Zaggle Prepaid To Meet 16% Margin Target In Next Four Years: CEO Godkhindi

Zaggle Prepaid Ocean Services Ltd. expects to achieve its margin guidance of 15-16% over the next four years despite a dip in Q3 of FY25.

Speaking to NDTV Profit, Zaggle’s Managing Director and Chief Executive Officer (CEO) Avinash Godkhindi said that the company is confident of achieving the guidance with an enhanced focus on margin improvements in the upcoming quarters.

"We've given guidance that in the next 3 to 4 years, we will be in the range of 15% to 16%. That's something that we've already given guidance on, and obviously, it's not going to be a steep step up one day overnight. It's going to be a gradual ramp-up," he told NDTV Profit in an interview. 

Zaggle Prepaid saw its adjusted Ebitda margins slip to 9.4% in Q3 of the ongoing fiscal in comparison to the 11.5% in the year-ago period. The company said its margins were hit in the quarter under review due to rising employee costs. 

Avinash Godkhindi stressed that the company has historically seen higher margins in the business and the recent drop is not a cause for concern. 

"It's just that in the last two or three years, we've focused a lot on growth. Cash flow has been a focus, and we've gone cash flow positive this year. In the last couple of years in our entire journey of about 13 and a half to 14 years, we were always cash flow positive. A couple of years ago we invested more post-IPO, and cash flows went negative, and we are back to positive cash flows now. So, same with margins; it has taken a little bit of a dip in the last few quarters, and we will come back," he said.

Godkhindi mentioned that margins also suffered due to a higher depreciation cost brought in by an office space purchased by the company in Hyderabad. He believed the office space acquisition would help the company tap into the growth opportunities.

"We had multiple offices in Hyderabad, and we needed to consolidate that, and that's an asset that we've acquired. So that's something which we believe is a big positive for the business, and it's going to help our business grow much faster, and for collaboration to be much better among teams," Avinash Godkhindi added. 

Asked if incentives and cashback for customer acquisition also brought the margins down, the Zaggle Prepaid CEO said, "The incentives and cashback, the growth is in line with revenue. It's not that the percentage of incentives and cashback have materially increased. It's just that revenues have grown, and cashback has also grown."

Zaggle Prepaid’s revenue jumped 68.9% year-on-year to ₹336.4 crore during the December quarter against  ₹199.5 crore seen in Q3 FY24. Net profit for Q3FY25 stood at Rs 19.74 crore from Rs 15.22 crore seen in the year-ago period, marking a 29.7% YoY rise. 

Shares Of Zaggle Prepaid Ocean Services Ltd. were locked in 5% lower circuit as of 1:56 p.m., in comparison to the benchmark Nifty 50's decline of 0.26% at 23,026.55 points.