Zaggle Prepaid Ocean Services Limited (ZAGGLE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Zaggle Prepaid Ocean Services Limited Q3 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] I now hand the conference over to Dr. Raj P Narayanam, Executive Chairman. Thank you, and over to you, sir.

Sure. Thank you. Thank you so much. A good, very good evening to everyone. Thank you for joining the earnings call for Zaggle Prepaid Ocean Services Limited for the third quarter of fiscal year 2025. On behalf of the company, I extend a very warm welcome to all of you. On this call, we are joined by Mr. Avinash Godkhindi, Managing Director and CEO; Mr. Aditya Kumar, our CFO and SG&A our Investor Relations advisor. The financial results, press release and the investor presentation are uploaded on the stock exchange and on the company website. I hope everybody has had a chance to look at it. Now I would take this opportunity to just give you a gradual business update. This has been a milestone for us with multiple accomplishments. I'm happy to announce our highest performance this quarter. And for the 9 months ended in terms of revenue, adjusted EBITDA and PAT. This quarter, the company reported a healthy growth of 69% with revenues at INR 336.4 crores on a Y-o-Y basis. For 9 months, the company exhibited a growth of 77% and the revenues for the 9 months stood at INR 891.2 crores. Our adjusted EBITDA for Q3 '25 delivered 38% on a Y-o-Y basis at INR 31.5 crores. For 9 months FY '25, our adjusted EBITDA stood at INR 87.6 crores, demonstrating a growth of 48% year-on-year. The reported EBITDA for Q3 '25 surged to INR 29.4 crores, increasing by 44% on a year-on-year basis. And for the 9 months, the reported EBITDA grew significantly by 81% Y-on-Y to INR 78.6 crores. The profit after tax for Q3 FY '25 increased by 33% on a Y-o-Y basis to INR 20.2 crores. And for 9 months FY '25, our PAT more than doubled to INR 55.5 crores, growing by 125% on a Y-o-Y basis. If you just look at it, I will do a revenue number. Propel revenue in Q3 FY '25 was INR 336 crores against Q3 FY '24 of INR 199.5 crores, showcasing a growth of 69% year-on-year. Adjusted EBITDA at INR 31.5 crores in Q3 FY '25 versus INR 22.9 crores in Q3 FY '24, which is 77.6%. Similarly, our adjusted EBITDA margin is at 9.4% versus 11.5%. Our reported EBITDA number has been 29.4% -- INR 29.4 crores versus INR 20.4 crores. Our reported EBITDA margin has been [indiscernible] we previously have told is about 9% and that is what we have guided for. I also want to highlight and thank all the investors in December 2024, we successfully completed the QIP of INR 595 crores. And I would like to thank our investors for showing trust and confidence in business. The fundraise is in line with our growth strategy of inorganic expansion. We are currently very pleased to also inform that we are currently evaluating 5 targets in the spend management and adjacent space, such as merchant card secure payment infrastructure, et cetera. Out of this, 2 are at advanced stages and moving towards completion at a fast pace. Okay. As you know, there are various steps to it. There is a time shift, then there is a due diligence, then there is a transaction document. And if required, we need to go ahead and take approvals from the statutory authorities. So, in both these cases, we are at a very, very advanced stage. And in due time, which is possibly in the next quarter, we would be able to give you a definitive time line. We are looking forward to a closure of all these 3 transactions in this calendar year. But we're hoping to -- so we'll continually share updates with you on a regular basis. With this, I would also like to welcome Mr. Viraj Sunil Diwanji to our team as the Non-Executive Director of the company. He is a seasoned banker with over 30 years of experience in building, managing and growing businesses across assets and liabilities. He has been involved with [indiscernible] group for about 3 decades in a variety of roles. During this journey, we have successfully managed the joint venture with international partners like Ford Credit International and executed the merger of midsized bank [indiscernible]. He also served as a nonexecutive director for over 9 years on the Board of Kotak General Insurance Limited from its inception stage. His experience across diverse roles and business leadership will help us accelerate our growth plans in the coming years. Now I want to just give you a little bit of global macro conditions in this spend management space. Globally, the spend management space is rapidly evolving with the introduction of AI power solutions to automatically detect the unauthorized spends and impact from dashboards, enabling you increased compliance and improve efficiency. We are very proud and pleased to tell you that Zaggle is also using AI and machine learning models in multiple fronts, rather AI driven chatbot, RazBot -- it was called RazBot has achieved a deflection rate of 60%. And we intend to enhance the deflection rate to about 99% while 60% is extremely encouraging, but I believe we will want to move it to 99% plus. Reflection rate is the percentage of the produce that we bought is able to resolve by itself without any human intervention. We intend to increase the expense of our uses for our AI bot across different product functions and to enable efficient business decision-making. Travel and expense is an integral and important part of our corporate spend. Zaggle has entered into agreements with multiple travel countries such as MakeMyTrip, FCM, Ria Travels and recently, with TBO access to offer bundled expense and travel solution to our customers, facilitating seamless travel booking payment reconciliation and filing of the expense directly into the GL. We are also building a tightly bundle self-booking tool that will integrate with preferred travel suppliers, thus ensuring consistency and cost savings in total bookings. Also want to take a minute and highlight that the current -- the union budget 2025 introduced importing tax reforms in that boosting consumption. There have been many questions and queries about how does this impact our revenues and profits. We want to take this opportunity to clarify that we see very little or no impact of this change in our sales business, which comprises of employee expense management, reimbursements and benefits. The employees in the 5 to 15 lakh salary range only take new benefits, which form a meager 0.48% of our current revenue. Incrementally, we see significant demand across our corporate customers for nontax dependent wallets and payments. We have recently launched a health and wellness wallet for our corporate customers. Along with that, we have also launched a cafeteria solution and [indiscernible] solution, et cetera. we see a significant uptick in the number of wallets in our card to continuously increase and a lot of these solutions, which we have offered are -- would be lapped up by a lot of employees within the corporate sector, also to state that we have not seen any kind of customer complaint or customers coming back to us and saying, "We want to do away with this particular program. So we have not had that. Simultaneously also want to clarify that the OTR, which is the old tax regime is still continuing, while we had accepted since last two years, at the old tax regime would be removed and only the new tax regime would be used. But contrary to our belief -- that they are still continuing with OTR, which is -- which would be slightly beneficial to us. But we really -- as we go forward in our business, we really do not want to depend on any tax benefits per se. Additionally, we have partnered with multiple service providers in areas like financial services, health care, taxation, et cetera, to provide value-added services to over 3 million plus active users. We have recently enabled BBPS Bharat Bill payment system on our platform through which users can pay their bills directly from the Zaggle App. Zaggle App also allows our customers to book FDs and multiple such instruments and so we are able to service them while offering very attractive at every waives of up to 9% per annum from various banks. Now I would want to take a minute and explain about the customers -- the customer updates We, as you have seen in our filings, we have signed significant maquee clients, including Genfit, Samson Homes, Mumbai Metro, Hitachi, Mahindra First Choice Wheels, Narayana Hrudayalaya et cetera. Blink commerce is gaining dominance in our day-to-day lives. We also tapped into this space by signing contracts with clients such as BlinkX [indiscernible]. BlinkX has signed up for our [indiscernible], which is one of the most newest offerings from Zaggle's [fold]. It is called branch recurring operating monthly expense. It's a solution, which is a new pace within our Zoyer product wherein corporates or retail brands can effortlessly manage their branch store-level expenses with secure payments, compliance checks and real-time insights for better financial control. Right now, as we speak, we have like hundreds of demos going on in this particular solution. And we think that this could be our star performer in the coming year and next year and with no dependence on, with absolutely zero dependence on any of the statutory or regulatory environment. We have a strategic focus on growing with our goal of deeper penetration within select industry segments. Our partnership with [indiscernible] and BlinkX exemplifies this strategy. We are implementing an automated bill fetch and utility payment reconciliation system for BlinkX, providing comprehensive visibility and control across their 500 direct stores on a unified platform. Given our strong performance, we are upping our guidance. Previously, if you remember the Q1, we had said we possibly will be growing at about 45% to 55% -- 45% to 50%. Then in the quarter after the closure of quarter 1, we had said that we might grow at about 50% to 55%. And now we are upping our guidance that we possibly will be able to do in the range of about 58% to 63% and this also may be a little bit [indiscernible] if the trends are to be seen. This is the kind of growth in our top line for FY '25. As we rapidly grow our top line, we continue to focus on protecting and growing our margins over time through increased operating leverage, enhanced efficiency and cross-selling. Additionally, our focus on new areas of organic and inorganic growth with deep profit pools is also expected to contribute significantly to our margin expansion in the coming years. Thank you. With this, I now hand it over to our CEO, Mr. Avinash Godkhindi.

