Zaggle stock shows resilience amid volatile market backed by acquisitions and partnerships

The stock of Zaggle Prepaid Ocean Services, which offers SaaS based employee spend management services to corporates, has gained 28% over the past month and51% over the past three months. The company has undertaken acquisitions and partnerships over the past few months, which are likely to boost future growth potential. Analysts have raised the EPS target by 5-8% over the next two years. The stock gained 2.3% on Thursday notwithstanding the weakness in the broader market, which pulled the benchmark indices down by 2%.

Incorporated in 2011, Zaggle offers solutions related to the management of business spends, rewards and incentives management for employees and channel partners, and customer engagement including gift card management. Its client base is spread across various sectors including banking, finance, manufacturing, healthcare, technology, consumer, and automobiles. Zaggle offers customisable platform depending on the client needs, which has kept the client retention rate high.

In September 2023, Zaggle had launched an IPO to raise Rs 563crore as a combination of Rs 392 crore in fresh issue and Rs 171 crore in offer for sale at a price of Rs 164 per share. The stock has given stellar return since then, trading above Rs 440 at present.A surge in Zaggle’s stock price over the past few months can be attributed to the improved growth potential owing to deal wins, partnerships, and stake purchases in other companies. It recently became a majority stake holder in Span Across IT Solutions, which provides tax filing solutions under the brand TaxSpanner. This would enable Zaggle to extend TDS/GST tax processing and payment services to corporates.Apart from this, a strategic alliance with Founderlink Technologies will help Zaggle to facilitate business loans to corporates, their vendors and channel partners through an online debt market place called Recur Club. It has also picked up a 26% stake in Mobileware Technologies, which offers UPI based services to banks.

“We believe these associations will help Zaggle enhance product offerings and thus provide more comprehensive solutions while generating fee income streams,” noted Equirus Securities in a report.

Zaggle reported a robust performance in the June 2024 quarter led by an increase in transaction volume and customer addition. Revenue grew by 113% year-on-year to Rs 252.2 crore while net profit jumped to Rs 16.7 crore from Rs 2 crore in the year-ago quarter. The operating margin before depreciation and amortisation (EBITDA margin) expanded by 220 basis points to 8.9%.

Given the recent developments, Equirus has raised EBITDA margin estimates for FY26 and FY27 by 40-70 basis points and net profit estimates by 4.5-8.5%. It has set a target price of Rs 595 valuing the stock at 46 times FY27 expected earnings.