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Zaggle Prepaid Ocean Services IPO entails to raise ₹563.38 Crore, which includes a fresh issue worth ₹1200 Crores and an offer for sale worth ₹170.10 Crore. The company offers a differentiated SaaS-based fintech platform, offering a combination of payment instruments, mobile application, and API integration.

About Zaggle Prepaid Ocean Services IPO:

• Zaggle Prepaid Ocean Services operates in the business-to-business-to-customer (B2B2C) segment with a diverse offering of financial technology (fintech) products and services, along with prepaid cards and has built a portfolio of software as a service (SaaS).
• Incorporated in 2011, it operates in the business-to-business-to-customer segment where it interacts and interfaces with r Customers (i.e., businesses) and end Users (i.e., employees) .
• It is among a small number of uniquely positioned players with a diversified offering of fintech products and services, having one of the largest number of issued prepaid cards in India in partnership with certain of preferred banking partners (which constituted approximately 16.0% of India’s total prepaid transaction volume, as of March 31, 2023), a diversified portfolio of SaaS, including tax and payroll software, and a wide touchpoint reach (Source: Frost & Sullivan Report).
• Company’s core product includes Propel, a corporate SaaS platform; Save, a SaaS-based platform, ‘CEMS’, a customer engagement management system, Zaggle Payroll Card’, a prepaid payroll card and Zoyer’, an integrated data driven SaaS based business spend management platform.
• As of March 31, 2023, Zaggle had 1,832 corporate accounts and 579 SMB accounts. As of March 31, 2023, March 31, 2022 and March 31, 2021, their average User base per business was 943, 983 and 828 Users, respectively. As of March 31, 2023, they had issued 10.83 million active cards to 2,411 Customers across India. These Customers used their software to manage spends related to their employees, business, channel partners and customers. As of March 31, 2023, they had served more than 2.27 million Users.
• The company offers an ecosystem-based approach across SaaS and fintech, with low customer acquisition and retention costs in the business-to-business (“B2B”) segment. Their approach revolves around cross-selling, up-selling, and offering their products and services in partnership with other players in the operating ecosystems.
• As of March 31, 2023, it had a sales force of 101 employees
• Promoters are Raj P Narayanam and Avinash Ramesh Godkhindi

Zaggle Prepaid Ocean Services IPO: Financials

Anchor Investors:

Zaggle Prepaid Ocean Services Limited raised Rs. 253.52 Crore from 23 anchor investors at the upper price band of Rs. 164 per equity share. Besides mutual funds marquee investors such as East spring, Abakkus, Ashish Kacholia, IIFL, Valuequest, Loomis and Mathews Asia, MK ventures (Madhu Kela) subscribed to the anchor book. .

Zaggle Prepaid Ocean Services IPO: Salient Points

• 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 has shown improvement in occupancy improved to 73.9% and avergage room rental to Rs 5854, resin Q4FY2023 as against 50.3% and Rs 3692 in Q4FY2022.
• The founder and chairman Raj P Narayanam is selling only 0.02% from his 44 per cent holding, which is a good indication.

Details regarding the use of the Net Proceeds.

• It has experienced rapid growth in the three preceding Fiscals, which growth was primarily attributable to increases in our User base in these periods which was accompanied by an increase in spending by our Users that facilitated an increase in Program Fees we received due to an overall increase in the scale of our business.
• Its Program Fees, which it derives from arrangements with banking partners, primarily consists of share of interchange fees, the spend-based fees earned from third-party Payment Networks such as Visa (the “Payment Networks”) for the transactions carried out by the Users of prepaid cards at offline and/or online outlets, pursuant to contractual agreements between the Payment Networks and our banking partners, including the key banking partners with whom we have collaborated, i.e., IndusInd Bank Limited, Yes Bank Limited and NSDL Payments Bank Limited (together, the “Preferred Banking Partners”). The table below sets forth brief details of our Users, as of the dates indicated.

• In-house developed technology
• Business model with diverse sources of revenue and low customer acquisition and retention costs.
• In Fiscal 2023, it incurred ₹126.76 million as expenses towards its sales team and ₹200.64 million towards advertising and brand promotion which includes expenses towards our sale campaigns at corporates sites, branding and advertising, strategic partnership costs, and sales promotions through online and offline channels.
• Zaggle Prepaid had undertaken a pre-IPO placement at a price of Rs. 164 per equity share aggregating to ₹98 crore, in two tranches. in first tranche, it allotted shares to six investors – Ashish Rameshchandra Kacholia, Bengal Finance and Investment, Himanshi Kela, Absolute Returns Scheme, Vikasa India EIF I Fund – Incube Global Opportunities and Acintyo Investment Fund PCC – Cell 1. In the second tranche, the company allotted 1,524,390 equity shares amounting to ₹25 crore to Value Quest SCALE fund.
• Zaggle Prepaid Ocean Services IPO valuations look streched but it see some merits in a company that lies at the intersection of SaaS(software as a service) and fintech and has established itself without frequent recourse to funding and has profitable operation.
• Some caution is advised in view of long line of IPOs in next few weeks.
• There is fall in profit of the company for Fye 23. the management has attributed this to issue of ESOPs and increased expenses on launch of new products. The asking price of IPO is at a P/E of 87x based on FY23 earnings and based on FY22 earnings, the P/E stands at 47.8x.
• Looking at its growth prospects and growth rates in past I am likely to apply in Zaggle Prepaid Ocean Services IPO provided there is good response to IPO on Day3. My own opinion on this issue is +ve, though extent of response will also weigh on me when taking the final call.
• GMP as reported on social media is around Rs. 15-20/-
• Recent crash in small caps has further affected possibility of good listing gains in the IPOs as they have been priced in different market conditions.
• Please do your own diligence. There is good amount of risk in all equity investments.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.