Thank you, Dr. Raj, for your comments. Over the years, we have pivoted from a product-based approach to a platform-based approach where we provide a bouquet of offerings to our customers to address their multiple requirements through our spend management solutions, be it for rewards, expense management, procure to pay, BROM, which is our branch recurring operating monthly expenses solution, fleet, ForEx and much more. The opportunity to digitize business spends through our software solutions bundled with payments is a highly accretive opportunity for us. During the quarter, our SaaS fee -- SaaS platform fee/service fee contributed to about INR 8.9 crores. Our program fees contributed about INR 135 crores. Total Points revenue consisted about 57% of our revenue, which contributed INR 192 crores. It is very heartening to see that Zoyer, which started clocking revenues only in April 2024, is contributing significantly to Zaggle's growth. We have achieved high acceptance levels for this product amongst our corporate and enterprise customers. We are providing payment solutions for Zepto's rapidly expanding network of dark stores and branches, addressing the diverse spend needs through our grown solution. Zepto also signed up for Zaggle's Safe solution to offer their employees expense management and benefits for a significant number of their employees using multiple wallets to enhance their benefits management. Another significant win for the BROM use case is our partnership with one of India's largest retail players to digitize all their store expenses. The solution, once implemented, will be deployed across an extensive networks of tens of thousands of stores. On the fleet side, we entered with an agreement with AG&P Gas, City Gas, which is [indiscernible] and Set Gas and successfully conducted the product launch in December 2024, with thousands of cards being issued and hundreds of gas stations being enabled to accept our cards. There are several other clients in the pipeline, and we see very good demand and deep profit pools and large addressable market on the fleet payment space. Going forward with our platform approach, we anticipate growth rapidly on the back of new client additions, along with much higher cross-sell in our existing clients. Our partnerships with multiple travel partners such as EaseMyTrip, FCM, Via, TBO, Yatra, et cetera, also derisks the travel options and provides numerous choices to large enterprises for our travel and expense solution. During the quarter, we also announced key collaborations that Dr. Raj spoke about. We have signed a significant agreement with Mastercard, which is a 7-year partnership. Under this partnership, Mastercard will recommend our software platform and card solutions to their corporate customers and other entities like banks and fintechs. Mastercard did an extensive evaluation of solutions in the market before entering this partnership with us. This highlights our capability to provide value to our customers through multiple solutions such as expense management, Zoyer, our rewards programs, et cetera. This partnership is a global partnership. Further, the much awaited HDFC Bank partnership has come in as a major addition to the list of our partner banks. In this agreement, HDFC credit cards will be bundled with our software, expense management and employee and benefits as well as our Zoyer platform and offered to their corporate customers. We also strive to build symbiotic relationships, and we believe in partnering with various industry players to stitch value-accretive collaborations. We have entered into a strategic partnership with Strata, which is a large MNC HRMS solution provider, working with multiple global Fortune 500 companies, wherein they offer the Zaggle SaaS and payment products to Strata's clients. I'm delighted to share that we have won quite a few awards this quarter. Zaggle won the Deloitte Technology Fastest Fiscal 2024 Transformation Tech Award. We also won the 19th Employer Brand Awards, Telangana's Best Employer brand. Zaggle also won the Best use of customer loyalty program Fintech at the FinX 2024 and the best use of print ad Fintech at the FinX 2024. These awards only highlight our ability to go the extra mile and provide value-accretive solutions to our users and corporates, and we continue to keep the momentum going ahead. As always, our endeavor is to provide comprehensive solutions in the spend management space and to maximize our reach to new clients and increase our wallet share with our existing clients. With this, I now hand it over to our CFO, Aditya, to take us through a financial update. Thank you.

