IPO listed on 22 Sep'23
Zaggle Prepaid Ocean Services Ltd
Minimum Investment
₹ 14,760 / 90 shares
Grey market premium
₹ 20 (12% premium)
Issue price
₹ 164
Listing price
₹ 164
Listing day %
-3%
Listing on
Sep 22, 2023
Our Verdict:
Avoid
- Based on the P/E ratio of 67x at the top end of the price band, the IPO appears to be aggressively priced in terms of valuation given the company's size and profit margins.
- Although the firm’s revenue witnessed a CAGR of 52% between FY21-23, its expenses related to customer acquisition have surged at a faster rate of 55% CAGR during the same timeframe, resulting in a notable decline in EBITDA for FY23.
- A major concern about its operational model is the low profit margin. Even though there's a high-margin SaaS segment in their portfolio, it's in its early stages. It would require steady growth over the years to make a significant impact in the overall revenue and profit figures.
- Considering these factors, alongside other risks discussed below, those eyeing long-term capital appreciation should monitor the company's progress in the subsequent two quarters before making any investment commitments.
About the company
Founded in
2 Jun'11
Managing director
Avinash Ramesh Godkhindi
- Zaggle Prepaid Ocean Services Ltd (Zaggle) provides fintech solutions as well as a range of Software as a Service (SaaS) offerings. As of March 31, 2023, they operate from seven locations in India, serving over 1,750 clients and catering to more than 1.7 million users.
- For the fintech business, Zaggle collaborates with banking institutions to issue prepaid cards and is recognized as a leading player in spend management. Their primary banking affiliations are with IndusInd Bank, Yes Bank, and NSDL Payments Bank. To date, they have distributed over 50 million co-branded prepaid cards.
STRENGTHS
- Impressive Financial Performance: Between FY21-23, Zaggle exhibited a remarkable growth with a CAGR of 52% in Revenue, 32% in EBITDA, and 9% in Net Profit.
- Substantial User Base Growth: The number of users surged from 904,713 as of March 31, 2021, to 2,274,138 by March 31, 2023. This increase in user activity and spending also contributed to a rise in the interchange fees, reflecting an overall expansion of the business.
- Robust Customer Retention: Zaggle consistently maintains a low customer churn rate. In Fiscals 2023, 2022, and 2021, the rates were 1.54%, 0.37%, and 1.17% respectively, showcasing the company's strong hold on its clientele.
RISK FACTORS
- High Customer Acquisition & Retention Costs: Zaggle's customer acquisition and retention costs are steep, needing regular cashback incentives. These costs grew by 58% CAGR from FY21-23, while revenue per customer rose just 2.2% during the same timeframe.
- Deteriorating Profit Margins: There was a noticeable drop in the EBITDA margin from 16.12% in FY22 to 8.69% in FY23. In parallel, the PAT margin also took a plunge from 11.29% in FY22 to 4.14% in FY23.
- Negative Return Ratios: The Return on Equity (RoE) posted negative values of (42.44%) in FY21 and a staggering (1,178.22%) in FY22, due to carried-forward losses. It was only in FY23, backed by capital infusion and the year's profits, that the RoE shifted into positive territory.
- Cash Flow Concerns: Zaggle has faced negative cash flows in relation to its operating and investing activities. It reported negative operating cash flows in FY23, primarily due to an increase in its trade receivables underscoring potential counterparty credit risks. Further, prolonged negative cash flows could limit operational efficacy and the execution of growth strategies.
Issue details
Issue type
Mainstream
Issue size
₹ 563.38 crore
Fresh Issue
₹ 392 crore
OFS
₹ 171.38 crore
Price range
₹ 156 - 164
Lot size
90 shares
Issue Objective
Net proceeds from the fresh issue will be utilised for:
- Funding expenditure towards customer acquisition, and development of technology and products.
- Repayment or prepayment of borrowings availed by the company; and
- General corporate purposes.
Dates
Bidding open
14 Sep'23
Bidding close
18 Sep'23
Allotment date
20 Sep'23
Refund date
21 Sep'23
Listing
22 Sep'23
IPO Reservations
Qualified institutional buyers
>75%
Non-institutional investors
<15%
Retail individual investors
<10%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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