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    Capillary Technologies India Q1 FY27 earnings call

    CAPILLARY
    Information Technology·4 Aug 2026
    Management Summary

    Capillary Technologies delivered robust Q1 FY27 results, with revenue growing 43% YoY to INR256 crores and EBITDA soaring 132% YoY to INR44 crores. This performance was driven by a strong 111% Net Retention Rate and the successful integration of the SessionM acquisition, which is already profitable. Despite a reported PAT loss due to a cyber-fraud incident, the normalized PAT was positive, reflecting underlying operational strength and strategic progress in AI-led migrations and customer expansion.

    Highlights

    5

    • Revenue increased by 43% YoY to INR256 crores, demonstrating strong top-line growth.

    • EBITDA surged by 132% YoY to INR44 crores, indicating significant operating leverage and efficiency gains.

    • Adjusted EBITDA margin improved to 17-18% overall, with organic business achieving over 20%.

    • Net Retention Rate (NRR) stood at 111% (116% excluding one large customer), highlighting strong customer expansion.

    • The SessionM acquisition is on track, already profitable, generating INR5-6 crores in free cash, and is expected to deliver payback within the year.

    Concerns

    2

    • Reported PAT was -INR9.5 crores, though normalized PAT was INR25 crores after adjusting for a cyber-fraud incident and deferred tax liability.

    • Recovery timeline for the exceptional loss due to the cyber-fraud incident, though covered by insurance, remains unclear.

    Key financials

    Single quarter

    08 metrics
    1. 01Revenue₹256 Cr+43%YoY
    2. 02EBITDA₹44 Cr+132%YoY
    3. 03PAT₹-9.5 Cr
    4. 04Normalized PAT₹25 Cr
    5. 05Adjusted EBITDA Margin (Overall)17.5%

    Order Book

    high confidence

    Total Value

    ₹ 1,026 crores

    as of 2026-06-30

    quantified
    34.0% YoY

    Pipeline

    deal pipeline tcv

    aiRA revenue run rate

    "Strong momentum in new logo sign-ups and NRR expansion driving ARR growth."

    Source:
    Prepared remarks

    Capital allocation

    2
    high confidence
    CategoryHeadline
    M&A

    SessionM

    acquisition · integrated · Consideration ₹NaN (cash)

    M&A

    CustomerGlu

    acquisition · closed · Consideration ₹NaN (undisclosed)

    Guidance & targets

    9
    CategoryTargetPriority
    Revenue
    aiRA Revenue Contribution
    5% to 10% of total revenue
    		Medium
    Revenue
    Organic Growth (Full Year)
    17%-odd (excluding currency impact)
    		Medium
    Revenue
    Organic Growth (Full Year, including currency)
    23%
    		Medium
    Revenue
    FY27 Revenue (Previous Guidance)
    INR1,065 crores
    		High
    Margin
    SessionM EBITDA Margin
    15%-odd in a year, then 35%-40% in another year
    		Medium
    New ACV
    New ACV Growth
    at least 30%-40% more than last year
    		Medium
    ESOP Expenses
    ESOP Expenses
    INR12 crores to INR15 crores
    		High
    ESOP Expenses
    ESOP Expenses as % of Top Line
    1% to 2%
    		High
    EBITDA
    FY27 EBITDA (Previous Guidance)
    INR172 crores
    		High

    What to watch in Q2 FY27

    5

    SessionM EBITDA Margin Improvement

    next year
    CurrentBreak-even to 5-10% margins (without upgrades)
    TargetProgress towards 15% EBITDA margin

    Why it matters

    SessionM's margin expansion is a key profitability lever for acquired businesses, contributing significantly to overall EBITDA.

    my gut is the journey from roughly a break-even now will be to a 15%-odd in a year, and then over another year, we will get to that 35%-40% margin.

    Risks & concerns

    3
    RiskSeverity

    Cyber-fraud incident

    An exceptional loss due to a banking fraud incident impacted reported PAT; recovery from insurance is in progress but timeline is unclear. — Management acknowledged

    medium

    Enterprise AI adoption

    Enterprise AI adoption is still 'abysmal' due to perceived risks, requiring Capillary to rely on its brand, distribution, and analyst recognition. — Management acknowledged

    low

    Competitive loyalty space

    The loyalty space is described as a 'red ocean' with many competitors, necessitating a dual strategy of organic growth and inorganic acquisitions. — Management acknowledged

    low

    Q&A highlights

    6

    “So, we've just done the SessionM acquisition, right. So, usually the way it works is, we spoke about it I think in the analyst day as well, that it typically takes about two to three years for all the customers to get upgraded. So, we will not start any SessionM migrations till probably end of this year, early next year, right. ... you will see more margins coming out over the next few quarters from SessionM as well, even without the upgrades piece. I think their infrastructure and the way they're running it when it was part of mastercard, it was definitely very excessive, so we do think we can get that business to a 5%-10% margins even without any upgrades.”

    Clarifies the phased approach to SessionM customer migration and the immediate margin benefits expected from operational efficiencies even before full platform upgrades.

    asked by Vinay Menon

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Q1 FY27 Financial Performance

    Capillary Technologies reported a robust Q1 FY27, with revenue growing 43% year-on-year to INR256 crores. This strong top-line growth translated into a significant 132% increase in EBITDA, reaching INR44 crores. The company's overall adjusted EBITDA margin improved to 17-18%, with the organic business achieving over 20%.

    02

    Net Retention Rate and Annual Recurring Revenue Growth

    The company demonstrated strong customer expansion with a Net Retention Rate (NRR) of 111%, which would be 116% when excluding one large customer. This NRR, combined with new customer wins, contributed to a 34% year-on-year growth in Annual Recurring Revenue (ARR), reaching INR1,026 crores in Q1 FY27. Trailing 12 months new ACV, excluding a large healthcare customer, grew 75% YoY to INR92 crores.

    03

    SessionM Acquisition Integration and Financial Impact

    The SessionM acquisition, completed on May 1st, is progressing as planned and has already turned profitable, generating INR5-6 crores in free cash within two months. The deal, valued at $20 million and costing INR17 crores net of adjustments, brought in $32 million in ARR. Management expects SessionM to break even within a few quarters and achieve a payback within the year, targeting 15% EBITDA margin in one year and 35-40% in two years.

    04

    Strategic Focus on AI and Experiences+

    Capillary is leveraging its AI-first platform, aiRA, for both new offerings and efficient customer migrations. aiRA currently has a revenue run rate of $2-2.5 million, with a target to contribute 5-10% of total revenue this fiscal year. The company also acquired CustomerGlu, rebranded as Experiences+, a low-code/no-code platform for front-end experiences, which is not financially material but enhances product capabilities.

    05

    Kognitiv Migration and Margin Uplift

    The migration of Kognitiv customers to Capillary's platform has begun, with the first customer expected to fully migrate by September 1st, 2026. This process, utilizing an AI platform for efficiency, is projected to accelerate for the remaining 10-16 customers over the next 2-3 quarters. These migrations are anticipated to generate an additional INR10-20 crores in EBITDA as acquired businesses transition from typical 30% gross margins to Capillary's 65-70% platform margins.

    06

    Cyber Fraud Incident and Normalized Profitability

    The company reported a PAT of -INR9.5 crores for the quarter, impacted by a one-time📎 exceptional loss due to a cyber-fraud incident and a deferred tax liability. However, after adjusting for these items, the normalized PAT stood at INR25 crores. Management confirmed that no customer or employee data was exposed and that the incident is covered by insurance, though the recovery timeline remains uncertain.

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