Thank you, Avinash, and a very warm welcome to everyone on this call. I'm pleased to share that the company has achieved another strong quarter of operational performance, driven by robust and broad-based revenue growth of 69% Y-o-Y basis, reaching to INR 336.4 crores. This growth has fueled by healthy expansion across all 3 revenue streams with program fee increasing by 54% Y-o-Y and the Propel platform witnessing a significant 87% sequential growth in Q3 FY '25. The rise in incentives and cash back aligned with business growth, driven by increased rewards offered to the clients' users for spending through our product offerings. Other expenses have risen due to higher sales and marketing costs during the quarter, while employee costs remained stable sequentially but increased Y-o-Y basis, reflecting the additional headcount needed to support business growth. Our adjusted EBITDA grew by 38% to INR 31.5 crores in the quarter compared to INR 22.9 crores in the same period last year. The increase in depreciation expenses is attributable to the capitalization of new products. Our cash PAT, which includes net profit along with depreciation and ESOP expenses, increased by 34% on a Y-o-Y basis to INR 26.2 crores. Our PAT has increased by 33% compared to previous year to INR 20.2 crores. For 9 months FY '25, our revenue from operations reached an all-time high, recording a substantial 77% Y-o-Y growth to INR 891.2 crores. This was driven by robust expansion in program fee, which more than doubled with 10% Y-o-Y increase, along with impressive 62% Y-o-Y growth in the total platform. Our adjusted EBITDA has surged by an impressive growth of 48% to INR 86.6 crores. PAT has more than doubled, rising by 123% Y-o-Y to INR 55.5 crores. Notably, our cash PAT has seen significant growth in increasing by 56% to INR 72.0 crores. During FY '25, we expect to record total ESOP expenses in the range of INR 9 crores to INR 10 crores. With that, I would like to conclude my update, and we are happy to open the floor for questions.

