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    CapitalNumbers

    544343
    Information Technology·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

    5
    • 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

    4
    • 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.

    What Changed2

    vs Q2 FY26

    Risks discussed3 → 4 (+1)Q&A highlights8 → 6 (-2)

    Key financials

    Single quarter

    11 metrics
    1. 01Total Income₹105.6 Cr+5.3%YoY
    2. 02EBITDA₹35.7 Cr-2.1%YoY
    3. 03EBITDA Margin33.8%-2.5%YoY
    4. 04Net Profit (PAT)₹25.8 Cr0%YoY
    5. 05PAT Margin25.8%-0.6%YoY

    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
    List

    Order Book

    high confidence

    Total Value

    USD 1.1 million

    as of 2025-05-23

    quantified

    Inflow this qtr

    USD 1 million

    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

    4
    high confidence
    CategoryHeadline
    Capex

    ₹20 crores

    Debt

    Gross ₹0 crores · Net ₹0 crores · 0.0x EBITDA

    M&A

    Undisclosed target company

    acquisition · announced · Consideration ₹NaN (undisclosed)

    Liquidity

    Cash ₹136 crores

    The company has a good war chest of cash available for M&A activities.

    Guidance & targets

    6
    CategoryTargetPriority
    Revenue
    Organic Revenue Growth
    15%
    High
    Revenue
    Revenue Doubling
    Double
    High
    Profitability
    EBITDA Margin Improvement
    100-150 bps
    High
    Profitability
    PAT Margin Improvement
    100-150 bps
    High
    Headcount
    Engineers to Add
    100+
    High
    Marketing
    Marketing Expense as % of Revenue
    8-9%
    Medium

    Gurgaon Development Center Revenue Contribution

    next presentation
    CurrentNot worked out, 100% capacity now
    TargetQuantified 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.

    How to verify

    key_financials.segment_breakdown[name='Gurgaon Office'].metrics[label='Revenue']

    Risks & concerns

    4
    RiskSeverity

    Sluggish growth in the U.S. market

    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.Management acknowledged

    medium

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

    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.Management acknowledged

    medium

    Market slowdowns and operational challenges in the Middle East

    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.Management acknowledged

    medium

    European market slowdown due to 'Trump tariffs'

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

    medium

    Q&A highlights

    6

    “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

    2 min read6 chapters

    Detailed Narrative

    01

    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🌐.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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 slowdown🌐s 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. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.