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

Ladies and gentlemen, good day, and welcome to Zaggle Prepaid Ocean Services Limited Q4 FY '25 Earnings Conference Call hosted by Equirus Securities. [Operator Instructions] Please note that this conference has been recorded. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Rohan Mandora from Equirus Securities. Thank you, and over to you, Mr. Rohan.

Thanks, Avinat. Good evening, everyone. Thank you for joining the call. I extend a warm welcome to everyone. On behalf of Equirus, I welcome the management of Zaggle Prepaid Ocean Services Limited to give a brief update on 4Q FY '25 results and address investor queries. We have with us from the management team, Dr. Raj Narayanam, Founder and Executive Chairman; Mr. Avinash Godkhindi, MD and CEO, and Mr. Aditya Kumar, CFO. We will now begin with a brief opening remarks from management, post which we can have Q&A. Thank you, and over to you, sir.

Thank you. Thank you, Rohan. A very good evening to everyone. Thank you for joining the earnings call for Zaggle Prepaid Ocean Services Limited for the fourth 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, MD and CEO; Mr. Aditya Kumar, CFO; and SGA, our Investor Relations adviser. The financial results, press release and 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 like to give you the Zaggle business update. FY '25 has been an outstandingly remarkable year for Zaggle as we achieved our highest ever annual performance. Talking about the quarterly performance, comparing Q4 FY '25 to Q4 FY '24, the company reported a very healthy growth in revenues at INR 411 crores, growing at around 51%. Our adjusted EBITDA increased to INR 38 crores, growing at about 40%. The PAT surged to INR 32 crores, growing significantly at 67%. Talking about the annual performance comparing FY '25 to FY '24, the company reported a healthy growth in revenues at INR 1,303 crores, growing at around 68%. Our adjusted EBITDA increased to INR 125 crores, growing at around 46%. But the beauty was the PAT surge to INR 88 crores, growing significantly at 99%, well above our earlier guidance. I would want to give you an overview of Zaggle's investments and acquisitions. Our inorganic growth rate is actually reflected a words of Salesforce CEO, Mark Benioff. When you combine 2 complete or more, you just don't get scale, you get a new story. Inorganic growth continues to be a key pillar of our growth strategy as we build a comprehensive booking of spend management solutions to further deliver value to our customers. During the year, we closed the acquisition of Tax Spanner, completed the strategic investment in Mobileware Technologies and have received Board approval for the strategic investment in EffiaSoft Pvt Ltd. These investments are helpful in enhancing our client servicing capabilities in tax, UPI and Payment Solutions segments. We see massive growth opportunities for Tax Spanner in FY '26 with one such promising opportunity in the gig worker ecosystem, where we have launched a solution called ZUGS, Z-U-G-S, Zaggle Unified Gig worker Savings. Nearly 20 million low-income blue collar workers in India face critical financial challenges. Despite having TDS deducted from their income, many do not file their income tax returns, preventing them from claiming tax refunds that could amount to nearly 2 weeks or more of earnings, a sizable amount for these blue collar workers. ZUGS, our comprehensive solution featuring our DIY journey with multilingual support to enable gig workers to claim their refunds in a seamless manner, while last year was a consolidation year for Tax Spanner, where we invested a lot of time, money, effort in the product the growth was a little bit subdued at about INR 3.35 crores. But this year, we look at a growth of about 60% to 70%, which we expect that we'll be able to do it with the relative ease. Mobileware estimated revenue grew from INR 17.06 crores in FY '24 to INR 33.89 crores in FY '25, representing a remarkable Y-o-Y growth of 98%. In FY '25, we signed marquee customers like IDFC Bank, Easebuzz, Catholic Syrian Bank and CAMSPay, amongst others. The largest growth contributor was the implementation of API banking layer in Suryoday Bank, allowing multiple merchants to take advantage of our UPI payment ecosystem. The stellar growth in FY '25 not only strengthens Mobileware's ability to onboard new banks in FY '26. It also enables Mobileware to command a higher price point, improving the overall financial metric fees. We continue to explore M&A opportunities in adjacent spaces in domestic and international markets, with a focus on opportunities in payment solution, loyalty management, merchant card software and so and so forth in the payments domain. We focus on targets that has stellar management teams, sound business help, are product accretive and easy to integrate across the Zaggle ecosystem to establish a strong strategic foundation that aligns with our long-term objective of scaling to INR 1 billion in annual revenue. I am happy to announce that we have also signed an MOU with Mesh Payments, a U.S.-based AI-powered travel and expense managing platform backed by a seemless technology exchange. This partnership not only reflects our offering to Indian customers looking to streamline and manage their global expenses. It also unlocks access to global go-to-market opportunities. while we continue to consolidate the market in India, this partnership gives a boost to our international expansion plans. Now I would like to give you the industry and Zaggle product update. Building on Steve Jobs' classic idea innovation distinguishes between the leader and a follower. We at Zaggle have reimagined the idea as AI-powered innovation, separating the disruptors from disrupted. We aim to fundamentally transform how businesses approach spends by becoming the default spend management infrastructure for companies and establishing ourselves as well as a truly SaaS company -- AI-powered SaaS company. We are transitioning from static rule-based systems to a dynamic intelligent context-based platform that continuously evolves and self optimizes over a period of time. We are seeing the emergence of model context protocol, MCP within the Agentic-AI. Agentic AI doesn't just support decisions but takes autonomous action and MCP is an open protocol that acts as a bridge between applications such as Zaggle and the large language models. MCP standardizes how agents would interact with other tools, data sets and associated environments within the Zaggle ecosystem, which would translate into a faster onboarding, accelerated revenue realization and a greater satisfaction and retention. We are implementing these AI workflows across our EMS, Zoyer, Propel offerings to keep delivering innovative solutions that set a new benchmark in the industry. Currently, in the pilot phase, Zaggle co-pilot would service an AI assistant, finance teams, streamlining workflows and enabling smarter, faster decision-making and reducing human interface. We are currently leveraging advanced conversational AI technologies to fundamentally reshape the way we engage with customers and users, delivering multi-label personalized and real-time interactions at scale. Looking ahead, our strategy is clear: focusing on intelligent automation, invest in product-led growth and scale responsibly. We are building capabilities for global enterprises while delivering long-term value to our stakeholders. Now I would like to give our guidance for FY '25, '26. Amid global geopolitical uncertainties and macroeconomic volatility we currently budget or stand-alone, and I repeat the stand-alone FY '26 revenue growth to range between 35% to 40%. Last year, FY '25, our guidance on stand-alone EBITDA margin was between 9% to 10%, and we are happy to announce that we are upping our guidance to 10% to 11% in the coming year in FY '26. Hopefully, our entire goal of achieving 12% to 15% EBITDA margin over the next 3, 4 years, you know, this year would be a deciding year for that goal to be achieved. I now hand over to our CEO, Mr. Avinash Godkhindi.