[Operator Instructions] The first question is from the line of [indiscernible].

[indiscernible] I mean in this quarter the margins are now even though I think we have sort of indicated that based on volume that we get merchants, the full year margin should revert to about 7% to 9% in that [indiscernible].

[indiscernible] you are not clearly audible, sir. Your voice is sounding very muffled.

Is it better now?

Yes, please go ahead.

Yes. So the question was around the Propel business gross margin. So this quarter, the margins have come down to about 3% even though in Q2, we sort of indicated that based on volume based discount that we will get from merchants, the margins should recover in the full year, we should get to about 7% to 9% -- so your thoughts on why we are not seeing an improvement in this business given that even at INR 192 crores of kind of revenues are about 6% of gross profit on this business, and we know that this business requires a lot of working capital as well. So just wanted to understand what is happening in this business.

Yes. Thanks for your question. I heard part of it, but I think I got it. Basically, a lot of the ORCs, overriding commissions are something that come in, in the Q4. Q3, very small merchants, we were able to [indiscernible] cross some of the base thresholds. These are slab structures. So the real increase in the margins, we anticipate to see some of it -- we anticipate to see most of it actually in this quarter. And then that's where that number is looking the way it is.

For the full year, do you expect that we will reach 7% to 9% for the full year?

It's a little premature for me to comment whether I'll absolutely reach there or we'll reach there or thereabouts, but we will be more there or thereabouts somewhere in that range.

Got it. The second question is on the overall cost base. So the good part that [indiscernible]. But if I look at the other cost base that has been expanding at quite a rapid pace even though in platform business, the cost base at lower pace versus the revenues. And now we are like cost base is growing at a faster pace than the revenues itself. So just wanted to understand where is this cost increase happen where are you investing because of this cost base is growing?

See, I think the cost base in a business, rapidly growing business like ours where we are on the one side, trying to cross-sell more to existing customers, on the other side, developing capabilities like DOME. It's fairly understandable, I believe that the cost base is going to grow. Overall, our focus is on our EBITDA and PAT, and that's growing very healthily. Of course, there's always room for improvement, and we want to improve on this in the coming years. But the investment obviously is happening in building capabilities. And as I mentioned in my speech, when one of the largest retail chains in India, largest conglomerates in India signs you up for tens of thousands of stores for your solution, then you don't worry about anything. You just see if the contract is highly profitable or doing well, then you deploy or you invest capabilities to be able to make sure that program works. And for DOME, for example, we've signed so many of these accounts. I'm going to name the ones which we've announced, the BlinkX, the [indiscernible], the big baskets, the Dr. Batra, the [indiscernible], the subways. So you can see that the number of these accounts that we have been talking of that these are only a small set of the ones that we've announced to the Street, right? So there's a lot of traction there.

The next question is from the line of Manish Oswal from Nirmal Bang Securities.

I have a couple of questions on the business model. The first question on the -- sir, I'm referring to Slide #27 of the presentation. And when I look at the performance of last 3, 4 years, the company has grown strongly in terms of top line. But in terms of operating margins and even the PAT margin, things not playing out in terms of improvement of the margin. So basically, the operating leverage is not playing out. But when you talk about the platform business, any platform business, the basic fundamental is the operating leverage benefit translating into the PAT and the ROCE, et cetera, but it is not reflected in our numbers. So can you help us apart from the 65% kind of growth we are looking at when you see the -- your growth converting into the higher profit growth also, sir?

Thanks, Manish. I think it's important to understand that the revenue mix has gone through a change. The propel points revenue that even the previous questionnaire was asking us has a much lower gross margin profile, right? That line of revenue, we have 3 lines of revenue, software/SaaS fees, program fees and Propel point fees. Propel point fees has grown very significantly in the last 3 years, and that has a much lower gross margin profile. And hence, some of these metrics may not look as encouraging. The way we look at it is how is our solution bringing value to our customers, a, and overall is our EBITDA and margins growing. We can see operating leverage kick in. It's just that the way the accounting India's rules are, we need to account for Propel points as a gross number.

Okay, sir. And can you guide us in terms of trajectory of our margin in the next couple of years, where we see margins playing out?

So we are looking at margins of about 15% to 16% in the next 4 years. That's something that we have already spoken of, and that's what we are aiming towards.

And lastly, on the -- this recently equity raise, which we have done. So what are the areas where we will be making the investment, especially in inorganic side of the side. So can you highlight the areas where we're putting our money?

So, we are looking at areas like the merchant card systems, we are looking at payment systems. These are the kind of areas that we are looking at.

The next question is from the line of Parikshit Kabra from KB Advisors Limited.

