Shares of Zaggle Prepaid Ocean Services Ltd, a leading fintech solutions provider, were locked in a 10% lower circuit on Monday, February 10, after the company reported a marginal decline in net profit for the December 2024 quarter (Q3FY25) on a quarter-on-quarter (QoQ) basis. The company’s consolidated net profit for Q3FY25 stood at ₹19.74 crore, reflecting a 2.7% decrease compared to ₹20.29 crore in the preceding September quarter (Q2FY25).
Despite the sequential decline, the company showcased a 29.7% year-on-year (YoY) growth in net profit, rising from ₹15.22 crore in Q3FY24. However, investor sentiment remained cautious, leading to a sharp decline in the share price.
Zaggle Prepaid Shares Locked in 10% Lower Circuit
Zaggle Prepaid shares opened 10% lower at ₹424.05 apiece on the National Stock Exchange of India (NSE) and remained locked in the lower circuit throughout the day. The stock had already been under pressure in the preceding sessions, declining by 14.3% over the last three trading days. This cumulative drop reflects growing concerns among investors about the company’s short-term profitability, despite strong revenue growth.
Q3FY25 Financial Highlights
While net profit witnessed a marginal decline, Zaggle Prepaid’s revenue surged significantly, reflecting the company’s ability to maintain robust top-line growth.
| Financial Metrics | Q3FY25 | Q2FY25 | QoQ Change | Q3FY24 | YoY Change |
|---|---|---|---|---|---|
| Net Profit | ₹19.74 crore | ₹20.29 crore | -2.7% | ₹15.22 crore | +29.7% |
| Revenue from Operations | ₹336.4 crore | ₹302.5 crore | +11.2% | ₹199.5 crore | +68.9% |
| Adjusted EBITDA | ₹31.5 crore | N/A | N/A | ₹22.8 crore | +38% |
| Adjusted EBITDA Margin | 9.4% | N/A | N/A | N/A | N/A |
The company’s revenue from operations rose 11.2% sequentially, reaching ₹336.4 crore in Q3FY25 compared to ₹302.5 crore in Q2FY25. On a YoY basis, revenue jumped by 68.9%, up from ₹199.5 crore in Q3FY24.
Revenue Growth Drivers
The year-on-year revenue growth was driven by multiple factors:
- Program Fees Increase: There was a 54% rise in program fees, attributed to an expanded portfolio of prepaid and credit cards and an increase in client spending.
- Propel Revenue Growth: The Propel revenue platform saw an 87% growth, primarily due to increased redemptions during the festive season.
These factors highlight the company’s success in diversifying its revenue streams and leveraging seasonal opportunities to boost growth.
Management Commentary and Outlook
In a post-earnings statement, Raj P. Narayanam, Founder and Executive Chairman of Zaggle Prepaid, expressed optimism about the company’s performance and future growth trajectory:
“This has been a milestone quarter for us with our highest-ever quarterly and nine-monthly performance in terms of revenue, adjusted EBITDA, and profit after tax (PAT). For FY25, we are confident of achieving 58-63% growth in our top line. We are also evaluating inorganic growth opportunities to expedite this growth, and discussions are at advanced stages.”
Adjusted EBITDA and Margins
The company reported an Adjusted EBITDA of ₹31.5 crore in Q3FY25, reflecting a 38% increase compared to the same period last year. The Adjusted EBITDA margin stood at 9.4%, indicating a healthy operational performance despite the net profit dip.
This increase in EBITDA showcases the company’s ability to maintain operational efficiency while navigating a challenging market environment.
Fundraising and Inorganic Growth Strategy
As part of its growth strategy, Zaggle Prepaid successfully raised ₹595 crore through a Qualified Institutional Placement (QIP) during the quarter. This capital infusion aligns with the company’s plans for inorganic expansion, which includes potential acquisitions and strategic partnerships.
The company is actively exploring acquisition opportunities to strengthen its market position and expand its product offerings. The management has indicated that discussions with potential acquisition targets are at advanced stages, which could lead to accelerated growth in the coming quarters.
Stock Performance and Market Reaction
Despite the company’s strong revenue growth and optimistic outlook, investors reacted negatively to the sequential decline in net profit. The stock opened at ₹424.05 on the NSE, marking a 10% decline, and remained locked in the lower circuit for the entire trading session.
The recent downtrend in the stock price could be attributed to several factors:
- Profit Booking: After a period of sustained growth, some investors may be locking in profits, contributing to the recent decline.
- Short-term Profit Concerns: The QoQ decline in net profit, though marginal, may have raised short-term concerns among investors about profitability trends.
- Market Sentiment: Broader market trends and investor sentiment towards fintech stocks may also have influenced the stock’s performance.
Analyst Views and Future Prospects
Despite the recent stock decline, analysts remain optimistic about Zaggle Prepaid’s long-term prospects, given its robust revenue growth, expansion strategy, and strong operational performance.
- Positive Outlook: Analysts highlight the company’s solid revenue growth, driven by program fees and the Propel revenue platform, as key indicators of future success.
- Inorganic Growth Potential: The planned acquisitions and inorganic growth strategy could provide a significant boost to the company’s market share and profitability.
- Cautious Optimism: Some analysts suggest caution due to the sequential profit decline, but overall, the company’s strong fundamentals and growth trajectory outweigh short-term concerns.
Conclusion
Zaggle Prepaid Ocean Services Ltd delivered a strong financial performance in Q3FY25, with revenue growth of 68.9% YoY and a 29.7% increase in net profit compared to the same period last year. Despite a marginal QoQ decline in net profit, the company achieved its highest-ever quarterly revenue and profit after tax (PAT).
The management remains confident in achieving 58-63% top-line growth for FY25 and is actively pursuing inorganic growth opportunities. While the stock faced short-term pressure and was locked in the lower circuit, the company’s strong revenue growth, expansion plans, and operational efficiency position it well for sustained success in the fintech sector.
Investors may view the current stock price dip as a buying opportunity given the company’s solid fundamentals and growth prospects in the coming quarters.
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