Concall AI

CapitalNumbers — Q4 FY25 earnings call

Call held 23 May 2025

Management summary

CapitalNumbers Infotech Limited reported a modest 5.27% increase in total income to INR 105.6 crores for FY25, with PAT remaining flat at INR 25.8 crores, primarily due to IPO-related investments and market headwinds. The company is debt-free with INR 136 crores in cash and aims for 15% organic growth and 100-150 bps EBITDA margin improvement in FY26, driven by strategic investments in AI capabilities and geographical expansion. Management acknowledged past growth challenges but expressed confidence in future performance from recent capacity building and marketing efforts.

Highlights

Total Income for FY25 was INR 105.6 crores, representing a 5.27% year-on-year growth.
Net Profit (PAT) for FY25 stood at INR 25.8 crores, which was almost the same as the previous financial year.
The company is debt-free and holds a strong liquidity position with approximately INR 136 crores in cash and investments.
Management provided a guidance of 15% organic revenue growth for FY26, excluding inorganic contributions.
Strategic investments in AI, ML, GenAI capabilities and expansion into key markets like Europe and Middle East are expected to drive future growth.

Concerns

EBITDA for FY25 declined by 2.07% YoY to INR 35.7 crores, with the EBITDA margin contracting by 2.5% to 33.77%.
PAT margin for FY25 saw a slight decline of 0.6% YoY to 25.8%.
Revenue growth was described as 'flattish' (5-10% range) for the two years prior to the IPO.
Delayed project onboarding and market slowdowns in the Middle East (due to Ramadan and visa issues) and Europe (due to 'Trump tariffs') impacted Q4 FY25 performance.

Key financials

01 Total Income ₹105.6 Cr +5.3%YoY
02 EBITDA ₹35.7 Cr -2.1%YoY
03 EBITDA Margin 33.8% -2.5%YoY
04 Net Profit (PAT) ₹25.8 Cr 0%YoY
05 PAT Margin 25.8% -0.6%YoY
06 Cash & Investments ₹136 Cr
07 Current Ratio 32.1%
08 Return on Equity (ROE) 23%
09 Return on Capital Employed (ROCE) 21.8%
10 Cash Flow from Operating Activities ₹19.23 Cr
11 Attrition Rate 26.2%

What they filed

Q4 FY26: revenue up 10.6%, net profit up 0.0% against the same quarter last year.

₹ Cr · quarterly

Line item	Q4 FY24	Q2 FY25	Q4 FY25	Q2 FY26	Q4 FY26
Revenue	47	50	50	53	52 +11%
Expenses	32	33	37	39	41
EBITDA	15	17	12	14	11 −27%
Margin	32%	35%	25%	27%	21%
Other income	2	1	4	6	4
Interest	0	0	0	0	0
Depreciation	1	1	1	1	1
Profit before tax	16	18	16	20	14 −12%
Tax rate	26%	25%	24%	25%	26%
Net profit	11	14	12	15	11 +0%
EPS	5.42	6.46	4.96	6.06	4.38

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

AIML, Cloud & Data Engineering
11% Revenue Contribution
Core Digital Engineering (Product Engineering)
85% Revenue Contribution
North America
50% Revenue Contribution
UK & Europe
30% Revenue Contribution
Middle East & Africa
10% Revenue Contribution
India
5% Revenue Contribution
Recurring Revenue
90% Share of Total Revenue
One-time Project Revenue
10% Share of Total Revenue

Order book

high confidence

Total value

$1.1 Mn

as of 2025-05-23 quantified

Inflow this quarter

$1 Mn

Pipeline

deal pipeline tcv

Current pipeline of signed contracts and deals at final stages

The company has 90% ongoing retained business and a current pipeline of signed contracts totaling approximately $1.1 million, with new MSAs expected to add $1 million to the top line this fiscal year.

Source: Prepared remarks

Capital allocation

high confidence

Capex ₹20 Cr
- Development of a new delivery center in Gurgaon ₹20 Cr
We have also earmarked about INR20 crores for development of a new delivery center in Gurgaon.
Debt Gross ₹0 Cr · Net ₹0 Cr · 0.0× EBITDA

The company is debt free.
M&A Undisclosed target company Acquisition · Announced · Consideration ₹[object Object] (undisclosed)

Strategic acquisition to enhance capabilities and growth.
Expected to add a minimum of $3 million in revenue.

We have also earmarked about INR40 crores this year for an acquisition. We are looking at a company between 3 to 5 million and we haven't really identified any particular company yet, but we have internally budgeted around INR40 crores. So, we believe that it should lead to a minimum revenue of 3 million is what we are expecting.
Liquidity Cash ₹136 Cr The company has a good war chest of cash available for M&A activities.

