Zaggle Prepaid falls 18% as Q4FY26 margins dip, Buy call

Stock slides after sequential margin contraction

Zaggle Prepaid Ocean Services shares fell sharply on May 14, after the company reported March-quarter (Q4FY26) results that showed strong growth in profit and revenue but a sequential decline in margins. The stock was down 17.8% at ₹233.32 around 11:30 am. The decline followed investor focus on profitability metrics, with the EBITDA margin contracting quarter-on-quarter despite continued top-line momentum.

The move came even as management reiterated longer-term margin targets and outlined growth drivers such as AI-led product execution and international expansion. A brokerage note from JM Financial also maintained a positive stance on the stock, citing an intact growth runway and a target price that implies a meaningful upside from prevailing levels.

What the market reacted to on May 14

The key trigger for the sell-off was the sequential dip in the company’s EBITDA margin in Q4FY26. Zaggle’s margin contracted to 9.4% from 9.9% in the preceding quarter, a decline of 46 basis points quarter-on-quarter. This margin compression came alongside quarter-on-quarter increases in profit and revenue.

Investors often weigh fintech and SaaS-oriented business models on their ability to scale while improving operating leverage. In this context, a sequential margin decline can weigh on near-term sentiment, especially when the stock is reacting to earnings.

Q4FY26 results: profit up 30%, revenue up 50% YoY

For Q4FY26, Zaggle reported a 30.4% year-on-year increase in consolidated net profit to ₹40.6 crore. In the year-ago quarter, the company had posted net profit of ₹31.13 crore.

Revenue from operations rose 49.9% year-on-year to ₹617.91 crore in Q4FY26, compared with ₹412.1 crore in Q4FY25. On a sequential basis, both profit and revenue also increased, but the margin line moved in the opposite direction.

The company said quarter-on-quarter profit rose 11.6%, while revenue increased 17.5%. Against this backdrop, the market’s attention stayed on the profitability trend, particularly the quarter-on-quarter margin contraction.

Margin pressure: EBITDA margin down to 9.4% QoQ

Zaggle’s reported EBITDA margin declined to 9.4% in Q4FY26, from 9.9% in Q3FY26. The company’s quarterly revenue growth remained strong, but the sequential dip in the margin suggested that cost and growth investments continued to influence operating profitability in the near term.

JM Financial, in its note, described an adjusted EBITDA margin of 9.5% for the quarter, up 50 basis points year-on-year, while acknowledging the broader margin discussion that followed the results. The brokerage also cited management’s reiterated long-term standalone adjusted EBITDA margin guidance.

FY26 snapshot: net profit up 57%, revenue up 46%

For the full year FY26 (2025-26), Zaggle reported net profit of ₹138 crore, up 57% year-on-year. Revenue for FY26 stood at ₹1,907.64 crore, marking a 46.3% increase.

Management described FY26 as a period of record quarterly and annual results, and linked the performance to execution on its AI-led strategy. The company also positioned its next phase of growth around product development and deeper monetisation.

Management commentary and FY27 growth guidance

Raj P Narayanam, Founder and Executive Chairman, said the company delivered its “strongest-ever quarterly and annual results” and that it moved “from AI-led vision to full-scale execution with dual AI engines”, one focused on internal efficiency and another on customer-facing capabilities.

For FY27, the company projected consolidated revenue growth of around 40%. Management attributed the expected growth to AI-first product development, expansion into MENA and US markets, and deeper monetisation across the company’s core pillars.

In addition, JM Financial highlighted that management reiterated its long-term standalone adjusted EBITDA margin guidance of 14-15% over four to five years. The brokerage note also mentioned management guidance for operating cash flow (OCF) turning positive by FY27, with a steady-state EBITDA-to-OCF conversion target of 40-50%.

Leadership update: Group CFO appointment from May 18

Zaggle also announced the appointment of Venkatesh Ramachandran as Group Chief Financial Officer (CFO), effective May 18, 2026. Senior finance appointments are typically watched by investors for signals on capital allocation, reporting discipline, and the execution approach to profitability and cash flows, particularly for high-growth businesses.

JM Financial’s view: Buy rating, ₹380 target price

JM Financial maintained a ‘Buy’ rating on Zaggle and set a target price of ₹380. The brokerage said FY26 momentum remains “intact” and pointed to continued momentum across segments.

In its commentary, JM Financial said revenue increased about 50% year-on-year (and 18% quarter-on-quarter) to about ₹620 crore in Q4FY26, supported by new client additions and higher per-client monetisation. It also pointed to product traction in Zoyer, Zatix and ZIP, rising cross-sell penetration, and recent acquisitions that it believes strengthen the ecosystem.

Key numbers at a glance

What investors may track next

After a sharp one-day move, investors typically watch whether growth remains strong while margins stabilise, especially given management’s longer-term margin guidance of 14-15% over four to five years. The FY27 consolidated revenue growth guidance of around 40% will also remain a key reference point as the year progresses.

Investors may also track updates related to international expansion into MENA and the US, and whether deeper monetisation across the company’s core pillars supports the path to better operating cash flow. Management’s guidance that OCF could turn positive by FY27, and the targeted 40-50% steady-state EBITDA-to-OCF conversion, are likely to be important markers in future quarters.

Conclusion

Zaggle Prepaid’s Q4FY26 results showed strong year-on-year growth in both profit and revenue, but the stock fell as EBITDA margin narrowed sequentially. Management reiterated longer-term margin targets and guided for around 40% consolidated revenue growth in FY27, while JM Financial maintained a Buy rating with a ₹380 target price. The market’s next focus is likely to remain on the balance between growth execution, margin trajectory, and progress toward positive operating cash flow by FY27.