Thank you, Dr. Raj, for your remarks. This year has truly been a landmark year for Zaggle. Reflecting on our journey, I'm pleased to share that Zaggle now serves over 3,455 customers across diverse industries and sectors. We continue to maintain a churn rate which is below 1.5% highlighting the strong trust our customers place in us and the reliable value our platform consistently provides. Our growth engine remains strong and predictable. We are harnessing the power of AI to drive strong, scalable and sustainable growth to unlock new business opportunities. Our AI-led approach positions us to stay ahead of the curve and create long-term value across our core markets. Today, we are proud to report that we have over 3.8 million active users using Zaggle powered cards and platforms software. This isn't just a milestone. It's a clear validation of our platform model and execution. We've launched the new Zaggle app to simplify expense tracking, wallet management and incentive monitoring. Our goals are to scale, enhance customer engagement and increased automation positioning Zaggle to drive financial innovation in India and beyond. Coming to numbers. During this quarter, our SaaS platform fee contributed INR 9.3 crores, our program fees contributed INR 157 crores, and our Propel points contributed INR 245 crores. Not just that, we signed multiple marquee clients, including Indus Towers, Honasa Consumer which is Mamaearth, Forbes Marshal, Truecaller International, Aster DM Healthcare and many more expanding our client base. To elaborate further on how we are helping our clients. One of our clients were providing in-house meals to their employees while deducting the cost from their salaries during payroll. This client faced challenges with manual tracking and post month reconciliations, which made employees unhappy due to the directions being applied to their post-tax income. To resolve this, we implemented the Zaggle Save solution, which provided tax benefits for their employees and automated transactions, improving operational efficiency by implementing the need for reconciliations. As we continue to pursue our platform-based approach, we anticipate rapid growth driven by a strong pipeline of new client acquisitions and effective cross-selling strategies. In Q4, we were able to cross-sell to a number of clients, including Tech Mahindra, Neuroglia Health, PhysicsWallah , Zepto and Wonder Home Finance, amongst others. I'd like to touch upon a couple of these examples. Tech Mahindra is an existing customer for our Save Solution. We agonize the potential for further collaboration, and we successfully plugged in our ZatiX solution along with a corporate credit card to enable seamless payments with complete visibility. Likewise, for PhysicsWallah, which is an existing customer of our Save solution, we were able to extend the BROME Solution which is Branch Recurring Operating Monthly Expenses to streamline and manage their 850 branches across the country more effectively with complete visibility. During the quarter, we announced key collaborations. As a part of the ongoing growth strategy, we entered into strategic collaborations with GIFT City, where we are launching a co-branded prepaid citizen card designed to streamline payments and deliver seamless user experience across a range of services within the city. Additionally, we will implement a robust [ Whilter ] management software system aimed at enhancing administrative efficiency across the GIFT City's ecosystem. These initiatives position us as a key enabler of GIFT City's smart city vision which also is opening up long-term revenue opportunities through the recurring transitions and data-driven services -- service enhancements. We've also partnered with Thomas Cook with the aim of transforming the global travel experience, corporate travel accidents by leveling their comprehensive travel management expertise to complement our AI-driven expense solution. This will help us provide a seamless integrated offering for domestic and international corporate travel with streamlined workflows and complete visibility. We are also codeveloping an innovative employee benefit solutions with Smart Employee Purchase Program, Smart EPP in partnership with Redington Limited, which is in collaboration with Google. This offering will be a tailored solution for corporate clients of Zaggle, enhancing our value proposition in the employee engagement and benefits space. I'm also pleased to share with you that Zaggle has been impaneled by Bank of India as an authorized issuer of pre-paid cards, further strengthening our presence in the banking ecosystem and expanding our distribution network. Overall, as we build and scale Zaggle into a fully comprehensive Fintech platform I'm proud to share some key milestones this quarter. First, we received the PPAP approval from NPCI. This means we can now facilitate UPI-based payments directly through our app and our platform impacting and enabling over 3 million users across all our services. This is a truly significant step in our mission to create India's more seamless and integrated Fintech ecosystem. Secondly, I'm delighted to announce that we've been recognized with an industry accolade. Zaggle has been named Financial Institution of the Year at Franchise India's 5th Edition of Successprenuer Awards. This recognition again reflects the innovation impact and trust we continue to build across the ecosystem. As always, our focus remains clear to deliver a comprehensive offering in the spend management space, expanding our reach to new clients while increasing wallet share amongst existing ones. With every step, we move closer to becoming the platform of choice for companies across India. I now hand over to our CFO, Aditya, to take you through the financial update. Thank you.

