Capillary Technologies India Limited — Q3 FY26 earnings call

Call held 6 Feb 2026

Management summary

Capillary Technologies reported a strong Q3 and 9M FY26, driven by robust revenue growth and significant expansion in Adjusted EBITDA margins. The company highlighted its leading position in the loyalty management space, strong organic NRR, and the strategic importance of its AI-first approach (aiRA) in improving win rates and future monetization. While PAT saw a decline in Q3 due to one-time costs, the underlying business performance and cash generation remained healthy.

Highlights

  • Q3 FY26 Revenue stood at INR 184 crores, marking a 16% YoY growth.

  • 9M FY26 Revenue reached INR 543 crores, growing 22% YoY.

  • Adjusted EBITDA for Q3 FY26 was INR 30 crores, a 25% YoY increase, with a margin of 16.4%.

  • 9M FY26 Adjusted EBITDA was INR 71 crores, up 54.3% YoY, achieving a 13% margin.

  • PAT for Q3 FY26 was INR 8 crores (4.3% margin), a 29.8% decline YoY due to one-time expenses.

  • Trailing twelve months Net Retention Rate (NRR) as of December 2025 was 111%, with organic NRR at 115%.

  • New order book for 9M FY26 grew to INR 66 crores, a 24.5% increase from INR 53 crores in the prior year period.

  • Operating cash flow for 9M FY26 was INR 101 crores, representing 142% of Adjusted EBITDA.

Key financials

3 periods

Headline

  • Revenue
    ₹184 Cr
    YoY +16%
  • Adjusted EBITDA
    ₹30 Cr
    YoY +25%
  • Adjusted EBITDA Margin
    16.4%
  • PAT
    ₹8 Cr
    YoY -29.8%
  • PAT Margin
    4.3%
  • Organic NRR
    115%

9M FY26

  • New Order Book
    ₹66 Cr
    YoY +24.5%

TTM Dec 2025

  • NRR
    111%

What they filed

Q1 FY27: revenue up 51.9%, net profit up 251.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue42 49 42 47 58 +37%65 +31%64 +52%
EBITDA9 15 6 8 10 +16%16 +5%15 +167%
Net profit0 7 -5 -3 1 +950%10 +40%8 +252%
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.

Guidance & targets

Profitability

  • Non-COGS Cost Growth Profitability · near-term and medium-term · Medium confidence much lower rate than revenue
    this cost is growing at a much lower rate and as we do acquisitions, this cost doesn't get impacted at all.

    — Anant Choubey, Executive Director, CFO and COO

  • Non-COGS Cost Scaling Profitability · near to medium term · Medium confidence inflation plus a few more points for team growth
    I think inflation plus a few more points for team growth, I think that should be a good way to think of this.

    — Aneesh Reddy Boddu, Founder, Managing Director and CEO

  • Below COGS Items Contribution to Revenue Profitability · future · Medium confidence further improvement / keep going down
    you will see further improvement on, like, the below COGS items contribution to like as a percentage of revenue will keep going down.

    — Aneesh Reddy Boddu, Founder, Managing Director and CEO

AI Monetization

  • aiRA Pricing Strategy AI Monetization · next 2 quarters · Low confidence know in a couple of quarters
    Hopefully in a couple of quarters we'll know what's the right way to price this, price aiRA, the analytics use case or the delivery use case of campaigns, things like that.

    — Aneesh Reddy Boddu, Founder, Managing Director and CEO

NRR

  • AI Impact on NRR NRR · next 1-2 quarters · Low confidence need a quarter or two to quantify
    I mean we will need a quarter or two to actually get to telling you how much of NRR can come from this.

    — Aneesh Reddy Boddu, Founder, Managing Director and CEO

Risks & concerns

  • AI disruption to software/SaaS firms

    medium

    Analyst raised concerns about AI's potential to disrupt software businesses; management explained their insulation due to 'system of record' focus and outcome-linked pricing.

    Analyst acknowledged

  • Pressure in US healthcare payer space

    low

    Analyst asked about profitability pressures in the US healthcare payer sector; management clarified Capillary has no exposure to Medicare business, thus no direct impact.

    Analyst downplayed

Q&A highlights

3 direct
Impact of AI disruption on Capillary's business model Direct
I think all enterprise software is not equal. So I would break enterprise software into really three big buckets. So one is like a system of record or a transaction system... And what's happening with AI is really I think the second bucket, which is the system of engagement and the system of intelligence are definitely seeing the most amount of, are seeing radical change. In our case, our pricing as I said is linked to number of transactions or number of customers or number of members, right? So slightly more outcome linked. And that again insulates us from any of these seat-based pricing shocks that you're now seeing in a lot of these seat-based pricing type software players.

