- 08 Nov 2023
- ICICIdirect Research
zaggle prepaid ocean services limited ipo opens for subscription on 14th september
TCS - 3876 Change: 54.20 (1.42 %)The third IPO that opens for subscription this week is Zaggle Prepaid Ocean Services Limited. The first two ones were R R Kabel and SAMHI Hotels. We have already covered them in great detail. Today, we will discuss the Zaggle Prepaid Ocean Services (ZPOSL) IPO, which opens for subscription on 14th September and closes on 18th September. The various aspects related to the company will help you decide whether to subscribe or invest in the IPO for the long term.
Zaggle Prepaid Ocean Services Limited IPO: Key Details
Below are the key details related to the ZPOSL IPO:
- Issue Size: Rs 563.38 crore
- Price Band: Rs 156 - Rs 164
- Issue Details: Rs 392 crore Fresh Issue + Rs 171.38 crore Offer For Sale (OFS)
- Market Cap: At the upper price band, Rs 2,002.39 crore
- Minimum Investment: Rs 14,760
Zaggle Prepaid Ocean Services Limited IPO: About the business
ZPOSL started its business in 2011, and the company provides financial technology (fintech) products and services to manage corporate business expenses through automated and innovative workflows. They are sector-agnostic, and their network of corporate customers covers the banking and finance, technology, healthcare, manufacturing, FMCG, infrastructure, and automobile industries, among others.
They are placed at the intersection of the SaaS and fintech ecosystems, and their SaaS platform is designed for business spend management (including expense management and vendor management), rewards and incentives management for employees and channel partners, and gift card management for merchants, which they refer to as customer engagement management system (CEMS).
ZPOSL 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 at the end of FY23. It offers a differentiated value proposition and diversified user base to its customers.
Zaggle Prepaid Ocean Services Limited IPO: Product Offerings
The company has five products under its portfolio:
- Propel: It is a corporate SaaS platform for channel rewards and incentives, employee rewards and recognition;
- Save: It is a SaaS-based platform and a mobile application to offer expense management solutions for business spend management facilitating digitized employee reimbursements and tax benefits.
- CEMS: It is a customer engagement management system that enables merchants to comprehensively manage their customer experiences, including rewarding merchants through gift cards and loyalty benefits.
- Zaggle Payroll Card: It is a prepaid payroll card that allows their customers to pay contractors, consultants, seasonal and temporary employees, and unbanked wage workers as an alternative to direct deposits to bank accounts or cash payments.
- Zoyer: It is an integrated data-driven, SaaS-based business spend management platform with embedded automated finance capabilities in the core invoice-to-pay workflows.
Zaggle Prepaid Ocean Services Limited IPO: Industry Overview
India's fintech ecosystem has approximately 2,100 start-ups spread across a wide range of segments such as payments, lending, wealthtech, insurtech, and neo-banking. This industry has already raised more than 25% (approximately) of all start-up funding in India and is anticipated to receive further interest from investors.
India’s fintech market revenue is estimated to reach approximately Rs 8,341 billion in 2027 from Rs 3,123 billion in 2022 as a result of supportive government policies, rising investments, and a fintech adoption rate of approximately 87%, the highest compared to other countries.
The RBI-DPI Index continues to show a considerable increase in digital payment usage and penetration across India. In FY22, UPI is expected to account for approximately 86% of all consumer payments, with mobile wallets accounting for only 2.4%.
With the significant increase in UPI traffic, it is forecasted that digital payments (debit cards + credit cards + UPI) from consumers to merchants climbed approximately 114% in FY19 to more than 420% in FY21 and are on track to reach 1,575% in FY22 from FY18.
Zaggle Prepaid Ocean Services Limited IPO: Listed Peers
As you would have guessed by now, the company does not have any listed direct competitors or peers in India. Some unlisted companies work in the same area as ZPOSL. However, as these companies are unlisted, limited information about them is available in the public domain.
Some of the leading players in this section and actively operating in the spend management industry include Divvy, Brex, Pleo, Ramp, Coupa, Expensify, Fleetcor, Edenred, Wex, and Happay.
Zaggle Prepaid Ocean Services Limited IPO: Financials
Let us now look at the most crucial part that one needs to consider while evaluating a new company. Below are the financial numbers of ZPOSL over the last three financial years:
- The company has reported a revenue of Rs 239.97 crore, Rs 371.26 crore, and Rs 553.46 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an exceptional 58.82% CAGR in this period.
- ZPOSL has reported average revenue per customer at Rs 0.22 crore, Rs 0.21 crore, and Rs 0.23 crore for FY21, FY22, and FY23, respectively.
- Average user per account has increased from 828 in FY21 to 943 in FY23.
- ZPOSL has reported an EBITDA of Rs 27.63 crore, Rs 59.85 crore, and Rs 49.09 crore for FY21, FY22, and FY23, respectively. In the same period, the EBITDA margins as a percent of revenue were 11.51%, 16.12%, and 8.69%, respectively.
- They have reported a net profit of Rs 19.33 crore, Rs 41.92 crore, and Rs 22.90 crore for FY21, FY22, and FY23.
- For the last three financial years, ZPOSL has reported an average EPS of Rs 3.11 (diluted) and an average RoNW of - (376.32) %.
- If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 87.23
- The Return of Equity (ROE) for FY21, FY22 and FY23 was (42.44)%, (1,178.22)% and 46.9%, respectively.
- The debt-to-equity ratio for the last three financial years was (1.52), (18.12) and 2.48, respectively.
What are the competitive strengths of ZPOSL Limited?
As per the company, their competitive strength is as below:
- ZPOSL has a differentiated SaaS-based fintech platform, offering a combination of payment instruments, mobile applications, and API integrations.
- They have in-house developed technology and a strong network effect.
- Their business model allows them to have revenue from diverse sources and low customer acquisition and retention costs.
- The company has diversified customer relationships across sectors along with preferred banking and merchant partnerships.
Risks associated with the Zaggle Prepaid
Below are the risks associated with the ZPOSL:
- Their recent revenue growth rates may not be indicative of their future financial performance. They have a limited operating history at the current scale.
- If they are unable to retain existing customers, attract new customers, convert customers using their beta or trial versions into paying customers, or expand usage of their products within or across customer organizations due to various factors, it will impact their business.
- The business is subscription-based, and customers are not obligated to renew expired subscriptions.
- They are dependent on third-party Payment Networks, channel partners, and third-party providers for various aspects of their business and growth, and any failure to maintain these relationships could adversely affect the business.