SaaS-based fintech platform Zaggle Prepaid Ocean Services failed to attract great interest for its IPO even on the second day of bidding, September 15. The initial public offering was subscribed to just 43 percent, with it receiving bids for 82.98 lakh equity shares against the offered size of 1.93 crore shares.
Retail investors have provided good support to the offer, buying 1.9 times their reserved portion which is 10 percent of the IPO size.
However, the response from high net worth individuals (non-institutional investors) and qualified institutional buyers (QIB) was lukewarm, buying 29 percent and 0.02 percent of the portion set aside for them, which is 15 percent and 75 percent of the total offer size.
Even on the first day of bidding, i.e. September 14, the offer was subscribed to 19 percent.
The business spend management platform provider intends to raise Rs 563.38 crore via a maiden public issue that comprises a fresh issuance of shares worth Rs 392 crore, and an offer-for-sale (OFS) of 1.04 crore shares worth Rs 171.38 crore by selling shareholders including promoter Raj P Narayanam, and Avinash Ramesh Godkhindi, and corporate entity Zuzu Software Services.
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Of which, Rs 253 crore has already been raised by the company via anchor book on September 13, a day prior to the issue opening.
Global investors like Neuberger Berman, Morgan Stanley, Matthews Asia Funds, Eastspring Investments, Copthall Mauritius Investment, Societe Generale, Goldman Sachs, and domestic fund houses like Kotak MF, ICICI Prudential, LIC Mutual Fund, and Abakkus were participants in the anchor book.
The net fresh issue money will be spent on customer acquisition and retention, and the development of technology and products. Further, the repaying debts and general corporate expenses will also be done via fresh issue proceeds.
Also read: Zaggle Prepaid Ocean Services IPO: 10 things to know before subscribing to the Rs 563 crore issue
Zaggle, which is strategically positioned at the intersection of the SaaS and fintech ecosystems, has integrated a comprehensive array of features into a single platform, making it one of the most feature-rich solutions for customers. The company has shown tremendous growth in its topline, with operational revenue growing at a CAGR of 100.8 percent during FY20-FY23 due to the addition of new customers and an increase in user base from existing customers.
With the launch of its new platform ‘Zoyer’ and constant endeavour to increase its customer base, the company has a positive outlook, said Choice Broking which feels the issue seems to be aggressively priced and thus assigned a subscribe with caution rating to this issue.
However, profitability margins which showed an improvement in FY22 all showed a steep decline (of 715 bps on-year) in FY23. EBITDA margin and EBIT margin saw significant decreases in FY23 (743 bps and 799 bps, respectively).
Also read: Samhi Hotels IPO: Muted response seen on 2nd day of bidding, subscribed 12%
The company is bringing the issue at a price band of Rs 156-164 per share at P/E multiple of 87x on an issue FY23 basis.
Hem Securities assigned subscribe for a long-term rating on the issue launched by the company having a differentiated SaaS-based fintech platform, offering a combination of payment instruments, mobile applications and API integrations.
"The company’s in-house developed technology and strong network effect along with a business model with diverse sources of revenue and low customer acquisition and retention costs & diversified customer relationships across sectors along with preferred banking and merchant partnerships is looking a decent avenue to deploy the funds in," the brokerage said.
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