crore to INR 264 crore to meet Dussehra/Diwali demand peaks. Corporates request flexibility, so management holds stock to fulfill demand.
• Intangible assets and AI investment: Increase driven by manpower and external AI consultants. Investment will continue at least through end-FY26, then streamline to normal depreciation over three to five years.
• Other expenses and marketing: Other expenses fell from INR 30 crore to ~INR 20 crore, but marketing expense is expected to increase in the short term due to the retail card scale-up. Whether the current level is sustainable was not confirmed.

Guidance & Commitments

Key Metrics