Congratulations on a good set of results. I was wondering if it was possible to provide guidance separately for your revenue guidance separately for your 2 different businesses, that is the program fees and the Propel points instead of giving a collective guidance of 60%.

Parikshit. The guidance is very strong on both items, right? Both items are -- both revenue lines are going to grow very healthily. As you can see for the 9 months as well, the growth on both Propel points as well as program fees has been extremely strong. And even our SaaS fees has grown pretty well. So we are seeing growth across all 3 lines, especially program fees as well as Propel points.

Got it. All right. Fine. And then -- but with the announcements that you made and the fact that there are even more under the hood, I would have thought that your program fees should be outpacing the growth of your Propel points. That's not something that you're seeing?

So current year, yes, that's going to happen. If you look at the 9-year numbers, I think 9-month numbers, this has grown at about 111% program fees, right? So that's higher than Propel points, and the momentum is very strong.

The next question is from the line of Devesh Kasliwal from Antique Stock Broking.

Congratulations on a great set of numbers. First question was like what I understand is that the basis of the margin expansion is on the fact of reduction of cash back expense as well as acquisition cost. And I think you had mentioned around 33% of the overall revenue is cash back currently, what you're estimating. So what can that be over the longer period of time? Like what can it come down to? That was the first question.

See, the margin expansion would be through multiple ways. Obviously, operating leverage kicks in. Obviously, our cash backs go down over time. We'll see a lot of our other costs also grow at a much smaller lower pace than our revenues. The acquisitions that we are looking at are highly EBITDA accretive and they're a great -- coming at a great multiple for us. So those all would contribute in expanding margin. Okay.

So a much concentrated question then. So if you look at the acquisition and retention cost, given the fact that we were trying to get customers with a higher revenue potential, it had gone up in FY '24 to around 1.4 million, right? So what can that be? Like will that be a consistent number now? Or are we expecting that to increase given we are trying to achieve better customers and create a better system for them?

No. See, every year, we keep adding new customers. And over time, we see that a lot of these customers, the amount of revenue that we generate on a per year basis because we cross-sell, upsell, there is more deeper penetration for the same product within the organization, the quantum of revenue grows disproportionately when comparison with regular inflation, et cetera, right? So that's the benefit of a SaaS business because this sort of a business allows you to acquire the corporate and then keep generating more and more revenues on a year-on-year basis as long as your platform is valuable to the corporate.

Okay. And sir, the recent partnerships that we had, HDFC Bank for the 3-year period and the other clients like Tata and all. So this will definitely increase the revenue per user that we are getting, right, which has already seen an uptick from around INR 1,000 to around INR 1,066. So what can the limit on that on a yearly basis? Like can it go to around 2,000, 3,000 [indiscernible]?

So the partnerships will also help in a big win. HDFC, Mastercard, Strata, all these partnerships are great partnerships, which would add both to our top line and bottom line. It's a little premature for us to attribute a certain number saying this is how much we will benefit from these partnerships in terms of our per user revenue. But we are very confident that these are great names, great companies with great customer bases. And we are very confident that this is going to add a lot of value to our top line and bottom line in the coming years.

The next question is from the line of Srinaranisha from Baroda BNP Paribas.

Am I audible?

Yes, sir.

So my question was again on the revenue mix. So directionally, in medium term, how do you see the revenue mix? I mean, how big can the propel revenue be of the overall pie, let's say, in 1 or 2 years?

Sir, we are seeing great growth in all 3 lines, right? But in the next 2, 3 years, we see our program fees to grow at the fastest pace. And because there's a lot of traction there. And then, of course, SaaS is very critical for us, and that's growing healthily as well. Propel points continues to grow. There's a lot of momentum in the ecosystem there. So that's also growing. So hard for us to say how the mix would look in the next 2, 3 years, but we definitely believe that program fees will be growing the fastest.

So the new customers which you are onboarding, is there any possibility to categorize? So most of them are -- the revenues are going to Propel or towards program and software fees. Any kind of color on that?

So the customers that we are signing, for example, for BROM, their revenue sits with SaaS and program fees, right?

So most of the customers are there in those buckets. So this should go meaningfully. That's what we should read, right?

Yes, because you can't earn propel points revenue on those products, Propel points revenue only comes on the Propel contracts.

Right, right. And whenever you do cross-selling, then there are chances that the Propel points could increase. But as of now, that's not how it looks like, right? So in near term, these 2 buckets would grow faster, right?

Yes. Yes. These 2 buckets would grow faster.

And just last question. So in Q4, so seasonality-wise, if we see Propel, so Q4 would be bulky, right? And...

Now I can hear you, sir.

Yes. So Q4, Propel would have higher sales, right, in the overall revenue mix?

Not necessarily. revenue-wise, yes. Net revenue-wise, obviously, lower margin gross revenue-wise.