Thank you, Avinash. Good evening, everyone, and thank you for joining today. I'm delighted to report that the company has delivered another quarter and year of strong performance with robust revenue growth coupled with margin expansion. I would like to give you an overview of our latest quarterly results first. In the Q4 FY '25, we saw a robust revenue growth of 51% Y-o-Y, reaching to INR 411 crores. This growth has seen across all revenue streams with the Propel platform raising up by 91% Y-o-Y, while program fees grew by 15% Y-o-Y. Other expenses increased primarily due to higher sales and marketing spend during the quarter. Employee costs remained stable on a sequential basis but increased Y-o-Y basis, driven by additional headcount to support business growth. This quarter also included certain transactional and legal expenses related to our inorganic expansion. Our adjusted EBITDA grew by 40%, reaching to INR 38 crores this quarter compared to INR 27 crores in the same period last year. The increase in depreciation expenses is primarily driven by product capitalization during the year, which includes our new office building as well. Our cash back, which includes net profit along with depreciation and ESOP expenses, saw an 86% increase Y-o-Y basis, totaling to INR 39 crores. Furthermore, our PAT rose by 67 percentage from the previous year reaching to INR 32 crores. For FY '25, our revenue from operations has increased by 68% Y-o-Y basis to INR 1303 crore. Our Propel platform saw an increase of 71% drive-over basis and our SaaS fee saw an increase of 12% Y-o-Y basis. We observed a 70% Y-o-Y increase in the interchange fee, which has become a significant contributor to over revenue. This growth is largely driven by performance of Zoyer and BROME Solutions, along with organic growth in the Save and Propel businesses. Additionally, there has been notable rise in credit card issuance during the -- under the Zoyer offering. Our adjusted EBITDA surged by 46%, reaching to INR 125 crores. PAT rose significantly totaling to INR 88 crores, which represents a 99% y-o-y increase. Additionally, our cash PAT experienced a substantial growth, increasing by 66 percentage to INR 111 crore. During FY '26, we anticipate recording ESOP expenses in the range of INR 9 crore to INR 10 crores. Our cash flow generation has improved significantly compared to last year. The cash flow from operations stood at INR 19.8 crores in FY '25 compared to negative number in FY '24. Our DS were improved from 82 days in last year to 60 days at the end of this year. With that, I would like to conclude my update, and we are happy to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of [ Soyam ] from Pinpointex Capital.

My question is related to our program fee growth. So as we know that one of our main focus is on the growth of our program fee. So is there any reason why suddenly growth has been at 15% around and what is your outlook going forward? Like how are we going to increase the transaction volume in this segment going further?

Thank you for your question, [ Soyam ]. So as you've seen in the year, we grew about 70% on program fees, right? I think you are looking on a quarter-on-quarter basis where we grew by about 15%. We've been focused on growing in a profitable way where we are able to increase our overall margins. And that has been the approach while working on improving our cash flow position. So we want to grow, of course, but we want to grow profitably, and we want to grow in a manner which allows us to improve our cash flows as well. So going forward also, we see very strong growth in program fees. And overall, we have given a guidance of 35% to 40%. And we see program fees also growing in line with the same assessment.

