Capillary Technologies India Ltd Q4 FY26 Earnings Analysis

- Revenue grew 16% year-on-year in Q3 FY26, with 22% growth for the nine months period. - Annual Recurring Revenue (ARR) increased by 21% over March 2025 for the nine months FY26. - New order book increased from INR 53 crores to INR 66 crores in the first nine months, indicating growth in new customer wins. - Net Retention Rate (NRR) for organic customers at 115%, demonstrating strong expansion within the existing customer base. - 12 new customers added over nine months, with three in the last quarter. - Growth driven by three axes: strong net retention, new customer acquisition, and M&A-driven customer migration. - M&A strategy involves acquiring low-margin competitors and migrating their customers onto higher-margin Capillary platform to improve revenues and margins. - Capillary continues to invest in AI and product innovation (e.g., aiRA) to boost win rates and enter adjacent markets, potentially enhancing future revenue streams.

- EBITDA improved significantly from -4% in FY23 to about 12% in FY25 and is expected to continue improving due to economies of scale. - Technology and corporate costs have reduced from 28% of revenue to about 18%, indicating further leverage potential. - Majority of costs (~60%) are fixed (tech, product, sales, marketing) and expected to grow near inflation plus team growth, supporting margin expansion. - Continued investments in AI-led product enhancements and customer migrations are planned, balancing growth and cost control. - New customer additions and organic net retention rate (NRR) of 115% indicate strong revenue growth and margin improvement. - Acquisitions will continue with margin-enhancing customer platform migrations driving profitability. - Overall, profitable growth with improving EBITDA margins and operating leverage is expected, with PAT normalized for one-time costs showing stability and potential for growth.

- Capillary is continuing investments in AI product development, which has been delivering good results and improving productivity for both Capillary and its customers. - Ongoing investment in product enhancements to facilitate smoother customer migrations from legacy platforms to the Capillary platform, particularly for acquired customers. - No new products are currently planned, but the company will update stakeholders as and when new products are developed. - Technology and corporate costs, which form a significant part of expenses, have decreased as a percentage of revenue, indicating ongoing investment efficiency. - The company has made acquisitions (fourth acquisition being Kognitiv in May) and plans further M&A activity, focusing on migrating acquired customers to Capillary’s platform to realize margin and efficiency gains.

- The transcript provided (up to page 16) does not mention any current or planned future fundraising through debt or equity. - No explicit discussion on raising new capital via debt or equity is noted in the Q&A or management commentary. - The company highlights a strong cash position with INR 463 crores cash balance and positive operating cash flows. - Focus appears to be on organic growth, product investments, and acquisitions rather than new fundraising rounds. - No specific disclosures or guidance regarding fundraising plans are provided in the material reviewed.

- Over the first nine months of FY26, Capillary Technologies added 12 new customers. - In the last quarter alone, 3 new customers were added. - New order book value added over the 9-month period is INR 66 crores. - This represents growth compared to INR 53 crores new order book added in the same period last year. - The company continues to grow its new order book steadily, indicating a healthy pipeline of new business.