This question directly addresses a major sector-wide concern and management's detailed response clarifies Capillary's positioning, insulation, and strategic leverage of AI.

Asked by Rishi Jhunjhunwala

Clarification on Capillary's role as a 'system of record' Direct
So Nikhil, the entire ledger for all the earn and burn, how many points you've earned, how many points you've redeemed, how many have expired, how many promotion points, bonus points, just making an example, that entire ledger like a bank ends up sitting on our side... In fact a lot of our customers audit the system every X years. So, it's again like you said, there's a full audit angle to it. There is all of that. Like, it's think of it like any bank ledger.

This clarifies a fundamental aspect of Capillary's business model, emphasizing its deep integration and data ownership, which contributes to high switching costs and stickiness.

Asked by Nikhil Choudhary

Monetization strategy and NRR contribution of aiRA Direct
No, we will obviously monetize this actively, but we'll stay in the loyalty space only... So customers start using it, start seeing the value and at the end of three months you then start charging them for it. So we now actually in conversations with a few of our first few POCs to actually start billing them for an annual license linked to number of usage and things like that... I mean we will need a quarter or two to actually get to telling you how much of NRR can come from this.

This addresses how Capillary plans to convert its AI innovation into revenue and NRR growth, providing insight into future financial drivers, albeit with a timeline for quantification.

Asked by Rohan Nagpal

3 min read 6 chapters

Detailed narrative

Q3 & 9M FY26 Financial Performance Overview

Capillary Technologies reported a strong financial performance for Q3 and 9M FY26. Revenue for Q3 FY26 reached INR 184 crores, representing a 16% year-on-year growth. For the nine-month period, revenue was INR 543 crores, up 22% YoY. Adjusted EBITDA for Q3 FY26 grew by 25% to INR 30 crores, achieving a 16.4% margin, while 9M FY26 Adjusted EBITDA increased by 54.3% to INR 71 crores, with a 13% margin. PAT for Q3 FY26 was INR 8 crores, a decline from INR 11.4 crores in Q3 FY25, primarily due to one-time expenses of INR 1.6 crores for gratuity and INR 2 crores for IPO expenses.

Net Retention Rate (NRR) and Growth Drivers

The company's Net Retention Rate (NRR) for the trailing twelve months ending December 2025 stood at 111%. Notably, the organic business NRR was 115%, placing Capillary in the top 10 percentile of global SaaS companies. Growth is driven by three axes: NRR expansion (platform overages, inflationary clauses, upgrades), new customer wins, and M&A. The new order book for 9M FY26 increased by 24.5% to INR 66 crores, compared to INR 53 crores in the same period last year, with 12 new customers added in the nine-month period.

Profitability and Cost Structure Leverage

Capillary's gross margins are robust at 69%-70%, with a 1.5% increase in 9M FY26. The company benefits from significant operating leverage, as approximately 60% of its costs (technology, sales & marketing, corporate) are not directly linked to revenue. While revenue grew 22% in 9M FY26, non-COGS costs grew only 11%. Depreciation and amortization increased from INR 13 crores in Q3 FY25 to INR 19 crores in Q3 FY26, largely due to the acquisition of Kognitiv in May. The company aims for further improvement in below COGS items as a percentage of revenue.

AI Strategy and Monetization (aiRA)

Capillary is adopting an AI-first approach with its AI-powered Research Assistant (aiRA), which is seen as a force multiplier for improving win rates. aiRA helps customers with analytics, campaign management, and customer support, moving beyond traditional workflow systems. The company is currently offering a 3-month free pilot for aiRA and is in early conversations to bill for annual licenses linked to usage. Management expects to have a clearer understanding of aiRA's pricing strategy and its specific contribution to NRR within the next one to two quarters.

Business Model and Market Positioning

Capillary positions itself as a 'system of record' for loyalty, managing the entire ledger of earn, burn, and customer profile data for its clients. This deep integration and data ownership contribute to high stickiness and switching costs. The company's pricing model is outcome-linked (per transaction or per member) rather than seat-based, providing insulation from AI-driven pricing shocks seen in other software segments. Capillary is highly rated by analysts like Forrester, positioned at the top of the Forrester Wave for its current offering and strategy, which aids in securing large enterprise deals.

US Healthcare Payer Exposure Clarification

Addressing an analyst's concern regarding pressures in the US healthcare payer space, management clarified that Capillary has no exposure to the Medicare or Medicare books of business. Their focus is on direct payer and insurance type use cases, which typically operate on a January 1st cycle. The company has seen major go-lives in this segment, with member bases increasing by approximately 50%, indicating no direct impact from the reported industry pressures.

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