Equirus Initiates Coverage On Listed Fintech Startup Zaggle, Signals 43% Upside
Equirus Securities, the prominent brokerage firm, has recently launched coverage on the dynamic fintech startup Zaggle. Marking a positive outlook, Equirus confers a ‘LONG’ rating on Zaggle, with a prospective price target suggesting an impressive 43% upside from its current market standings—at an ambitious estimate of INR 400.
Zaggle’s innovative approach to revenue has caught the attention of industry watchers. “Zaggle operates on a unique business model where a mere 10-20% of its earnings are sourced directly from corporates—the primary beneficiaries of the product—establishing a mutual benefit scenario. The majority of its revenue streams, however, emanate from merchants, primarily through card expenditures or redemption of reward vouchers,” Equirus explained in their detailed report.
An edge that sets Zaggle apart is its unparalleled position in the market. Its expansive product portfolio spans across three distinct segments, without any significant competition mirroring its breadth and depth.
In its analysis, Equirus elaborates on the diversified revenue channels Zaggle capitalizes on. Among these are consistent income from Software as a Service (SaaS) and subscription fees, levied on corporates for utilizing their software solutions. Additionally, a considerable part of their revenue comes from programme and interchange fees, thanks to the shared interchange revenue from transactions facilitated by Zaggle co-branded cards with their banking allies.
Moreover, revenue generation extends to the Propel platform and gift card fees, arising from the redemption of Propel reward points by diverse stakeholders, including employees, distributors, and channel partners.
Positioning Zaggle in the financial lifecycle, Equirus observes, “We believe Zaggle is in the initial phase of its lifecycle poised for multifaceted growth driven by strategies such as new customer acquisitions, extensive cross-selling to the existing customer base, potential global expansions, and the introduction of novel products.”
While optimistic, the report also nuances potential regulatory risks, especially concerning interchange fees pivotal to Zaggle’s revenue model. Despite speculative discussions on regulatory adjustments to digital payment charges, Equirus reassures, pointing out the absence of immediate risks to pre-paid card interchange rates, a crucial revenue source for Zaggle.
Since its foundation in 2011, Zaggle has evolved to become a cornerstone in spend management and corporate employee benefits. Its technology-driven solutions, developed in collaboration with banking partners, streamline accounts payable processes while offering a vehicle for rewarding employees through prepaid incentives and gifts. The Fintech SaaS company celebrated its entry into the stock market last year, embarking on a new phase of public investment and accountability.
The landscape of spend management is rapidly expanding, with the market projected to grow from INR 82 Bn in FY21 to an estimated INR 139 Bn by FY27. This growth mirrors a shift towards outsourced solutions, expected to claim a larger market share, surging from 37% to over 44% within the forecast period.
Zaggle’s fiscal health showcases significant growth, with a stellar leap in profit after tax (PAT) to INR 15.2 Cr in the December quarter of FY24, up from INR 1.5 Cr in the parallel period the previous year. Its operating revenue also saw a robust increase of 35.1%, reaching INR 199.5 Cr in the same period, up from INR 147.6 Cr year-on-year.
At the time of the report, Zaggle’s shares were observed trading at INR 283.45, anchoring the company’s position as a fintech entity worth watching in the ever-evolving marketplace.