So because for Propel, the seasonality is in Q4. So again, Q4, we can see margins to look optically on the lower side.

No, it's again premature. So Q3, Q4, both is season for Propel, Q3 being the festive season in India for rewards. So I think it's hard for us to comment right now. But what we are seeing is that the momentum is great across BROM, across our expense management platform and as well as Propel is growing very well [indiscernible].

The next question is from the line of Rohan Mandora from Equirus Securities.

Sir, just want to understand your guidance for FY '26 because what you shared is for '25. So both on top line and EBITDA, how one should look at it?

So on the guidance, we just upped the guidance to 58% to 63% for our top line, right? that?

For FY '26 as well, it's a similar guidance? I'm asking for '26.

This is FY '25, FY '25. FY '26, we'll come back to you on that.

Sure. Second was that there was just recently an announcement from RBI wherein a prepaid card can be used in U.K. with a third-party payments app. So just want to understand its impact on our business.

Yes, these are all great pieces of news, Rohan. This opens up engagement on our app. And there are certain steps to take to qualify and to get there, but we are in the process, and those are all very positive pieces of news for us.

Right. So I understand that the addressable market here may be increases. But just on the interchange, will there be any impact here? Or do we have any bargaining power here? I just want to understand that, please?

So if you look at Rohan, [indiscernible] is about 1.1%. What we see overall is that when the mix happens and the number of transactions which will start happening on UPI specifically through the system, I think it will have a very positive blend to the overall interchange number. So there will be a positive spike on the number is how we look at it. And if you see one of the acquisitions which we are doing is also on these lines. We want to be able to actually run the entire UPI switch [indiscernible].

Sure. And lastly, just on the OpEx line items for 3Q, the employee expense at INR 17 crores, which is higher than, say, the earlier run rate of INR 14 crores, INR 15 crores that you are having. So is this a normalized run rate incrementally? Or is this built in the annual incentives and everything in this run rate? I just want to check that. And also on the other OpEx, there's a jump from INR 17 crores to INR 22 crores, if you can explain that?

So employee cost is normalized. That includes INR 2 crores of expenses, Rohan. And this is factored in normal employee growth level, which we hire the people. And OpEx growth because as we are in the growth phase, right, we are investing so much in the products. There are multiple products which were launched in Q3 in terms of the fleet, et cetera. All those investments are happening in that. That's what the OpEx has been, Rohan.

So this again would be a normalized run rate incrementally? Or is there any one-off in this other OpEx?

It's not like -- since the amount is not higher, if you look at it as in quantification, just INR 4 crores, which is like reasonable [indiscernible]. So possibly, you might see a little bit of lower expenditure in the Q4. But as the business grows, even that will be as a percentage of revenue, if you look at it, that will be a normal [indiscernible].

Got it. Got it. And lastly, the conglomerate account that we talked about where we are -- we have entered a partnership recently. What kind of an annual revenue potential can this kind of an account have? If you can just share some outlook here?

So it depends on the conglomerate what kind of conglomerate on an average you can take the potential could be to do about anywhere about INR 50 crores to INR 65 crores conglomerate is how you can look at it. That is the number which we have done. This is one conglomerate, and we are thinking that in and about more or less the behavior would be same.

And sorry, just lastly, if I can squeeze in one more. The program fees revenue that we have, if you split -- if you can give the breakup between the 3 business lines for 9 months [indiscernible].

We'll do that offline.

The next question is from the line of Debashish Majumdar from [indiscernible] Investments.

Congratulations on a very good set of numbers. And also congratulations for adding names like Zepto and BlinkX to [indiscernible]. So I have 3 questions basically. So first question is linked to the program fees. If I see my program fees post Zoyer launch in Q3 FY '24, we have reached a number of INR 137 crores on a quarterly basis. And since then, we are kind of at that range only. So the 2 points I'm trying to understand. One is, is it like Zoyer is not firing up the way we thought from the initial benefits that we got in Q4? Second question is, are we at the -- I mean, this is a contrary to the first question itself. Are we at the inflection point for Zoyer revenue to be booked going forward because of the big lanes that we have signed in the last 2 to 3 months? So that is my first question.

There is still a certain amount of seasonality there at play. And overall, a lot of these contracts are going through their go-live, and you'll see the benefit or impact of that in Q4. I'll just leave it at that.

So should we take it like this way that Q4 -- in Q4, the sequential growth in Zoyer revenue would be or the program fees revenue would be significantly higher?

I mean that would be too specific for me to comment, but I think the reads are good.