And my second question is on the Propel part. So the gross margin of Propel, which is almost 10% this quarter, assuming mainly due to the ORC, but if I look at that on the FY '25 basis, it's somewhere around 6%. So can you please elaborate like why are these margin this year are at these levels? And also like in previous investor meet, we were mentioning about acquisition of merchant platform. So can you briefly tell like how this is going to help us in this segment going forward to increase the margins?

So as explained in the last call as well, we were expecting the margins in Propel points to go up to 6%, and we were able to achieve that. Because of the ORCs, as you rightly pointed out. Margins as this business has grown, will stay in this range of 6% to 7% for the coming year as well and that's how we have estimated it. This is where the margins we anticipate to be on a stand-alone basis, of course, the acquisition would help as and when we are able to close that because that allows us to be able to actually start issuing the gift cards for various merchants and dip into commissions from the merchants for issuing those vouchers, which is a SaaS income as well as expanded margins through breakage, et cetera. So -- but right now, the guidance that I'm giving of 6% to 7% is on a standalone basis, assuming that the acquisition would happen as and when it happens.

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

Congratulations on a good set of numbers. This question was on the Mobileware acquisition. So this -- as far as I understand, this includes UPI payments for our platforms going ahead. So how is the revenue going to be recognized? And what is our take on it as in what would be the margin for this like integration of our products with the UPI platform?

So Mobileware is an investment. We have about 38% shareholding today there. And they have a very comprehensive, robust platform for a variety of NPCI technologies. Obviously, UPI being the first, but IMPS, APS, BBPS, et cetera. And they work with over 90 banks today. Obviously, post our investment, it's been a plus for them to be able to acquire these banks and other Fintechs. So from our perspective, we are today also acting as a customer of Mobileware where we are using their pipes to be able to connect to NPCI for both our PPAP and our BROME Solution, right? And that's how we look at it. But of course, we support the company through our relationship and our connections to be able to increase their business.

Okay. Second question, in terms of customer acquisition costs, what was the number this year for the entire financial year? And additionally, the cash sitting on our books, so forth, how are we going to deploy that over the current financial like FY '26? What plans do we have on that front?

So customer acquisition costs, it's around INR 360 crores, which we have spent in the current year. The cash sitting on the bank account side will be used for a regular working capital requirements which needs to be regularly invested on the product optimization and all other stuff. But otherwise, the money what we had in terms of raised from QIP that will be placed towards the respective objects, mainly towards investment activity.

Acquisition.

The next question is from the line of Jalaj Manocha from Swan Investments.

So Avinash, so drilling a little deeper. So specifically on the platform -- sorry, on the -- for the program fees. So you said that we are looking for a profitable business. So does that mean that we are saying no to a few transactions or some sort of business so as to ensure the profitability? And on what parameters is exactly the decision or what is deciding? Because I thought that it be standard margin product which is being sold right now. Could you talk a little bit?

Yes, yes. So look at it in conjunction with the incentives that we gave and incentives we give to both users in Propel and Save as well as incentives that we give at times to corporates in Zoyer for the growth, which has gone up from INR 137 crores to INR 157.1 crores in program fees, our incentives on the other hand, has come down from INR 110 crores to INR 108 crores, right? So while the program fees has gone up by INR 20 crores for the -- I'm doing a Q-on-Q comparison here, Q4 FY '24 to Q4 FY '25. The incentive number has actually gone down. So that is what I was trying to allude to, and thank you for your question because you see the top line as well and the costs have come down, right?

Okay. Okay. And then specifically on the program fees or Intercharge, how is the traction specifically on the Zoyer cards because as per our understanding or whatever discussion we got that the product was a superstar product and should have started to see a lot more traction. So are we seeing that how far are we from that inflection point in the product? What sort of traction are we seeing right now?

Traction is very good. Traction is very good, and we are continuing to grow there. The whole idea is to be able to, as I mentioned, optimize on profitability, optimize on cash flow while we grow, right? There's no point in our view to grow blindly without looking at these 2 other factors. And that's why we are trying to balance it out.

Okay. And anything specifically, is there a pressure on the year or the take rates are different on a Zoyer product versus the Save or the [indiscernible] product per se? Is that the reason why the growth isn't as quick as we were expecting because ideally if the products were so great that Y-o-Y I see specifically for this quarter is just a 15% growth. Is this something...

No, the take rates are not too different. They're all in the same range, in the range of about to 1.7% to 1.75%. And the idea is, again, I'm repeating myself that -- the whole idea is not to just grow but also to grow with better margins. We could have probably shown you much higher growth than that 15%, maybe we could have grown at 30% or 40%, if we had given more incentives, right? We wanted to control the incentives and build that discipline in the market because we're not building for 1 quarter or 1 results. We are wanting to build that discipline and improve our incentive position over time for the coming quarters and coming years as well.

Sure. Okay. So could you talk a little about the quick commerce deal. We had talked about, I guess, that was for the Zoyer again. How is that shaping up? And how is the -- how that -- what sort of traction are you seeing there?

