Target: ₹400

CMP: ₹284.25

Zaggle Prepaid Ocean Services is a leading SaaS-based spends management and analytics platform. Its offerings cover employee reimbursements and tax benefits, rewards and incentives for channel partners/employees, and vendor payments.

Zaggle has a unique business model wherein it earns only 10-20 per cent of its revenues directly from corporates who are beneficiaries of the product – a win-win for both parties. Rest of the revenues come from merchants where card spends happen or where reward vouchers are redeemed. Additionally, Zaggle does not have any meaningful competitor with a presence in all three of its product segments.

The domestic market opportunity size is estimated to be ₹13,900 crore by FY27E. We believe Zaggle is in the initial phase of its lifecycle with multiple legs of growth ahead like new customer acquisition, increased cross-selling of products to existing customers, global expansion and new product offerings.

We build in FY24-FY27 revenue (net)/EBITDA/PAT CAGR of about 47/40/45 per cent aided by nearly 32/50 per cent gross/net revenues by FY27 coming from a recently launched vendor payments solution (Zoyer). However, a high growth in Zoyer will result in incentives and cashbacks (about 68 per cent of program revenues in FY27E) to stay elevated in the near term.

Initiate coverage with Long and a FCFF-based Mar’25 TP of ₹400.