Zaggle Q1 FY27: Growth held up, but margins reflected consolidation and cash flow reset

Zaggle Prepaid Ocean Services Limited started FY27 with a quarter that showed two stories at once. The first was continued scale. Consolidated revenue from operations rose to INR 423.3 crore in Q1 FY27, up 27.5% year on year. The second was a deliberate shift in operating stance. Adjusted EBITDA grew only 4% to INR 34.7 crore and the adjusted EBITDA margin fell to 8.2% from 10.1% a year earlier. Profit after tax declined 32.9% to INR 17.5 crore.

Management described Q1 as an inflection point, where the business is moving from a decade of profitable growth into a phase of transformation through consolidation. The company’s near-term priorities are more explicit now: optimize core operations, integrate acquisitions, scale AI across platforms, and impose greater cash flow discipline.

The revenue mix and why management prefers looking at net numbers

For Q1 FY27, the company’s consolidated revenue mix from operations was disclosed as software fees of INR 12.5 crore, program fees of INR 160.0 crore, and Propel points of INR 250.7 crore. Propel is reported on a gross basis under Ind AS, and management guided investors to look at revenue on a net basis after deducting the cost of point redemption and gift cards.

This matters because the cost line is large. In Q1 FY27, the cost of point redemption and gift cards was INR 233.0 crore. As a result, while Propel points shows INR 250.7 crore in reported revenue, the net revenue for that line item was INR 17.7 crore.

The consolidated gross profit was INR 189.5 crore, up 15.4% year on year, but the gross margin declined to 44.8% from 49.5%. This drop was consistent with the accounting structure of Propel, the mix shift, and higher incentives and redemption-linked costs.

Costs, margin compression, and the Dice effect

Management attributed the EBITDA margin decline largely to integration-related costs and operating policy changes.

First, Q1 included expenses related to the Dice acquisition, including transaction costs, one-time vendor payments, and relocation expenses for more than 100 professionals. The company also noted that revenue from Dice contracts was not captured in Q1 and would start reflecting from Q2 onward.

Second, the company moderated the push of expenses into the P and L that were earlier capitalized. On the call, management said product development costs on one product of roughly INR 6 crore were expensed completely, and the long-term intent is to expense more than capitalize over time. The capitalization policy is being reviewed in consultation with auditors and advisers, and management acknowledged the transition will take time.

Third, annual increments and the added employee and operating costs from the acquisition of Zagg.Money also contributed.

The quarter also showed a sharp rise in depreciation and amortization, which rose to INR 12.7 crore from INR 7.0 crore year on year, reflecting both a larger asset base and higher amortization from acquisitions.

Segment and product focus: moderating cashback, tightening working capital, and prioritizing quality earnings

In the investor presentation, Zaggle laid out focus areas across its revenue segments.

In SaaS, management linked Dice’s AI capabilities to solving more complex enterprise problems and commanding a price premium, while also improving implementation timelines and feature velocity.

In program fees, the company highlighted two levers: moderating cashback across corporate credit cards and prepaid cards, and moving volumes to banks that process invoices faster to reduce the working capital cycle.

In Propel points, the messaging was more explicit about cash flow quality. The company said it is moderating engagement with cash flow intensive customers and moving direct volumes away from redemption models with no advance and long working capital cycles.

The concall reinforced that program fee growth was moderated partly by design to support cash flow optimization. Management also said actions like moving customers to different banks involve re-carding and have a gestation period.

Strategic initiatives: acquisitions, UPI tailwinds, and international expansion

The quarter also reflected how Zaggle is building a broader portfolio through acquisitions and investments.

Dice Technology

Zaggle stated the Dice transaction transitioned from an intended share purchase to an asset purchase. The consideration was stated as INR 68 million, described as an optimization from an initial INR 123 million valuation. The company acquired Dice’s product suite and intellectual property along with its enterprise and partnership contracts.

Management said contract novation of 85 plus clients is underway and is expected to complete by the end of Q2 FY27. Revenue from Dice contracts is expected to begin from Q2 FY27, with a fuller pickup by Q3 FY27 as novation completes. Management also stated payment rails integration with Dice is largely done, with the final part expected by August 31 to September 10, and expects payment-related revenues from Dice from Q3 onward.

On the call, management said Dice did around INR 12 crore of revenue last year and it expects INR 15 to 16 crore in FY27.

Unobank (moneyHOP)

Zaggle completed an INR 8 crore investment for a 19.9% stake in Unobank Private Limited, which operates under the brand moneyHOP. Management emphasized Unobank’s RBI Authorized Dealer Category II license, enabling cross-border payments, remittances, foreign exchange services and forex cards. The investment is positioned as aligned with Save and Zoyer products.

Zagg.Money

Management reported traction in the credit card on UPI and TPAP ecosystem through Zagg.Money, including an increase in the annualized run rate of new acquisitions to around 84,000 cards. It also highlighted product launches with bank partners, including a twin co-brand card with Punjab National Bank across Visa and RuPay.

86400 (Mobileware) and GreenEdge

The presentation disclosed Q1 FY27 subsidiary performance. GreenEdge reported revenue of INR 44.0 crore and EBITDA of INR 4.3 crore. Mobileware (86400) reported revenue of INR 22.0 crore and EBITDA of INR 8.8 crore.

Policy tailwinds

Zaggle highlighted two policy vectors.

One was the potential implementation of Merchant Discount Rate on UPI for larger enterprises, which management said could translate into interchange for issuing parties, creating incremental program fees. It also linked the opportunity to products like BROME under Zoyer, Zagg.Money, and 86400.

The second was new income tax regulation changes that expanded wallets under the new tax regime and increased limits for meal and gift benefits. Management said 73% of new users onboarded in Q1 FY27 came from existing clients due to these changes.

UAE expansion

On the call, management said it is opening a subsidiary in ADGM, Abu Dhabi Global Markets in Q2 FY27. It plans to enter the UAE with Save, Zoyer and Propel, citing interest from partners and inherited Dice client relationships.

Investor takeaways

Zaggle’s Q1 FY27 numbers were strong on reported revenue growth, but profitability metrics reflected the cost of consolidation and a shift in accounting and operating discipline. Management’s messaging was consistent across the deck and the call: near-term volatility is acceptable if it improves cash conversion, reduces dependence on cash flow intensive models, and strengthens the platform through AI and integration.

The next two quarters carry clear signposts that management itself highlighted: Dice billing starting Q2, fuller Dice contract novation by end-Q2, and incremental payment-led monetization from Dice expected from Q3. Alongside that, the market will also watch whether the company’s working capital actions and cashback moderation translate into visibly better operating cash flow as FY27 progresses.