Again, in each of these cases, there are multiple of these quick commerce deals that we've done in the BigBasket, Zepto, Blinkit, et cetera. And each one of them is shaping up well. traction is good, and we are now juxtaposing that with our ZUGS platform, Zaggle Unified Gig worker Savings. And that would then again further deepen our penetration with these companies and enhance the value proposition with these companies.

Does it typically take a lot of quarters or a few quarters to scale up the business while you onward a client? Because again, so just on an absolute terms, program fees should have scaled up because these are usually larger clients having huge expenses per store, I guess, a few crores should come in. So that obviously revenue will not flow but take rate even if you put in. So a sensible amount of revenue should have started to flow from them. So does it take a few quarters to scale up?

Yes, it takes a few quarters to scale up because there is an adoption, there is education, you need to make sure that you're doing it in a manner which is giving the confidence to the CFO and her team that they have control on the spend. So you're talking about large enterprises and hundreds of crores of spends. So each company has their own pace that they want to roll it out.

Okay. Okay. So how far are we from that inflection point or broadly in those accounts or for these larger accounts?

So [indiscernible] -- so in 3 of these larger accounts, we are live, and then there are like about 4 or so, which are -- which would go live in, let's say, anywhere between 4 to 6 months. okay? And once you have gone live, then the adoption starts, so you go live with, let's say, maybe 100 branches, then you expand it to maybe 500 branches, see this system stability, et cetera, and figure out that, okay, what are the various kinds of issues are there for that particular enterprise, solve them and then scale them to which ever -- however many stores. So post that initial setup of that 300 to 500 stores, then you are able to expand it to even to 3,000-odd stores. Okay. So that is how this entire thing functions. So from signing of the contract, typically, you will take anywhere between 4 to 6 months to go live in a very, very large account. Did that answer your question?

Yes. This is Debashish Mazumdar with Jalaj. So just a small follow-up with the question that Jalaj was asking. So it's fair to assume that then this quarter is a kind of transition quarter for us where because of the large size account visibility that we have we are kind of sacrificing growth for those accounts where profitability is low. And that's why this quarter, there is a lower growth in the program and going forward we will see much traction there ?

So see, let's not oversimplify it, okay, because there is no, what you call, a clear-cut formula for this. So I would say that the growth has been healthy, okay, over last year on a Q-for-Q account, what happens is this is Q4, Q4's biggest -- like last year, Q4 was a bumper, bumper year, and it has grown by another 15% over the Q4 of last year. What we see is that as we sign up more and more clients, overall, the pace of if you see Q4 of FY '26, you would see much, much more larger revenue increase over this quarter, the last Q4 of FY '25. So can't say transition, but it is constantly improving the growth is how you would be able to see it.

Got it. And one last question, maybe quickly on the margins. So did we close the...

Sorry to interrupt. May we request that you return to the question for follow-up questions as there are several participants waiting for their turn. The next question is from the line of Prateek Poddar from Bandhan AMC.

Sir, 3 questions. One is on a sequential basis, I see a very sharp increase in other expenses. So maybe you can help me understand what has happened over there. The other is when I look at your cash flow statements, there is something called other current assets where a substantial amount of cash has been blocked close to INR 40-odd crores. So you can help me understand what is that? That's second. And lastly, I see CapEx which is pretty high. Maybe you can just break that down between product development and other CapEx, whatever you would have done? So 3 sets of questions.

So the other expenses sharp increase is on account of the business promotion advertisement expenditure, which we have done in this quarter. we did multiple conferences and all other stuff. That's one. And second is also increase on account of the network charges and the switch cost what we have to bear when we have to debate with any of these clients. So this typically comes when new client addition happens and all of those things. As a percentage of revenue, if you see, it will be the standard thing. And moving on to the CapEx item. So in the current year, if you see, we have launched 2 to 3 new products like ZatiX and fleet solution and [ Zip ] et cetera, which has been is in the stage of under development stage that has been capitalized and moved to the intangible asset stage. And when it comes to the PPE, the new office building, which we have shifted it, that is the standard increase. So third one on the other assets. Other assets, typically, this was explained earlier also. So it includes you of 2 components. One is the virtual stock, which we maintain on every monthly basis in order to maintain demand of the customers and clients. And second is the preloaded cards. So these 2 put together, we have close to around INR 152 crores. And rest of the balance of 16 -- total other current assets is around INR 170 crores what you see in the balance sheet. These 2 put together as the INR 152 crores and balance, INR 14 crores, INR 15 crores are the reconciliation shipment, which we do with the pool accounts. Out of this INR 152 crores, around INR 60 crores pertains to the gift voucher stock and around INR 90 crores pertains to the preloaded cards. So why this number is higher is because on account of 2 reasons. One, the business has increased significantly compared to last year and now. And second, if you see in the March, especially what happened is 29, 30, 31 are the holidays, 31 is on account of Eid, it's an holiday. So where we have received the orders from the clients, but fulfillment was not done. So what happens in order to meet the demand on the timely demand and meet the SLAs with the clients, we have to load the cards upfront and deliver to them at a later point of time as soon as we receive the orders. Since 3 days of the holidays where we received the orders and fulfillment was not able to being done because of the holiday structure. So these are the reasons.

