In one con-call they mentioned acquisition of Span Across IT Solutions Private Limited, which again based on search on its key people, it looks like it is TaxSpanner (https://taxspanner.com/). Not sure about the intent of acquisition.
We should take a followup of all the partnerships, R&D (eg fleet loyalty Platform for Tirrent) and acquisitions
I still have a bit of confusion on its Program fees income stream and associated expenses.
So program fees is mainly interchange fees received by network and acquiring bank (as below Aug con call)
Further when they provide the free credit on the credit cards, they have to bear cost of funds (which is part of Cashback and Incentive line item.
So what I understood from this is that even if they bear the cost of funds, they donât bear the risk of NPAs? is that correct?
Also, do we need to look at this income stream as we look at an NBFC?
Hi, from what I understand your question is with respect to the programme fees earned by Zaggle and whether that they bear the CoF
Iâm directly quoting the mgmt from this quarter concall on what they said wrt the programme fees
To your second question, what is the program fee and platform fee. Platform fees largely are
software fees that we charge as the SaaS fees. On the program fees, a very large component of
program fees is the interchange that is generated on every card swipe. It also includes some
incentives that we get from banks and networks like Visa, Rupay, Mastercard, etc., for the
volume of spends that we generate.
Since Zaggle is in the business of spend management they help the employer who is issuing the credit card to their employee for various kinds of spends be it food, travel, leisure etc the particular card issued by zaggle would help the employer to track the spends by each employee more intuitively and also catch any bogus transactions which is not the case with a non-zaggle credit card.
Earlier the management has clarified that they earn about 90% of the interchange that is generated on every card swipe.
Now within this programme fees line they have a cashback & incentive line item as explained by mangement in the first screenshot that you have attached. This cashback line item is actually this prepaid component that they talked about earlier. So from what the management has said it is safe to deduce that zaggle bears the cost of these cashbacks and other incentives given to the employee on swiping of their cards, this encourages the card holder to spend more thus generating more programme fees for them.
Now, I donât think this component is big enough to consider it as a NBFC so to say and since these cashbacks and incentives are I believe seasonal in nature and might as well be reduced in the future once the company has a bigger customer base.
Disc: invested, biased.
I am following this company for some time. Kindly consider in this way.
You are a new employee joining in a MNC. Zaggle will provide a co branded card to you. At initially to encourage you to use that card frequently they will provide cashback and incentive kind of things. Once you regularly use this card they will stop the incentive. As of now company spending big chunk as incentives to increase the program fees revenue. Once this trend started to reverse we may see boost in margins. Hope it helps
Thanks for the reply Shankar, I watch your videos regularly and also read thru the article on Zaggle, helped re-assure some of my understanding of Zaggleâs business.
Thanks @VaibhavBhardwaj @hunter for inputs
While I agree with your points on what was explained by management regarding cashbacks and incentives.
My understanding is that there is a third comonent which is part of this line item, that is interest/cost of credit for the free credit given (usually 45 days) on credit cards
Most welcome 
⌠thanks for your continued support
Glad you found the newsletter issue on Zaggle helpful
Personally to me, it doesnt look like pure Saas company. Their revenue from software is very marginal. It looks to me more like a payment processing company. I havent looked at how they recognise revenue of their different verticals. I prefer valuing it more like Route mobile or Twilio, transaction based revenue. So valuing it more like them may be more appropriate?
The board approved acquisition of two companies.
Mobileware
Paying 15.6 Cr for a 26% stake for a company with turnover of 17Cr. Valuation is about 4x. Seems about same valuation ratio of Zaggle, though we do not know about earnings of Mobileware.
SpanAcross IT solutions
They are acquiring 98% stake for about Rs 30 Cr, for a company that has a turn over of Rs 4.73 Cr. Something doesnât add up as it is an order of magnitude higher than expected⌠Please let me know if I am doing something wrong.
Also, am confused on this one. They say it is related party, but promoters have no interest in entity acquiredâŚ
Disc: Invested
Management recent interview on the 2 acquisitions (https://www.youtube.com/watch?v=vw0ZDa9A8VU&list=PPSV)
Some back of the envelope calculation:
8% PAT assumed for FY25 x 40% rev gr. guidance in FY25 x 775.6 Cr (LY revenue) x 60 PE (assumed) = 5212 Cr market cap
Current market cap = 5194 Cr
[PE assumption = Route Mobileâs PE x 2]
So CMP of Zaggle already has this yearâs growth potential priced in. Is this a fair statement to make?
Theyâve repeated in interviews that theyâre tempted to up the guidance looking at the performance in the first 2 quarters, so itâs very likey that the 45% guidance is very conservative.
For a company with a size of 900 Cr topline, Zaggleâs 950 Crs Fund raise is a very big amount. It will be a key thing. They have hinted many times about their vision to enter the USA markets. I think they will try through an inorganic acquisition.
I think this is very conservative calculation, but I understand its always wise leave some room for margin of safety. I am expecting the management to formally up the growth guidance after Q2 result. I recall CEO in his recent interview has already indicated that they will up the growth guidance (from 45-55% to a higher number) for the full year. Usually only 35% of the full year revenue is contributed in H1 and since the H2 will have higher volumes, the realizations will be better as the revenue is the function of the take rate (for both Zoyer and co-branded credit card spending). Letâs see what the Q2 numbers look like.
Disc : Invested
Yeah, this came in as a surprise. The stock is already quite expensive and this QIP will mean the EPS will get further diluted by around 20%. Hopefully the management has some good inorganic plan up their sleeve, but weâll have to wait and watch if this will go boom or bust.
Disc : Invested.
In line with our growth plans, we have taken approval from the board of directors for a fund raise of up to Rs. 9500 Mn. subject to shareholders approval.
Looking ahead, we are upping our guidance to 50-55% growth in our topline for FY 25. We are very confident of doubling our FY24 revenues in the next two years.â
Can you please share the link for newsletter?
Shankarâs writeup on Zaggle