Okay. The second question is, when you look at my margin, obviously, currently, it is under pressure or it is stagnant because of the Propel platform revenue growing faster than our overall revenue. So just wanted to get some sense that what is the incremental revenue or what is the margin for the program fees or [indiscernible] revenue that we can book at the EBITDA level because we seem to be very confident of 15%, 16% kind of EBITDA margin over the next 4 years. And this is like from 9% to 16%, this is like almost doubling our margin levels. So is it like our Zoyer margin or intercharge margin is double of the Propel platform margin that we report?

See, thank you for this question, and I'll give you a detailed answer for this. one of the acquisitions which we are doing is on a merchant card system, okay? When you deploy that particular SaaS product on the merchant store level, your propel margins are going to increase significantly, okay? So today, we just buy and sell, okay? And that is why those incremental margins on the issuance side don't come to us, okay, the ability to enjoy the breakage does not come to us. When both of these come, the blended margin is much higher. Second is the rate of growth in SaaS as well as in program fees is going to be much, much higher, as I just told to another analyst is that the conglomerate accounts which we have started cracking have a huge potential of anywhere between INR 50 crores to INR 65 crores per conglomerate, okay? If we are able to get about 10, 15 corporates over the next 2, 3 years, you are talking about a INR 500 crores to INR 600 crores revenue coming from these conglomerates, okay, where the margins and these conglomerates operate more and more on the program and SaaS fee and less and less on the propel. So the way we are looking at it is that the propel margin has to go up, the revenue on the program fees and the SaaS fees has to go up. That is how we are [indiscernible]. So I'm saying that there is a maximum possible expansion of margin in Propel. Beyond that, it might not go. But on the program fees, the ability to grow is much higher. So how we look at it and why we are confident we have guided about 9% to 10% EBITDA margin for this year, and we had said that maybe 10% to 11% next year. So our range remains between 9% to 11% for this year and next year. But post that, there will be significant expansion as both these acquisitions which are in play would come into action and the blended margins would be much, much more higher. So if you remember, if you have tracked this for some time, you please look at our '22 margins, '22, we were at 16% EBITDA and from that 16% EBITDA is what we came down when we started investing heavily into the various kinds of other programs which we started to sell more and more, and there was a significant cost which we had to incur in developing Zoyer plus Propel also started expanding. So if you -- if I were to go back to those 2022 days, it is not very difficult for me to see that how we will achieve about 16% EBITDA. And that is our stated goal that we will reach about 15% to 16% EBITDA in next 3 to 4 years.

Sure. So just one addition to this, you must be tracking your intercharge fees EBITDA separately. Has it already reached to that 14%, 16% bracket that you are talking about?

In terms of if you could just repeat the question or rephrase it?

So what I'm saying is the intercharge EBITDA margin for your intercharge fees or program fees that you.

It is much higher. No, no, no, much, much higher, much, much higher.

Okay. Okay. Okay. So that is what is giving us confidence of kind of.

Absolutely. If you remove properly, it's much, much higher.

Okay. Okay. And the last question is, you have said that 2 [indiscernible] of acquisition -- I mean, 2 announcements which are the final stage of discussion. Can we expect the acquisition announcement to happen to this financial year?

This financial year may not be possible while we'll try our best. There are -- as I explained earlier also, there are various processes which we have to follow. So all those processes takes time. We are at advanced stage, may not be able to tell you exactly precisely that will we be able to do it within this quarter. But we are very, very hopeful that all the 3, actually, 2 are big ones, the third one is a smaller one that we should be able to complete all 3 in the next year. Before the next year ends, we should be able to close it.

The next question is from the line of Aman [indiscernible] from IWealth Management.

Congrats on a very good set of numbers. Sir, I wanted to understand on our program fees business. Sir, what I see is that you are consistently expanding your customer numbers quarter-on-quarter basis from past 4 quarters and your existing client GMV would also have been increasing. sir, why our program fees number has been flat from past 4 quarters? It has been in the similar range of INR 136 crores.

So I think there is a lot of seasonality, as I mentioned on the call as well. So looking at it from the comparing Q4 of a year with Q1, Q2 or even Q3 of the next year is not necessarily is a fair comparison. The other thing also, of course, is a lot of these contracts that we have signed are large enterprises. So these have their own gestation period to go live. And many of them, they go live, but they don't start the cards, for example, on the prepaid cards, the cards need to be, first of all, issued, then loaded and the whole training has to be done from the software and then the card usage starts, right? So we see that -- and a lot of the usage happens in the Q4. So we anticipate Q4 program fee numbers to be much more robust.

So Avinash, you are trying to say that the customers which you would have signed in the quarter of March '24 wouldn't have actually started contributing to you yet?

See, there is a lot of different behaviors. Many of them have started to contribute. Many of them can contribute a lot more. Some of them are in the process of contributing, right? Because you're talking of hundreds and hundreds of corporates here. So behavior will be different.

So what is an average gestation period to come live on your business?