No, this is very helpful. And lastly, just on the trajectory of other expenses. Is this the new normal we should think about because other expenses generally are rising faster than, let's say, our sales growth obviously on a low base, but is that something which will happen next year also?

So I can't comment as of now, Prateek, but this is like one of the activities. But typically, as a percentage of revenue, it will be in the range of 1, 2 percentage on these specific items, which we book other than the employee cost?

Got it. And lastly, just wanted to confirm. Look, next year, I think you're guiding for 35%, 40% growth with some margin expansion. And given that we've had some years of hyper growth, this 35%, 40% should result in now a decent cash flow attrition, right? We would not get into a situation where there is negative OCF. Obviously, this year, you've generated some OCF though very small as a percentage of what the EBITDA is. But the EBITDA to OCF conversion next year should improve. That's a fair understanding, right?

So definitely, yes Prateek, it will improve because like last time, last year, it was much, much negative. And as we promised to the wider investors, et cetera. So we have in even in the current year. So the idea is to focus on this much more and be capital efficient and OCF to EBITDA also will increase gradually. So we are, in fact, one of the past of what we did, if you see is our DSO days, right? So which used to be 82 but has come down to 60. So we potentially go ahead and reduce that further. That's where the focus will be as well as that gets reduced, the automatically the cash flows return positive.

And maybe some guidance maybe not today, but in future calls on conversion from EBITDA to OCF helps a lot. So that's 1 suggestion I would leave you guys with, but otherwise, thanks so much for this.

Definitely. Thanks Prateek.

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

My first question is on the EBITDA margin. So if we see your Propel margin increases...

So can you be pleased louder, can't hear you.

Yes. So my first question was on EBITDA margin. So we can see your Propel margins going up to 10% this quarter versus 3Q but we can't see the overall EBITDA margins moving up in that direction. So from 3.3% something percent to 10% is the margin, which we see in Propel, but EBITDA margin is flat. So can you throw some light why this did not flow through?

So we explained this last time as well. The Propel margins were supposed to expand in any case because of the overriding commissions that were due for the sales that we generated through the first 9 months. So that has flown through now Overall, if you look at it, our margin guidance was 9% to 10%, and we are at about 9.6% for the year. And next year, our guidance is for 10% to 11%, and we will look to meet that. If you look at Q4 of last year as well, Q4 is a high-growth quarter for us, but margins are generally a little compressed in Q4 because a lot of the corporates also meet their spend thresholds in Zoyer, et cetera. And they tend to get some of their commissions, et cetera, from us, incentives from us. So this is the nature of our business, that you know, Q4 does tend to have much higher growth with a slightly compressed margin profile.

And these expenses, we cannot even this out over the course of the year. So with the 4Q lumpiness I mean by way of accounting, it is required or can we do some provision in earlier quarters for these expenses? Is that not possible?

It's hard because we don't know who will cross what -- what hit what thresholds. Just the same way as we are not allowed to take revenues in earlier quarters because we are also not able to prove to the auditors that we will cross those thresholds in Propel points. That's the nature of this whole piece.

Okay. Understood. And secondly, sir, on BROME, if you can highlight what in terms of [ BMV, ] what we have achieved or in terms of revenue gross or net revenue, that would be great?

Overall, on BROME, we have grown very significantly in terms of number of clients, which have gone live and where we have signed up. It's a little too early for us to give you more data specifically in BROME, which is part of Zoyer as to how much we have done in terms of revenues, et cetera.

So do you have any sense on -- I mean, directionally by when you see that to be a significant chunk of the business and you start giving numbers on that?

So it will always be part of Zoyer, but specific numbers, probably we'll give some time in this year depending on how numbers pan out and how it is. But you will see in our business more and more as we push for cross-sell that a lot of these numbers are going to be intertwined. The whole idea is to capture all the spend of the corporate. While we explain the solution to you as a separate use case. When the team goes and sells to the corporate, it's the -- thesis is all about trying to give you a comprehensive spend management solution, right?

Okay. Then last question if I...

Sorry to interrupt, maybe -- the next question is from the line of Rohan Nagpal from Helios Capital.

So since you've booked overriding commissions in Q4, the actual growth that we're seeing in the underlying volumes is a little hard to gauge. Could you give some sense of how much growth we are seeing in the underlying Propel volumes ex of the overriding commissions level booked this quarter?

See, the volume growth is what it is. We've told you it has grown from INR 128 crores in Q4 FY '24 to INR 245 crores. Of course, the margin gets added to that. So largely, the growth is pretty strong. It's just that the ORCs come in, in the last quarter.

The next question is from the line of from Parikshit Kabra from Pkeday Advisors LLP.

