Zaggle Prepaid's Q1 Profit Jumps To ₹17 Cr | NDTV Profit - video Dailymotion

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00:00All right, we're in the thick of earnings.

00:08First off, welcome to NETV Profit.

00:09I'm Harsh Saita.

00:10And we continue to focus on numbers.

00:13And we have Zagil prepaid, a very strong set, at least when it comes to growth, very, very

00:22strong set of numbers.

00:24And to try and break those down a little bit more, we have Avinash Godkindy, who's the

00:28MD and CEO at Zagil Prepaid.

00:31He's also the co-promoter there.

00:34First off, welcome, Avinash.

00:35You know, we've spoken to you at various points over the last quarter.

00:40Orders continue to trickle through for you, and at a very strong rate, I must admit.

00:47Just talk to us.

00:48You've guided for roughly 50 percent growth on top line versus last year, which is FY24.

00:53You closed FY24 at 770.

00:56You've done 250 plus in this quarter, and likely you will only go up from here sequentially.

01:05Would you therefore revise your top line guidance, because you'll be well past 1000 and well

01:10past 50 percent?

01:11Yeah, we're tempted to, Harsh.

01:14Thank you so much for having me on your show.

01:17We're tempted to.

01:18And if you look at the year-on-year growth, it's 113 percent, right, 113 percent in revenue

01:26and, of course, PAT has been 713 percent, right?

01:29So let's keep the PAT number on the side for a minute.

01:34The revenue numbers have grown very strongly, and we expected them to grow well, but this

01:41has exceeded our expectation.

01:43So two reasons.

01:44One, the demand in the market for digitization, as such, with enterprise customers.

01:51And also, we are getting the benefit of being a clear market leader in spend management

01:57as a space.

01:59And when you get a market leadership position, the participants in the ecosystem tend to

02:05gravitate towards you.

02:06So we are tempted to up our guidance, but so far, we are going to hold our guidance

02:10of 45 to 55 percent overall year-on-year growth, which would be about 1,150 to 1,200 crores

02:18for now.

02:19So depending on how Q2 goes, we may up our guidance.

02:23Got it, Avinash.

02:24Let me zoom out, Avinash, and for the benefit of viewers, give us – you're a fintech

02:30plus SaaS.

02:32Give us a lowdown and try and simplify this business for us, for the viewers, to try and

02:38give us a lens as to what the business is all about and what's the growth potential

02:43like and what's the kind of traction you are seeing in terms of demand.

02:47More on the business, less on the traction and demand.

02:49Sure, Arsh.

02:50So if you think of it, right, any company – and NETV is a customer of ours as well

02:54– any of your enterprise and mid-market customers are all trying to figure out how

03:00can they manage their spends better, right?

03:03You want to reduce leakage, you want to reduce friction, you want to make it very convenient

03:07for your users, whether it's your employees, whether it's your vendors, whether it's

03:10your channel partners.

03:12And that's the way the world has evolved.

03:15That's the way India has moved, and we are very clearly the number one player in the

03:20fintech space in the world today as India.

03:24And consumers and corporates demand that the solutions are working seamlessly.

03:29So it's not about software or a payment instrument.

03:33What the customer is asking is software and payment instrument, and the entire experience

03:39has to be integrated and seamless.

03:41And that's what we are able to provide through our platform, whether it's SAVE, which is

03:45our employee expenses and benefits platform, or ZOIA, which is our vendor payments platform,

03:51or PROPEL, which is our channel incentive platform, where each of these platforms integrate

03:56with the ERP on the one side, with the HRMS on the other side, and all these integrations

04:01are bringing in data, information, allowing corporates to set policies, limits, as well

04:07as to be able to view the data of the spends in a single unified view through very easy

04:16to understand dashboards, whether it's pie charts, bar graphs.

04:19So any layperson can understand what's happening in terms of the spends, not just your accounts,

04:24folks.

04:25Historically, it's only the CFO's office which has been responsible for controlling costs.

04:29And it's been a old complaint of CFOs that revenues seem to be the prerogative of everybody

04:34in the company, but cost control is a burden of only the CFO.

04:40This allows you to spread that responsibility across the organization.

04:44Got it.

04:46Okay.

04:47So yes, more simplified, but if you can also give us what's the kind of market share, if

04:54there is one, if there is a metric, what's the kind of market share you have in the space?

05:01Because for one integrated player to be doing all the businesses that you're doing, that's

05:08unique in itself.

05:09So if you can give us product-wise or how does it work?

05:14So Harsh, we're clearly the number one player in the spend management space in India today.

05:20And the market is recognizing it.

05:23The rest of the competition is highly fragmented.

05:26It's hard to create an ecosystem the way we have.

05:30And I say it with all humility that it's taken us a 13-year journey and we've just scratched

05:37the surface so far.

05:39So it's hard to be able to integrate with all these systems, acquire these corporates.

05:44Today we have 14 bank partners, some of the best banks in the country like SBI, ICICI

05:50access, et cetera.

05:52So market share-wise, we are very clearly the market leader to pinpoint a percentage

05:57is hard because there's a lot of fragmentation in the market when it comes to the point solutions

06:04which others offer, whether it's expenses, whether it's benefits, whether it's channel

06:09incentives.

06:10But overall, if you look at it, we are a top five player in the commercial card space today

06:14in India, red card.

06:16We are one of the leading issuers of prepaid cards in the country.

06:22So that way you would obviously see where we stand.

