Zaggle Crashes Despite Strong Growth; What Is The Market Worried About? | Business News | ET Now

Added: 2026-05-15

[00:00:00]In fact, uh one of the stocks which has been in focus since yesterday has been Zaggel on the back of those numbers that it declared. Really, the concerns are just a couple of concerns. The growth has been extremely strong. They've beaten the growth guidance. But, in terms of cash flow uh and cash flow especially from uh getting blocked in receivables and working capital items of around 150 odd crore, that is where the drag seems to be. And that's where probably investors are also a little bit worried. Mind you, it did a positive cash flow from operations in FY25, FY26, we've continued to see a drag. Let me bring on board Raj P.

[00:00:38]Narayanan, founder and executive chairman at Zaggel to discuss exactly that. Uh great having you, Mr. Narayanan. Let me first start off by asking you, what's your assessment of the concern? Is it just cash flow driven or there's something else which investors are worried about?

[00:00:55]So, Harsh, thank you so much for inviting me on this show. I think this is, you know, Zaggel is a growing company and has been growing at a hectic pace of about, you know, 40 to 45% over the last 3 years. And and if you see, the receivables are, you know, are capped at like, you know, March 31st.

[00:01:14]So, they, you know, it's a one cutoff date which is taken, okay? And because it's like the year end, what happens is lot of redemptions happen and we need to, you know, ensure that once we bill them, they're, okay, the payments are going to come, you know, over the next 45 days. So, in my opinion, that's very natural because on a 1,900 odd crore, you know, revenue which we have, it is, it is, you know, within permissible limits. But, we continuously are looking at how do we improve that? And that's what we are going to do, you know, in this in this quarters, you know, coming 2 3 4 quarters. And we are bound to have positive cash flows, you know, by the year end.

[00:01:56]When I was doing the maths, you know, Mr. Narayanan, you had you have and and correct my math if I'm wrong.

[00:02:03]What you're penciling in for FY27 is approximately a 40% growth on a 1,900 crore top line, which takes your top line to approximately 26 to 2,700 crore if you meet your guidance. Of course, you've met your guidance on most occasions in the last on all of your occasions in the last few years. In fact, you've beaten it. But say you meet it this time around, you'll do approximately 26 2,700 crore in terms of top line. But margins, on the margin count, can you do 9 to 10% margins? Give us a sense of that first.

[00:02:35]So, on a standalone basis, we have absolutely, you know, no worries. The range could be just in and about that.

[00:02:41]So, I don't see any, you know, any major change there in the, you know, in the margins. You know, on a consolidated basis, because these are like, you know, the couple of companies which we have acquired are growing at a very very rapid pace. And the margins could, you know, could move a little bit here and there, but overall, you know, for a standalone, we remain committed to our margins. And the whole idea is that to reach to a level of about 15%, you know, EBITDA margin, which we had, you know, committed by in the next four or five years. So, that is where we are moving towards.

[00:03:17]And okay, so but but that is for 5 years away. Can you do a 9% margin? Because on Propel on Propel the margins have come off for you. So, can you despite that and you you've cut your guidance there as well? Maybe 6% margin is what you're guiding for if I've understood this correctly.

[00:03:35]Can you do a a console margin of 9 and 1/2 to 10% next year? Is that something you we can pencil in?

[00:03:41]>> I'll I'll explain it to you. Okay, so my in my SaaS business, I have got about 95 odd, you know, percentage gross margin.

[00:03:49]And we are significantly improving our, you know, SAS margins as well as from 95 we can we go to 96 97 and overall the overall in the pie of SAS pie in the overall business also we are improving.

[00:04:03]Okay, so in my opinion we should really really work, you know, hard towards also maintaining the proper margins because proper business is a large business and and we are we have invested significant amount of, you know, effort in in the proper business. So there should be uptick in that business as well.

[00:04:23]Okay. So so proper business should also take should also see an uptick but why has there been a downtick, Mr. Narayanan? If you can just explain that very quickly.

[00:04:33]Okay, so it also depends on, you know, whether the ORC commissions have come or not. You know, in that particular quarter sometimes, you know, merchants don't pay you that overriding commission and you know, it gets booked in the next, you know, quarter. So we have what we are today looking at is that how do we maintain the, you know, the growth rate without diluting the margins and improving cash flow. So these are the three levers. One is revenue growth, the second is operating cash flow and cash flow is our focus. And then is the margin. So margins also we are going to work harder and harder to improve the margins and as we go on at a consolidated level we will be able to tell you exactly where we land.

[00:05:13]I'll take a step back now. Your your top line guidance of around 2700 crore or 26 2700 crore for FY 27 at a 9% margin will likely take you to a 240 crore of EBITDA.

[00:05:27]Now your receivable clip has been going up by say 150 to 180 crore in the last 12 months. Do you expect your receivable clip to go up by 250 crore in the next year or will it come off?

[00:05:43]>> no no no. I think it will come off But, significantly it will come off. Exactly.

[00:05:47]So by how much? Give us a perspective because you're currently sitting on Yeah. So, I think you know, in in in those terms, we possibly, you know, would be same, you know, at about 160 to 180 crores is where, you know, we possibly will land in spite of the expansion because the you know, the kind of measures which we have taken for overall, you know, cash flow positiveness in the business has been significant. It's already yielding results. And as you see in the coming quarters, you will see more results more results of that. And we probably on the receivable side, we should be roughly about 180 odd crores.

[00:06:25]Okay, 180 crore or more. So, on the 360 crore rupee receivable base that you're currently at, it'll go up by nearly 50% next year. No, it will No, no, no, no.

[00:06:34]So, what I'm saying is that 360 crore receivable base will come down. Will come down. By how much?

[00:06:41]>> down and will come down, you know, possibly, you know, by about let's say about, you know, 80 to 100 crores. By 80 to 100 crore it'll come down, which will mean that you'll do 320 crore of cash flow net of gross of taxes.

[00:06:56]Gross of taxes, we should be able to do that cash flow. Cash flow is going to be positive is is what is our effort. We are going to put in as much effort as possible to make it positive. Similarly, if you look at it in terms of the receivables, we are going to try and control that receivables as much as possible. So, what you know, also to give you a very clear indication, A for us, you know, cash flow positive is the is the barometer. Okay, so, that is what we are going to focus largely on. Growth, of course, we have to do the growth. And that's why we have, you know, the it is easy to give you a guidance of 40%. And last 3 years, if you see, we have never ever Whatever guidance we have given, we know, we have been able to meet that guidance. Okay, so, it's easy to give, but you know that's why we are giving our 25% to 30% you know on standalone and 40% on a consolidated basis. We could have easily you know but if you really ask me and say Raj, what's your opinion? I probably will say that we might grow at 45% but we still have been very conservative and the idea of being conservative is to improve cash flow, improve margins and you know the operating leverage which has kicked in to utilize it as much as possible.

[00:08:09]Thank you so much Mr. Narayanan for coming in. Unfortunately, I'm completely out of time. I'm going to have to call you again Mr. Narayanan. I'm sorry but I'm really going to have to call you again. Really really curious to understand what's playing out on the stock price because you've seen a very sharp fall. I've not been able to do full justice. Thank you so much though for coming in and speaking to us. Thank you. You know we would love to also pick up this stock at this price. You know it's a fantastic price and I won't I'm saying whatever money I have I'm going to put in there you know to buy my stock.

[00:08:38]Right. I would love to talk a little bit more about that but I'm going to have to park that for another time unfortunately. My producers are pressuring me to close this. So let me close this. Thank you so much for coming in and speaking to us. Out of time on on this edition. Thank you so much for joining.

[00:09:02]>> [music]