The Rs 563.38-crore initial public offering (IPO) of Zaggle Prepaid Ocean Services managed to sail through during the third and final day of the bidding process. The issue was booked 20 per cent on day one, while it was overall subscribed 44 per cent at the end day two of bidding.
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Zaggle Prepaid Ocean Services offered its shares in the price band of Rs 156-164 apiece during the three-day bidding process, with a lot size of 90 equity shares and its multiples thereafter. The issue includes a sale of fresh equity shares worth Rs 392 crore, while an offer-for sale (OFS) of up to 1.05 crore equity shares worth Rs 171.38 crore.
According to the data, the investors made bids for 2,28,26,880 equity shares, or 1.18 times, compared to the 1,93,26,761 equity shares offered for the subscription by 12.45 pm on Monday, September 18. The three-day bidding opened on Thursday, September 14 and will conclude on Monday, September 18.
The allocation for retail investors was booked 3.50 times while the portion for non-institutional investors saw a subscription of 1.79 times. However, the portion reserved for qualified institutional bidders (QIBs) was booked only merely 9 per cent as of the same time.
Incorporated in 2011, Zaggle Prepaid Ocean Services provides financial technology (fintech) products and services to manage corporate business expenses through automated and innovative workflows. As of FY 2023, it had seven offices across India, more than 1,750 customers, and over 1.7 million end users.
Brokerage firms are not very positive on the issue and have flagged the aggressive valuations and highly competitive nature of the business as the key risks and . Also, over dependence on select clients and inability to attract new customers may dampen the prospects further, they said. However, some have suggested to bid for the issue with a word of caution.
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Considering the P/E valuation, on the upper end of the price band of Rs 164, the stock is priced at pre issue P/E of 70.32 times on FY23 EPS of Rs.2.33. Post issue, the stock is priced at a P/E of 87.44 times on its EPS of Rs 1.88. It has created a market niche in India by offering a combined solution for spend management through prepaid cards and employee management, said SMC Global.
“However, a substantial portion of Zaggle’s revenue is generated by Program Fees through the arrangements with its banking partners. Also the company is dependent on third-party payment networks to operate its prepaid card business. Besides, the high operating cost has also led to decline in the EBITDAmargin of the company. A high risk appetite investors may opt for the issue,” it added.
Zaggle Prepaid Ocean Services the company undertook a pre-IPO placement of 44.51 lakh equity shares at a price of Rs 164 per shares aggregating to Rs 73 crore on August 16 and a similar placement of 15.24 lakh equity shares at same price amounting to Rs 25 crore on August 21. This has reduced the size of fresh issues in the offering.
The company experienced negative operating cash flows in the financial year 2023 and had a negative net worth in FY22 and FY21. This factor could make getting future financing difficult or expensive for the firm. Looking at all the factors the investment in the company may be avoided and one can look for a further conducive environment to investment for better returns, said Sushil Finance.
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ICICI Securities, Equirus Capital, IIFL Securities and JM Financial are the book-running managers to the issue, while Kfin Technologies has been appointed as the registrar to the issue. Shares of the company are likely to be listed on both BSE and NSE.
