Zaggle Prepaid Ocean IPO booked 31% on day 2 so far; retail portion fully subscribed

The Rs 563.38-crore initial public offering (IPO) of Zaggle Prepaid Ocean Services continued to witness a muted response from the investors during the second day of the bidding process. Zaggle Prepaid Ocean Services is selling its shares in the range of Rs 156-164 apiece during the three-day bidding process and investors can make a bid of a minimum 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 24,25,590 equity shares, or merely 13 per cent, compared to the 1,93,26,761 equity shares offered for the subscription by 12.45 pm on Friday, September 15. The three-day bidding for the issue will conclude for bidding on Monday, September 18.

The allocation for retail investors was booked 1.38 while the portion for non-institutional investors saw a subscription of 19 per cent. However, the portion reserved for qualified institutional bidders (QIBs) was not even off the mark at 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.

Zaggle  is bringing the issue at a P/E of 87 times on post issue FY23 basis. The company has differentiated SaaS-based fintech platforms, offering a combination of payment instruments, mobile application and API integrations, said Hem Securities with a 'subscribe' rating on the issue.

"Company’s in-house developed technology and strong network effect along with 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," it added.

Ahead of its IPO, 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.

"Zaggle has demonstrated growth at a CAGR of approximately 51.9 per cent during the three years- FY 21-23, driven by increased usage of digital modes of payment in India. If we attribute FY23 earnings to the post-IPO fully diluted paid-up equity capital of the company, the asking price is at a P/E of 66.7 times and we believe it to be priced aggressively," said StoxBox with an 'avoid' rating.

India has the fastest-growing digital payments industry in the world and India’s fintech ecosystem has grown rapidly. Zaggle’s diversified customer relationships across sectors, In-house developed technology, strong network effect, strong customer retention capability, and diversified revenue streams, portrays strong growth prospects, said Hensex Securities with 'subscribe' tag.

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.

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