06:27Overall, to say that this is our market share is a little tricky because this is yet a nascent

06:33industry, very fast growing and with the tailwinds of a demon, GST, COVID, all kicking in towards

06:43digitization.

06:45So there are a lot of those tailwinds.

06:46So the market continues to expand very rapidly on a daily basis.

06:52All right, let's talk margins profitability.

06:55First off, with regard to your adjusted EBITDA margins, as you'd call it, which for viewer

07:01context just about excludes ESOP.

07:03So margins excluding ESOP, you've suggested that that number should be 11 to 13 percent

07:11in the medium term, maybe a year or two is what I guess give us that guidance as to how

07:15quickly you get there.

07:17are fluctuating between that maybe 9 to 12, 11 odd percent bracket?

07:24Yes, we are this quarter at about 10.1 percent.

07:28And our guidance is that for this year, we'd be in similar levels by FY28 or so.

07:35We've been in the range of 15 to 16 percent.

07:39And the way we look at the margin expansion is if you think of it, you know, how those

07:43typically margins expand.

07:45It's firstly the growth in top line.

07:47I'm talking of a growing industry and growing company.

07:50So your top line grows, then your gross margins grow.

07:52Our gross margins have started to grow very healthily.

07:55So this quarter, our gross margins were about 56 to 57 percent compared to the same Q1 of

08:02last year, which was about 51 percent.

08:05So we're seeing expansion of the gross margin and eventually in the next two, three years,

08:10it will flow right down to PAT through EBITDA and, you know, into PAT.

08:15So we're seeing the expansion.

08:16But right now, our guidance for margins for adjusted EBITDA is around 10 percent for this

08:24year.

08:25Got it.

08:25And so maybe a year or two from now, we will make the journey to 13.

08:30And thereafter, FY28-16 is mine.

08:34So we would have to understand how that goes.

08:39Sometimes, you know, these things take a little while longer, but we are fairly bullish about

08:44the fact that by FY28, we should be in the range of 15 to 16 percent.

08:48Whether that happens, you know, right off the bat or maybe it takes a little while and

08:52then it kickstarts in a big way.

08:56We'll have to wait and see.

08:58Right.

08:59And you've guided for doubling of revenue versus FY24.

09:04FY24 at roughly 770 crore, doubling by FY26.

09:10Where should that go?

09:11Because you're growing at nearly 50 percent over FY25 and 26.

09:16If that were to continue to happen, you'll likely double maybe 50 and 40 and you'll likely

09:22double, you know, to around 15 to 1600 crore.

09:26Where does that go?

09:27Because the base gets higher then.

09:29How much of that is annual recurring and where does that go to?

09:33So, one, we are very confident of comfortably doubling, you know, in two years.

09:41We potentially would outdo that.

09:45And, you know, the beauty of being in a country like India and in a market like spend management

09:53is the market size of the time, so to say, is so large.

10:00And we are now experiencing the benefit of being the market leader.

10:04I can't emphasize this enough.

10:06How enterprises and, you know, mid-market customers gravitate towards somebody who has

10:13a high quality solution which is established in the market.

10:17And given the number of, you know, startups and fintechs who've had a tough time, being

10:23listed, being profitable is a very big sign of stability.

10:29Last five years, we are profitable at a back level.

10:32And the corporates and banks really give a very large premium to that profitability.

10:38So, we are very confident that going forward also after those two years, the growth will

10:43be very robust.

10:45What it will be may be a little premature for me to say, but internally our targets

10:49are very robust right up to 2032.

10:53Got it.

10:53And, you know, I want to try and understand if your EBITDA margins are 16 percent.

11:00So, currently margins are at around 10, 10 and a half.

11:03You know, your PAT margin is roughly 6 and a half, 7.

11:08Once they reach 16, your EBITDA margins, where does PAT margin lie?

11:13Because you'll have a significantly higher cash flow coming in.

11:18Likely those interest expenses will go away.

11:22Your depreciation is largely insignificant compared to the larger top line you'll have

11:26by then.

11:27So, I want to try and understand, will that completely flow to bottom line?

11:31Is that the right way to look at it?

11:32Is that the right way I'm looking at it?

11:35So, Harsh, you're very, very bang on, right?

11:38I mean, it would very largely flow into PAT.

11:41Of course, there's a tax component.

11:45So, obviously, there's there, but from a PVT perspective, a very large portion of the

11:49expansion and EBITDA will flow into the PVT and, of course, the PAT as well.

11:54Got it.

11:54And with regard to cash, where are you deploying?

11:58Where are you investing your free cash?

12:00It's a high cash generating business.

12:02So, just want to get that as well.

12:05See, on cash, if you look at it, cash would go into organic and inorganic growth levels.

12:13And we are looking at opportunities for inorganic growth very seriously.

12:19Both domestic and international.

12:22We're also looking at opportunities where these acquisitions are EBITDA accretive.

12:28The challenge there, Harsh, is profit or EBITDA accretive acquisitions are rare to find,

12:34especially in the spend management space.

12:36But we are looking at them.

12:38And if not, then we would definitely make sure that that acquisition is bringing significant

12:43value to us in the product side or the geographic expansion side.

12:48And a lot of investment is going on in adding high quality talent in the organization,

12:56leveraging technologies like AI.

12:59We've spoken extensively in the analyst call as to how AI and OCR and NLP are really making

13:05a big difference in the lives of our users and corporate customers.

13:10And we'll continue to invest and double down on that.

13:17Thank you.

Zaggle Prepaid's Q1 Profit Jumps To ₹17 Cr | NDTV Profit

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