Just want to clarify, the fourth question that was about program fees growth guidance for next year. I think, Avinash said that it will go in line with the overall guidance. So that implies that program fees will also be about 30%, 35% for this year. Is that a fair understanding?

Yes, 35%, 40% is what we have projected as our overall growth and program fees should also grow in line with that.

Okay. Perfect. And will this be front-loaded, back-loaded? Anything along those lines, same thing for, by the way, for EBITDA guidance. Are we expecting it to gradually ramp up? Or are we expecting it to come from Q1 itself?

See, all of it will gradually ramp up because the nature of our business is also such that Q1, Q2 generally are lesser in terms of revenue. Q3, Q4 are higher contribution. So historically, it used to be a 65%, 35%, now it's gone down to about 57%, 58% -- 42%, 43% type of a number. With Zoyer's increased contribution, but there is always a skew towards Q2.

Got it. But from a year-on-year growth perspective when I compare Q1 to Q1, Q2 to Q2, I'm talking on that perspective, should I not be seeing 30% to 35% growth from Q1? Or because then it would imply then that for the year-on-year guidance to be met that in Q3, Q4, you will be giving upwards to 40, 50?

Yes, it's pretty much like that. You should see growth because Q1 of last year was also a lower number, I think, INR 118 crores for program fees. So you'll see that number pan out at that 30%, 35% range.

Okay. Got it. Perfect. And sir, my second question is from a -- sorry, the [ GTV ] perspective, from the gross transaction value, is it possible for you to start disclosing some of our program fee, what is the gross transaction value you're seeing because over the last year, we have added so many clients, but the program fees have not grown as much. So -- and the take rate has also not changed as your previous response. So that means that GTV has not managed to grow. Is that correct?

Well, the GTV has grown. It's grown fairly well because if you look at it, the whole year, the program fees, sir has grown by 70%, right? And it's not at a small way, the base last year also was INR 322 crores. And on that, we have grown by 70%. So I think somewhere maybe we had -- we want to highlight this that overall, you should look at the year's numbers and how the number growth has been. And overall, the number has grown very healthily at 70%.

[Operator Instructions] The next question is from the line of Ankush Agrawal from Surge Capital.

My first question is a bit on change in commentary. So the last quarter, the commentary was more around that we are more focused on growth because the opportunities so you and even if that sort of keep some margins subdued in the near term, we are fine with it? Whereas in this quarter, we have been talking a lot more about margins and better cash flows. And that reflects on your guidance as well wherein you expect margins to improve in the coming year. So I wanted to understand what has led to this change, wherein earlier, the guidance and was more growth focused and now just more balanced growth perspective? Has something changed?

So nothing has changed sir. If you look at last year, when we came in March of 2024, we said we possibly will grow by 45% to 50%, okay? And we ended up growing by about 68%. So the whole idea this year is that while we look at growth, we also look at improving our margins and the improvement in margin is a part of the long-term objective which is that we have to take it to about 15%, 16% over the next 3 to 4 years. Okay, while the margin expansion will come, it will also come at scale okay? The stage we have to achieve will come only by having a little bit aggressive growth plan. What we are referring to 35%, 40% is, please see it is on a INR 1,300 crores base. Last year, the base was INR 775 crores. Previous to that year was INR 553 crores. So look at it if we are saying this year that we are growing at about 40%, that is about INR 1,800 crore plus. You compare that 2 years back, we were at INR 553 crores. And today -- next year, we would be at about INR 1,800 crores. So that is like 3x jump in about span of 3 years, okay? So -- and at every base we were growing, the idea is not to let the growth slowdown, but idea is to improve margins while we improve growth.

Got it. Got it. The second question, sir, is around the M&A. So it has almost been a year or so where wherein we have been talking about doing some major M&A. It's almost been about 5, 6 months since we have raised a substantial amount of capital as well. So just trying to understand like what is happening over here like have we sort of pinpointed some M&A and the due diligence expenses taking a long time or we are still figuring out which company to acquire because the time line between capital raise and not being able to acquire itself has been like 6, 7 months now. So if you can share some insights like is the due diligence taking time or you're not able to figure out the right M&A like what is happening there, it could help?

Sure, sure. Very good question, and I'll answer it in detail for you. See, when we raised the money that was like end of December. Okay. And since January, in fact, and we had started looking at multiple companies, we are in very advanced age. But even when I say very advanced stage between the closure and very advanced stage, it could be a quarter, okay? And these are like -- these are like a little bit large acquisitions with multiple investors on the other side. And there has to be -- and also the due diligence typically it takes about 3 to 4 months because there is FDD, which is financial due diligence, then tax due diligence and then legal due diligence and then the final terms which we have to agree with the acquiree company. Okay. So what's happening is that we have set up about 7 to 9 players and there is a lot of amount and time and effort which goes from management side as well when we are looking at these companies, though we have a dedicated set of team, which is looking at it, but the management time also goes in. So what we have done is -- and in spite of coming very, very, very close, sometimes it just stretches at the last moment. Okay. And that stretch is what we have seen in 1 or 2 cases but we should be able to very soon tell you as to what's the status on all these acquisitions.

