Zaggle Prepaid Ocean Services IPO Details

Zaggle Prepaid Ocean Services Limited is a leading player in spend management with a diversified offering of fintech and SaaS products and services to corporates. Their SaaS platform is designed for (i) business spend management (including expense management and vendor management); (ii) rewards and incentives management for employees and channel partners; and (iii) gift card management for merchants, which they refer to as customer engagement management system (CEMS).

OBJECTS OF THE ISSUE

• Expenditure towards Customer acquisition and retention.
• Expenditure towards the development of technology and products.
• Payment of certain borrowings availed by the company.

Raj P Narayanam

Executive Chairman of the Company. He has been on the Board of the Company since April 30, 2012. He completed post graduate diploma in business management with specialisation in finance from the FORE School of Management, New Delhi. He has experience in the technology and fintech industry.

Hari Priya

Company Secretary and Compliance Officer of the Company. She joined the Company on January 18, 2022. Prior to joining this company, she worked with Axis Clinicals Limited as assistant general manager- company secretary, Gayatri Projects Limited as assistant company secretary and Spandana Sphoorty Financial Limited as deputy company secretary and manager– corporate affairs

Avinash Ramesh Godkhind

Managing Director and Chief Executive officer of the Company. He has been on the Board of the Company since May 7, 2012. He holds a bachelors’ degree in engineering from Bangalore University, and a masters’ degree in business administration from the University of Chicago. Prior to this, he worked as an Assistant Vice President at Citibank N.A., India.

Venkata Aditya Kumar Grandhi

Chief Financial Officer of the Company. He joined the Company as vice president-finance and accounts on May 9, 2022 and was promoted as the Chief Financial Officer on August 25, 2022. He is a member of the Institute of Chartered Accountants of India, New Delhi. Prior to joining this Company, he worked at Spandana Sphoorty Financial Limited.

COMPANY PROFILE

• Zaggle Prepaid Ocean Services is a leading player in spend management, with more than 50 million prepaid cards issued in partnership with banking partners and more than 2.27 million users served, as of March 31, 2023’.
• The Company’s network of corporate customers (“Customers”) covers the banking and finance, technology, healthcare, manufacturing, FMCG, infrastructure, and automobile industries, among others. The Company has relationships with brands such as TATA Steel, Persistent Systems, Vitech, Inox, Pitney Bowes, Wockhardt, MAZDA, PCBL (RP – Sanjiv Goenka Group), Hiranandani group, Cotiviti, and Greenply Industries.
• Its core product portfolio includes i) ‘Propel’ (a corporate SaaS platform for channel rewards and incentives, employee rewards and recognition), ii) ‘Save’ (a SaaS-based platform and a mobile application to offer expense management solution), iii) ‘CEMS’ (a customer engagement management system), iv) ‘Zaggle Payroll’ Card (a prepaid payroll card), and v) ‘Zoyer’ (an integrated data-driven, SaaS- based business spend management platform).

COMPETITIVE STRENGTHS

• Differentiated SaaS-based fintech platform, offering a combination of payment instruments, mobile applications, and API integrations.
• In-house developed technology and strong network effect.
• Business model with diverse sources of revenue and low customer acquisition and retention costs. Diversified customer relationships across sectors along with preferred banking and merchant partnerships.
• Seasoned management team with deep domain expertise supported by a professional workforce.

KEY STRATEGIES

• Continue to increase the Customer base of corporate accounts, SMB accounts, start-ups and merchants.
• Continue to scale and expand by increasing user penetration and cross-selling within the existing Customer base.
• Continue to innovate to introduce new products and use cases.
• Leverage strategic partnerships with financial institutions and merchants.

KEY CONCERNS

• The Company is dependent on their relationships with their banking partners, for a substantial portion of their revenue, which is derived from Program Fees generated from their arrangements with such banking partners.
• The Company is dependent on third-party Payment Networks, channel partners, and third-party providers for various aspects of its business and its growth.
• It may encounter challenges with the adoption and usage of the products if it is not able to successfully integrate with other software applications.
• The Company operates in a highly competitive industry.
• It experienced negative operating cash flows in Fiscal 2023 and negative net worth as of March 31, 2022, and March 31, 2021.

COMPARISON WITH LISTED INDUSTRY PEERS (AS ON 31ST MARCH 2023)

There are no directly listed companies in India, or internationally, whose business portfolio is comparable with that of our business and comparable to Zaggle Prepaid Ocean Services Limited’s scale of operations. Hence, it is not possible to provide an industry comparison in relation to this Company.

FINANCIALS (RESTATED CONSOLIDATED)

OUTLOOK & VALUATION

Zaggle Prepaid Ocean Services Limited is a uniquely positioned player in the fintech industry, offering a diversified suite of products and services. The company has a SaaS-based fintech platform and in- house-developed technology. Additionally, the company has diverse sources of revenue and a low-cost operation model.

However, there are some concerns about the company's financial performance. The company has a major dependency on third parties, and it has faced negative cash flow and a decline in its profitability in recent years. Additionally, the company operates in a highly competitive industry.

The IPO is coming at a P/E valuation of 66.6x, which is significantly higher than the valuations of its listed peers. The company's debt-to- equity ratio is also high.

Overall, we believe that the risks outweigh the potential rewards for this IPO. We would avoid investing in this IPO.

DISCLAIMER:

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Swastika Investmart Ltd or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither Swastika Investmart Ltd nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. Swastika Investment Ltd may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the Subject Company or third party in connection with the Research Report.

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