Currently, we have cash and investments of roughly INR136 crores on the book. We enjoy a strong liquidity position... We have a good war chest of cash available for M&A activities.

Guidance & targets

Revenue

Organic Revenue Growth Revenue · this financial year · High confidence 15%

Our organic base should grow by about 15% on a Y-o-Y basis this financial year.

— Mr. Mukul Gupta
Revenue Doubling Revenue · next 36 months · High confidence Double

Our goal is to double the revenue in next 36 months and to become a leader and an industry leader in Al driven delivery models.

— Mr. Mukul Gupta

Profitability

EBITDA Margin Improvement Profitability · this financial year · High confidence 100-150 bps

We believe that we should be able to improve our EBITDA margin by about 100 to 150 basis point this financial year.

— Mr. Mukul Gupta
PAT Margin Improvement Profitability · next financial year · High confidence 100-150 bps

The PAT about 100 basis points, 100 to 150 basis points. That margin is 100 to 150 basis points, but the impact will go to PAT only.

— Mr. Sanket Harlalka

Headcount

Engineers to Add Headcount · this year · High confidence 100+

This year we plan to add about 100 plus engineers in the company and the focus would remain AI, ML, digital engineering and sales force.

— Mr. Mukul Gupta

Marketing

Marketing Expense as % of Revenue Marketing · current · Medium confidence 8-9%

I think 8%. 9%, right now.

— Mr. Mukul Gupta

What to watch in Q1 FY26

Gurgaon Development Center Revenue Contribution

next presentation

Current Not worked out, 100% capacity now

Target Quantified revenue contribution from Gurgaon office

Why it matters

The expanded Gurgaon center is a key capacity investment; its revenue generation will indicate the return on investment from this strategic expansion.

But we don't have an exact number of revenue from the Gurgaon office, no, sir. So, we'll keep a note of that. Maybe in the next presentation, we'll have the data as well.

Risks & concerns

Sluggish growth in the U.S. market
medium

The company was already seeing sluggish growth in the U.S. prior to the IPO, necessitating a focus on AI-driven projects and expansion in Europe/Middle East.

when I was doing my road shows, the two things that the company was pursuing, we were already seeing sluggish growth in the U.S.

Management acknowledged
DeepSeek AI launch causing client confusion and re-evaluation of AI initiatives
medium

The launch of DeepSeek AI on the same day as the IPO created confusion and led clients to re-evaluate their AI budgets due to its promise of lower costs, causing a slowdown.

DeepSeek basically launched exactly on the same date as our IPO... it created a confusion and chaos because it came with a promise of 10% of cost of what it would cost otherwise to deploy on other models.

Management acknowledged
Market slowdowns and operational challenges in the Middle East
medium

The Middle East market experienced a month-long closure due to Ramadan, and visa issues related to Umrah led to delayed project onboarding and impacted business activity.

during the period of Ramadan, the market would be entirely closed for a month... due to Umrah [inaudible 08:15]... no visas would be granted during that period as well.

Management acknowledged
European market slowdown due to 'Trump tariffs'
medium

External factors like 'Trump tariffs' led to chaos and a slowdown in the European market, affecting business development efforts.

In the European market, because of the Trump tariffs, it led to again chaos and that led to a slowdown in the European market as well, but we are coming out of it now.

Management acknowledged

Q&A highlights

5 direct

Client concentration and strategy for diversification Direct

The client concentration hasn't changed because the last time you published the data was for the separate September and H1. Between H1 and H2, there was no significant change in client concentration. And we are now actively trying to move in the direction of spending more or acquiring more clients in European and Middle East region. So, this financial year, you will see some changes in client concentration as we acquire some higher value clients in these regions.

Addresses concerns about client dependency and outlines the company's strategy to diversify its client base, particularly in new geographical markets.

Asked by Sanket from Aarth AIF

Discrepancy in reported working capital days Partial

I'll tell you what is that. 26 days is our data turnover. And the trade payables is our 10 days. So, this basically 16 days where our revenue got stuck. So, this is the figure actually.

Highlights a potential data discrepancy between external analyst reports and internal figures, which could lead to investor confusion regarding the company's operational efficiency.

Asked by Amogh Kedia from FWH

Justification for 15% organic growth guidance despite significant investments Direct

So I don't want to say anything which I will not be able to deliver. So I want to say something which I know for sure that I will be able to deliver... But right now I want to be conservative in terms of what I'm committing to my investors. So that is why I'm giving a guidance of 15%. Also that completely is a form of organic based and I'm completely not counting in any growth or any growth that will come from any inorganic acquisition.

Reveals management's conservative approach to guidance post-IPO, suggesting potential for upward revisions if performance exceeds expectations, and clarifies that the 15% target is purely organic.

