Fintech company Zaggle Prepaid Ocean Services Ltd is planning to enter the merchant card network sector through an acquisition and is currently in discussions with a potential target, according to managing director and CEO Avinash Godkhindi. This acquisition aims to enhance the company’s reach and strengthen its relationships with existing merchant partners. Although the Hyderabad-based firm has established a solid presence in the corporate sector, enabling it to create a robust ecosystem of employees, channel partners, and vendors, it lacks sufficient merchant partnerships. “We have over 300 merchant partners, but we don’t have a software that integrates with their systems,” Godkhindi stated in an interview.
Zaggle is still in the due diligence stage regarding the potential acquisition and has not disclosed the name of the company involved in the discussions. If the acquisition proceeds, it will enable Zaggle to issue prepaid cards and loyalty points directly linked to the billing systems of its merchant partners. “With billing system integrations, we can access stock-keeping unit level data, allowing Zaggle to leverage that data and insights more effectively,” he explained.
In December, the company raised ₹595 crore through a qualified institutional placement, which will be used to finance the acquisitions. Zaggle reported a 69% year-on-year revenue increase for the quarter ending December 31, reaching ₹336.4 crore, while net profit rose to ₹20.2 crore, a 33% increase compared to the same period last year. However, net profit was down 3% sequentially due to rising operating costs, leading to a decline in the stock price. The company’s shares were locked in a 10% lower circuit, closing at ₹424.05 on the National Stock Exchange on Monday.
Zaggle is in talks with five entities and plans to proceed with the acquisition of two or three of them in the coming quarters. “Our goal is to pursue EBITDA-accretive acquisitions, focusing on tech-driven or tech-enabled companies,” Godkhindi noted. EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, is a crucial indicator of a company’s profitability.
The company intends to continue investing in technology for organic growth while remaining open to separate acquisitions where they see potential capabilities to acquire. Zaggle has identified opportunities for expansion into other geographies but has yet to take action due to uncertain policymaking in the US. The company had considered expanding into the US about eight months ago but decided to postpone those plans in light of the upcoming presidential election.