Completely depends on the nature of the contract and whether they are taking only 1 solution, 2 solutions. We are also trying to now bundle solutions like I gave the example of Zepto, where they are both on Zoyer and Safe. It's very effective to try and sell both or all 3 solutions right at the time of sign up, right? So it's -- that's our endeavor now.

When we say about the seasonality, what is it exactly? Because when I see your program fees business and I divide it by 1.71%, which is generally your interchange income from the past 4 quarters, your GMV would have been at INR 8,000 crores, which is not growing. That means the spends are not growing at the customer end. Is it the right understanding?

No, it is not the right understanding because if you do 1.71%, that is what -- that is a blended rate which has come in, okay? So there will be spends which are happening at a lower interchange. There are spends which are happening at a higher interchange. So while our GMV has been constantly growing quarter-on-quarter, the blended margin, which comes in certain areas like on fuel, you have like a surcharge on fuel, okay? So if you look at the grocery, there is a less percentage which is there. like that, there are various categories, okay? Only the e-com category, which is higher is like you have about 2.2%, okay? So looking at that, what happens is it's not GMV, if you track on quarter-to-quarter basis is consistently and constantly growing. What the mixture which you are seeing is basis the spends happening on lower interchange category and the spends which are happening on higher interchange category. That blend which is coming looks like to you, it will look like as if the spends there is no growth in the GMV, whereas we are seeing very, very decent about 15% to 17% growth on a quarter-to-quarter basis.

I understand, sir. Sir, just a last question and a request from my side, sir, is it possible for you to share the profile and Zoyer contribution on the programming side because as an analyst, it's very hard to track how the growth is happening on the programming side because you see your profile revenue has been increasing on a very healthy pace, right? it is rightly possible that your profile program fees would have been increasing, but not [indiscernible].

On Propel, there is hardly any program fees is a limited part of on the Propel platform. And Propel points, there is [indiscernible] the margin is always a little bit here there. There is no -- on Propel points per se, we don't see that there is any deviation there, okay? But in terms of -- if you look at Safe as well as this, they have been growing very, very healthily. So both of the Safe as well as Zoyer, and we'll be very happy to share, please set up a call with us separately, and we'll be very happy to give you any detailed information which you may want to see.

The next question is from the line of Pratik from Bandhan Asset Management.

Sir, just one small question on your software side of the business. Look, the growth rates are quite muted. Are they tracking the number of corporates which you have onboarded or it's slightly lower? Can you just talk a bit about that?

So we are tracking, obviously, both the number of corporates as well as number of users. And the nature of SaaS businesses is that because we are dealing with enterprise and not SMBs, these are very sticky types of revenue, but their growth rates obviously will be -- will take longer for those to grow at a much faster pace than, say, program fees or Propel.

And just with the BOME product, which has been now live and you're onboarding quite a few of customers, will we see an inflection? I think that is what you were trying to hint on the software side of the business that in the next couple of quarters, we could see an inflection over there where the growth rates would be quite higher than what they are in the previous past?

Yes, absolutely, Pratik. We will definitely see that it will -- next 2 quarters, 3 quarters, there will be a marked improvement in terms of the -- specifically in terms of the software contracts. And all contracts which we have signed in the last 3, 4 quarters are also going live at a hectic pace. So overall, we see a huge positive in terms of next 2, 3 quarters.

Got it. And one last question. I think you called out other expense increases because of investments which you are doing. I would have thought the nature of your business such that the employee cost wouldn't have been major heads in which you will do investments, right, in terms of building out software, et cetera. So just curious why other expenses, what is this, which has led to this increase of INR 4 crores on a quarterly basis Q-o-Q?

So basically, Pratik, there were a couple of products which went live during the quarter, right? That requires one kind of -- and which can't be capitalized. There's an ad of expenses, which we need to put it every time whenever the new product launch happens. So especially in the Q3, we have launched fleet solutions with the couple of clients who also went live on that process. That requires an additional cost.

Understood. Understood. And given the healthy gross margins, which are there in the software side of the business and what we just discussed, next couple of quarters, we will see margin expansion happening, right? I mean just inferencing from what you said. Obviously, the other parts of the business, how they will shape up. But a lot of it of the software should slow down, right? That's a fair understanding.

Yes. The software literally almost everything flows down, and that's the intent that we expand on the margins. That's what is our continuous focus internally with all our teams. That's what we are pushing for, and that's the end.

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you all for participating in today's call. We hope we addressed all your queries and provided some valuable insights. We remain extremely optimistic and focused on the future growth of the company, and we are excited about the opportunities ahead. For any further information, we request you to get in touch with SGA, our Investor Relations adviser. Thank you, and have a great day and a great weekend. Thank you. Bye.

Thank you. On behalf of Zaggle Prepaid Ocean Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.