Asked by Veer Vikram Singh from Truvesta Capital Advisors LLP

Impact of DeepSeek AI launch and Trump tariffs on business performance Direct

So that caused a lot of slowdown in a sense that caused a lot of confusion where people started re-evaluating their AI initiatives and started looking at DeepSeek of what impact it would create in the marketplace... In the European market, because of the Trump tariffs, it led to again chaos and that led to a slowdown in the European market as well, but we are coming out of it now.

Provides crucial context for the Q4 FY25 slowdown by detailing external macro factors that affected client spending and market conditions in key regions.

Asked by Riken from Capri Global

Reasons for EBITDA margin contraction in FY25 Direct

So what led to a reduction in EBITDA? There were three factors that came into play. The first factor was that right after our IPO, we invested a lot in marketing and trade shows... The second factor was that we invested heavily in capacity building... The third key reason which led to a reduction in EBITDA was increase in marketing activity, investment in key managerial positions and expansion of our Gurgaon development center.

Clearly explains the specific internal investments and operational costs that led to short-term margin compression, linking it directly to the company's long-term growth strategy.

Asked by Amogh Kedia from FWH

Utilization of the significant cash balance post-IPO Direct

If you look at our objectives of the IPO, we basically said that we earmarked around INR20 crores for a strategic acquisition, whereas this year we have already earmarked around INR40 crores for acquisition. So, this cash that we have on our books would be deployed over the next three financial years, both towards internal capability development and towards M&A.

Clarifies the company's capital allocation strategy, addressing concerns about idle cash by outlining plans for M&A and internal capability development over the next three fiscal years.

Asked by Rajat Gupta from Rajat International

2 min read 6 chapters

Detailed narrative

FY25 Financial Performance and IPO Impact

CapitalNumbers reported a total income of INR 105.6 crores for FY25, marking a 5.27% year-on-year increase. However, EBITDA declined by 2.07% to INR 35.7 crores, with the EBITDA margin contracting by 2.5% to 33.77%. Net Profit (PAT) remained flat at INR 25.8 crores, resulting in a 0.6% decline in PAT margin to 25.8%. Management attributed the modest growth and margin compression to significant investments made post-IPO in marketing, capacity building, and key managerial hires, as well as external market headwinds.

Strategic Investments and Capacity Expansion

Following its IPO in January 2025, CapitalNumbers invested heavily in its growth strategy. This included expanding the Gurgaon development center from a 24-seater to a 60-seater, which is now at 100% occupancy. The company also made upfront investments in marketing activities, participating in three major events in February and March, and hired key personnel in AI, sales leadership for Europe, and department heads for centers of excellence. These investments are expected to yield returns and contribute to future growth, with new recruits projected to be 100% billable by Q2 FY26.

Geographical and Service Line Focus

The company's core geographical focus for the current financial year remains Europe and the Middle East, with North America still contributing approximately 50% of total revenue. CapitalNumbers is actively expanding its digital engineering capabilities, with a strong emphasis on AI, ML, GenAI, and cloud engineering solutions, which currently account for about 11% of total revenue. Core digital engineering, particularly product engineering, constitutes the majority at 85% of revenue.

Pipeline Development and Deal Wins

Since April 1, 2025, CapitalNumbers has observed strong pipeline development, securing six new year-long Master Service Agreements (MSAs) across diverse industries such as automobile, e-commerce, and healthcare. These MSAs are projected to add approximately $1 million to the top line in the current financial year. Additionally, the company is in the final stages of closing a Salesforce implementation deal in the Middle East valued at around $100,000.

FY26 Outlook and Capital Allocation

For FY26, CapitalNumbers targets an organic revenue growth of 15% year-on-year and aims to improve its EBITDA margin by 100-150 basis points, returning to pre-IPO levels of around 35%. The company is debt-free and holds approximately INR 136 crores in cash and investments. It has earmarked INR 40 crores for strategic acquisitions this year, targeting companies with $3-5 million in revenue primarily from Western economies, and INR 20 crores for further development of its Gurgaon delivery center.

Market Headwinds and Mitigation Strategies

Management acknowledged several external factors that impacted Q4 FY25 performance, including the launch of DeepSeek AI causing client re-evaluation of AI initiatives, and market slowdowns in the Middle East due to Ramadan and visa issues, as well as in Europe due to 'Trump tariffs.' To counter these, the company is focusing on local presence in key markets, increasing marketing efforts, and building capabilities in high-demand areas like Salesforce, with the expectation that these strategies will lead to improved revenue growth from Q2 FY26 onwards.

This is an AI-generated summary of a publicly available earnings call transcript.

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