Zaggle Prepaid share price hits 10% lower circuit despite jump in Q3 PAT, revenue. Here's why

Shares of Zaggle Prepaid Ocean Services, a SaaS fintech company, came under significant selling pressure in trade on Monday, February 10, hitting the 10% lower circuit limit at ₹424.30 following the release of the company's December quarter performance.

The company reported its Q3FY25 results post-market hours on Friday, showing improvements in both revenue and profitability. However, a sharp increase in operating expenses, driven by rising employee costs and other expenditures, weighed on investor sentiment, resulting in a significant drop in the stock price.

Zaggle Prepaid, which provides spend management products and solutions, reported its highest-ever quarterly revenue of ₹336 crore in Q3FY25, reflecting a 68.6% year-on-year (YoY) jump. However, operating expenses surged to ₹308 crore, marking a 72% YoY increase.

Its EBITDA stood at ₹29 crore, rising 45% compared to Q3FY24, while the EBITDA margin was recorded at 9.4%. Profit after tax for the quarter increased by 33% YoY to ₹20 crore.

The YoY growth in Q3 revenue is attributed to a notable 54% rise in program fees, driven by an expanded portfolio of prepaid and credit cards, along with increased client spending. Additionally, revenue from the Propel platform saw a strong 87% growth, fueled by higher redemptions during the festive season.

The company stated that the rise in employee costs is primarily due to workforce expansion to support business growth. "The increase in incentives, cashback expenses, and operational expenditures aligns with the overall expansion of the business. The total ESOP expenses in FY25 are expected to be approximately ₹95-100 million," the company said in its Q3 earnings filing.

Meanwhile, the company expanded its customer base to over 3,300 and secured contracts with several major brands, including Blinkit, CanFin Homes, BigBasket, Mumbai Metro One, Mahindra First Choice Wheels, and Hitachi India, as per earnings report. 

For FY25, the company is confident of achieving 58-63% growth in its top line. It is also evaluating inorganic growth opportunities to accelerate expansion, with discussions currently at advanced stages.

Stock down over 18% in 3 months

The stock has been on a downward trend over the past three months, declining from ₹519 to its current trading price of ₹424 per share, marking an 18.3% drop. However, it remains up by 50% over the last eight months. At current levels, the stock is trading 158% above its IPO price of ₹164 per share.

Founded in 2011, Zaggle is a key player in the business-to-business-to-customer (B2B2C) segment. The company specializes in fintech solutions, offering prepaid cards and software-as-a-service (SaaS) products to corporate clients across various industries.

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