Good assessment. I agree that Zaggle is not a SaaS company. They just report a very small percentage of their revenue as the software/SaaS fee. It is unlikely to increase exponentially (unless they venture into newer geography, which will come with other challenges) despite the flurry of new contract wins over last few months. Having said that, I think there is lot of scope for their program fee to go up non-linearly. While there is no compulsion of the employees to use the corporate credit card, I think the employers would want their employees to use it since it is integrated to the expense management and the reconciliation is easier. In the firm I work for, we use SAP concur and our employer recommends using only the corporate credit card which eliminates the ‘leaks’.
Coming to future growth, I think Zoyer is finding lot of new use cases and I think Zaggle is doing well to promote it amongst the MSME companies. They offer petty cash management, fleet management and now they are exploring the fee management from the educational institutions. Forget the overseas market, even in India there is a huge untapped market with almost zero competition.
In the same interview Raj has given the consolidated growth guidance of 2x the FY24 revenue by FY26 (which is very conservative as they will reach 55-60% of this target in FY25 alone). Raj went ahead and gave the FY27 growth guidance of 80%.
They are also planning multiple inorganic opportunities which will add new levers of growth. They aim to do 5 acquisitions with the QIP money and the money that was left from the IPO proceeds. Some of the areas that they are exploring includes Fasttag, card system companies that integrates with Point of Sale (PoS) and a company specialising in accounts receivable solutions (Same area in which Zoyer operates).
Their aim is to become a 1bllion dollar revenue company (more than 8x from the current levels within 5-6 years) and I think it will be interesting to see what the future holds.
My only worry about Zaggle is that despite the profits the cash flow from operations has remained negative, hopefully with scale this will change and we will see more sustainable growth.
Sources:
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Interview with Raj Narayanam
https://www.youtube.com/watch?v=pm9AsEKhBbQ -
ToI article in which Raj has mentioned about inorganic growth and aim of being a $1 billion revenue company.
Zaggle Prepaid eyes acquisitions with Rs 595 crore QIP fund to achieve $1 billion revenue goal | Hyderabad News - Times of India