So the take away would be that we have figured out what we want to acquire. It's just that the due diligence and the overall process is taking time, but we have figured out what we want to...

100%, and we wouldn't raise money or we would not go ahead and dilute ourselves if we had not a clear cut process on home to acquire.

The next question is from the line of Deepak Poddar from Sapphire Capital.

So just a couple of clarification first up. And what was the Tax Spanner revenue for FY '25?

So FY '25, it was about INR 3.35 crores.

INR 3.35 crores Okay, understood. And in terms of -- I think you mentioned something, a 6% to 7% stand-alone, so what was you were referring to and some outlook is shared on 6% to 7%...

No, no, 60% to 70% growth.

So it was not in context of Tax Spanner, but on -- but stand-alone basis, you were saying something 6% to 7%. Just wanted that.

So 6% to 7% is the Propel margins, Propel margins would be about 6% to 7% range is what we are seeing on a stand-alone basis.

Understood. Fair enough. And just, sir, my first question is in terms of acquisition, whatever we are targeting? Are we looking at them as a margin accretive one, I mean, how should one look at?

So the majority of them, I would say 95% of them would be margin accretive, but 1 of it could be product accretive as well.

Fair enough. That's very clear. And when we say 30% to 40% outlook in terms of growth, are we being conservative there?

Sir, if we say so yes, 35% to 40% is what we have projected. Let's look at it how the year goes by and let's also see how the market shapes up. And right now, this is what we have a very clear cut plan to achieve this. But maybe in coming quarters, we would be able to give you a better guidance.

Okay. Understood. And just last thing, in terms of margins, you mentioned we are looking at 15% to 16% in next 4 years, 3 to 4 years. So per annum, I mean, 100 basis points is what we are looking at, I mean, internally in terms of improvement?

Yes, that's a smart assessment. That is what is our thought. So this currently, we are looking at 10% to 11%, okay? And as we go on, every year, we would look at improving the margin.

By 100 basis points?

Yes, could be. It depends next year, I'll be able to tell you about next year is how it goes.

The next question is from the line of Rohan Nagpal from Helios Capital.

I just have a follow-up. So I'm saying if there is -- if there are overriding commissions that have been booked this quarter, then the revenue that you book under Propel will be the Propel revenue from your gift cards that you have sold plus the overriding, right?

Yes. Yes.

Yes. So I'm just trying to understand that -- so that doesn't really give us a picture of what the underlying growth rate is within the Propel business because the override commission has been starting that growth rate. So could you give us a sense of what the underlying growth rate is within Propel?

Excluding versus Rohan, it is 78% is on a Y-o-Y quarterly basis.

The next question is from the line of Rahul Rajani from MIPL Family office. Sorry to interrupt, you have the turbine from here. Could you please connect?

Yes. Yes. Can you hear me?

Yes, go ahead.

Congratulations to the management for the great results. Wanted to just have one update that is in the last conference call, you had mentioned that you had signed a contract with 1 of the largest retail chains in India, which is one of the largest conglomerates. So how is that shaping up? How is that going about and when we can see the revenues kicking in for that?

So yes, as we explained, thank you for your question, as we explained, these large ones take a while to go live. And in this case, the POC was successful, and we have gone lab you would understand that scale up when you're talking about thousands and tens of thousands of branches has its own gestation period. And that's what we are seeing. Revenues have started to come through. but it would take us a little while for us to be able to really see very significant revenues. Also, please note that right now, the base of revenues that we are looking at is INR 1302 crores to INR 1303 crores, right? So it has to be significant with that base. And that's a little while away yes.

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

Circling back on the guidance. So you're saying that stand-alone guidance will be around 35% to 30%, which I'm presuming will be a conservative estimate right now. But apart from that, from the acquisitions and the acquisition that we're projecting to come forward in the next quarter, obviously, that will also add to the revenue. So the overall consol guidance, can you give the number, if possible?

See if all of them come before September, then Devesh we should be at about 80-odd percent as growth. Okay. So stand-alone is what we have said, 35% to 40%. Consolidated, if we get all the acquisitions which we have planned, we are able to complete before September, then we will be able to take the whole year and it would be about roughly in the range of another 40%, it should easily add.

Okay. Okay. And one last question. So normally, given our platform is a SaaS platform. So we have clients that are recurrently using our platform on a monthly basis. So is there a possibility that you could give a monthly recurring revenue number that we are at right now because, obviously, it is always going to grow going forward, unless we have clients exiting. So that would be a fairer assessment of how things are shaping up on a stand-alone basis for the overall company?

Sure. We will look at that and come back.

Due to time constraints, this was the last question. I would now like to hand the conference over to the management for closing comments.

So thank you all for participating in today's call. We hope we have addressed all your queries and provided valuable insights. We remain 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 good night.

Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.