ZAGGLE - ZAGGLE PREPAID OCEAN SERVICES LIMITED Share Price

In the Q3 FY '26 earnings call, Zaggle Prepaid Ocean Services Limited's management provided an optimistic outlook for the company, highlighting strong financial performance and growth strategies. Key financial metrics included a revenue of INR 498 crores for the quarter (a 48% YoY growth) and adjusted EBITDA of INR 51 crores (63% YoY growth). The profit after tax (PAT) surged to INR 36 crores, up 78% YoY. For the nine-month period, revenues reached INR 1,260 crores, with PAT increasing to INR 95 crores, highlighting a robust trajectory driven by margin expansion.

The management has articulated a significant focus on leveraging AI to enhance operational efficiencies. The transition to "Agentic AI workflows" is intended to streamline complex tasks, considerably reducing product development time from 75 days to less than 30 days. This efficiency is positioned as a competitive advantage as the company aims to accelerate product rollouts and enhance responsiveness to customer needs.

In terms of acquisitions, Zaggle has completed its acquisition of Rio.money (now ZAGG.money), which is expected to add approximately 3.7 million salaried users to its platform, with a revenue target of INR 500 crores in this segment over the next 4-5 years.

Management anticipates that the continued integration of AI and the expansion of collaborations"”highlighted by new partnerships with Visa and Mastercard"”will drive growth. A capital infusion of over INR 100 crores has been earmarked to support this strategy.

The outlook for revenue growth remains strong, with guidance for a 40-45% organic growth in FY '26. The management reiterated a commitment to achieving cash flow breakeven by the end of FY '26 and turning cash flow positive in FY '27, reflecting a focus on operational sustainability alongside aggressive growth measures.

1. Question: "In the consolidated segmental revenue, we have our platform fees at around INR 79 crores. What has caused this significant jump, and how is it divided between organic and inorganic?"

Answer: "The change is largely due to a regrouping in financial reporting rather than a fundamental shift in revenue generation. The updated financials reflecting this change have been submitted to stock exchanges, confirming the accuracy of our reporting."

2. Question: "Can you explain the business and economics of the Smart EPP program and how we make money from it?"

Answer: "The Smart EPP program has healthy margins due to tax benefits, allowing clients to save on both income tax and GST. We earn substantial commissions on this program, making it highly profitable without any working capital deployed from our side."

3. Question: "What is the current cash flow conversion from last quarter's incentives, given that we see a large points issuance?"

Answer: "We are on track with our cash flow guidance, which we previously shared. We expect to break even by year-end and plan to be significantly operating cash flow positive in FY '27."

4. Question: "Can you comment on the higher employee costs this quarter and if there will be any impact moving forward?"

Answer: "Yes, there were one-off payments of around INR 2.1 crores related to structural regrouping in this quarter. These will not recur in future quarters, ensuring a more stabilized cost structure ahead."

5. Question: "You've mentioned breakeven in Q4 leading to cash positive in FY '27; what should we expect in EBITDA to OCF conversion?"

Answer: "It's too early to provide precise figures for EBITDA to OCF conversion for next year, but we aim for it to be north of 50%. We're focused on improving cash flow metrics as we continue to grow."

6. Question: "What does the long-term path look like for ROE and cash flow, given the company's growth?"

Answer: "While we're in a high-growth phase, we do expect both ROE and cash flow to improve significantly over the next 5 years as we capture market share and optimize our operations for better efficiency."

7. Question: "Can you share any specific use cases for AI integration and its expected benefits?"

Answer: "We are automating reconciliations, which is a major pain point for CFOs. By implementing Agentic AI for reconciliations across multiple systems, we expect a substantial reduction in manual labor and a more efficient data management process."

8. Question: "Are you planning any further equity dilution given current cash conditions?"

Answer: "We are not looking to dilute equity at this moment. We have enough cash reserves, raised for acquisitions, and we are focusing on leveraging those resources for strategic growth opportunities."

9. Question: "Could you provide an update on the ramp-up of the acquired business, Rio.money?"

Answer: "The acquisition of Rio.money, now ZAG.money, is complete. We're leveraging our extensive user base of 3.7 million to cross-sell various financial products, including spend-linked services, leveraging favorable new tax guidelines."

10. Question: "What is the competitive landscape you foresee, and how are you positioned in relation to it?"

Answer: "While competition exists, we aim to solve complex problems dynamically and efficiently through our tech-first approach. Our scale and accumulated institutional knowledge allow us to preempt client issues, setting us apart in the marketplace."