Capillary Technologies India Limited — Q4 FY26 earnings call

Call held 6 May 2026

Management summary

Capillary Technologies reported a strong Q4 and full-year FY26, driven by robust revenue growth, improved adjusted EBITDA margins, and high net retention rates. The company successfully closed the acquisition of SessionM, a $35 million business, which is expected to propel FY27 revenue to INR 1,000-1,050 crores. While short-term margin pressures are anticipated due to integration and salary hikes, management remains confident in achieving steady-state EBITDA margins of 25-30% through continued organic growth and efficient acquisition integration.

Highlights

  • Q4 FY26 revenue grew 26% YoY to INR 191 crores, demonstrating strong quarterly performance.

  • Full-year FY26 revenue increased 23% YoY to INR 734 crores, indicating consistent growth.

  • Adjusted EBITDA margin for Q4 FY26 was 19%, a good improvement from last year, with the full-year margin at 15%.

  • The SessionM acquisition, a $35 million business, was closed on May 1st, 2026, and is expected to significantly boost future revenue.

  • FY26 overall NRR stood at a healthy 110%, driven by 114% organic NRR, showcasing strong customer retention and expansion.

  • Operating cash flows for FY26 were INR 150 crores, with a free cash flow to PAT of 200%, highlighting robust cash generation.

Concerns

  • Q1 FY27 margins are expected to see a slight dip due to salary increments and the initial integration phase of the SessionM acquisition.

  • Acquisition-linked revenues (estimated INR 80-100 crores of FY26 revenue) initially generate lower margins, impacting overall profitability until full integration and platform migration.

  • The EBITDA expansion cycle for SessionM is projected to take 1-2 years, with break-even in year one and positive margins in year two.

Key financials

2 periods

Headline

  • Revenue
    ₹191 Cr
    YoY +26%
  • Adjusted EBITDA
    ₹35.7 Cr
    YoY +28%
  • PAT
    ₹43 Cr
  • Normalized PAT
    ₹19.6 Cr
  • Adjusted EBITDA Margin
    19%
  • Headcount
    700 employees
    YoY +1%
  • Sales Investment
    17 % of top line
  • AI Stack Revenue Share
    4%
  • Exceptional Income
    ₹25 Cr

FY26

  • Revenue
    ₹734 Cr
    YoY +23%
  • Adjusted EBITDA
    ₹107 Cr
    YoY +43%
  • Normalized PAT
    ₹32 Cr
  • Adjusted EBITDA Margin
    15%
  • Operating Cash Flow
    ₹150 Cr
  • ARR Run Rate
    ₹765 Cr
  • Overall NRR
    110%
  • Organic NRR
    114%
  • Inorganic NRR
    94%

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.

Order book

high confidence

Total value

₹765 Cr

as of 2026-03-31 quantified

Inflow this quarter

$20 Mn

Execution

large contracts take 6-9 months to go live

The company continues to win new logos and expand with existing customers, contributing to a healthy run rate and future revenue visibility.

Source: Prepared remarks

Capital allocation

high confidence
  • M&A SessionM Acquisition · Closed · Consideration ₹[object Object] (undisclosed)

    Acquisition of merchant loyalty business from Mastercard to expand offerings and customer base, including 5 Fortune 500 companies.

    Sizeable $35 million business with 40+ logos. Acquired at ~0.5x revenue. Expected to be break-even in year one, positive margins in year two, and deliver ~INR 15 million type EBITDA over the next few years (currently zero).

    We announced the acquiring the merchant loyalty business from Mastercard. It's a company called SessionM on Feb 24th. We closed that transaction on May 1st. So it's a sizeable $35 million business, 40 plus logos, including five Fortune 500 companies. ... We've also got this at a very, very good price, right, at like 0.5x revenue is what we've got the deal at. ... The business should be at a break-even for year one and probably a little bit positive margins for year two. So, year three is when you will start seeing significant margins as the upgrades happen, as the customers fully move over. ... SessionM should easily deliver about a INR15 million type EBITDA to the business over the next few years, annual EBITDA going forward. Today that number is at zero
  • M&A Kognitiv Acquisition · Integrated

    Prior acquisition where a churn indemnity clause was triggered due to seller's failure to meet commitments.

    Received INR 25 crores as one-time exceptional income from a churn indemnity clause.

    Now, this exceptional income represents compensation received under a churn indemnity clause in the Kognitiv acquisition, which was triggered because seller failed to meet certain agreed commitments. And it's a one-time thing and hence we have called it out separately

Guidance & targets

Revenue

  • ARR as an entity Revenue · next 12 to 18 months · Medium confidence $115 million
    this should take us to, you know, over the next 12 to 18 months, this will take us to 115 million in ARR as an entity.

    — Aneesh Reddy

  • FY27 Revenue Revenue · FY27 · High confidence INR 1,000-1,050 crores
    We've just integrating SessionM, just those revenues coming in will take you like closer to a INR1,050 crores mark,. So yes, we do have that visibility now. With the acquisition having closed, we are comfortable that revenues will cross INR 1,000-1,050 crores in FY27.

    — Aneesh Reddy

  • Organic NRR Revenue · ongoing · High confidence 115%
    On the organic side, you know, we try and target this 115% NRR., so that's the 115% NRR on the organic side will roughly translate to like a 10%, 11% growth coming from the NRR motion.

    — Aneesh Reddy

Profitability

  • Steady-state Gross Margin Profitability · steady state · High confidence 70%
    So, we at steady state we'll be at like a 70% gross margin.

    — Aneesh Reddy

  • Steady-state EBITDA Margin Profitability · steady state · High confidence 25-30%
    So, net-net, this should be a 25% to 30% steady-state, probably more, EBITDA margin business.

    — Aneesh Reddy

Order Book

  • New ACV from new customers Order Book · next year · Medium confidence INR 70-80 crores
    We did about like this year we did about INR70 to INR80 crores of absolutely new customers, right? People who were never on the Capillary platform earlier. I think next year you should assume something similar. So, about 10%?

    — Aneesh Reddy

What to watch in Q1 FY27

Q1 FY27 Adjusted EBITDA Margin

next quarter
Current 19% (Q4 FY26)
Target Observe impact of salary increments and SessionM integration

Why it matters

To assess the short-term impact of integration costs and salary hikes on profitability.

Now, you see a bit of increase in cost in Q1 given the salary increments happen in this quarter. ... So, overall margins might not show the same or might show a 1% growth, 1.5% growth, but the core business continues to ramp up on margins.

Risks & concerns

  • Short-term Margin Compression

    medium

    Q1 FY27 margins are expected to dip due to salary increments and initial integration costs of the SessionM acquisition.

    Management acknowledged

  • Acquisition Integration Timeline and Profitability

    medium

    EBITDA expansion for SessionM is projected to take 1-2 years, with initial acquisition-linked revenues having lower margins.

    Management acknowledged

Q&A highlights

8 direct
Margin Trajectory and Steady-State Profitability Direct
So, net-net, this should be a 25% to 30% steady-state, probably more, EBITDA margin business. ... The inorganic side, which is the INR35 million that we bought from SessionM, right, those will not show much margins for the next 12 months.

Management provided clear long-term EBITDA margin targets (25-30%) and acknowledged short-term margin pressures from acquisitions and salary increments, offering transparency on future profitability.

Asked by Disha Chordiya

SessionM Acquisition Synergies and Financial Impact Direct
SessionM should easily deliver about a INR15 million type EBITDA to the business over the next few years, annual EBITDA going forward. Today that number is at zero, but if it plays the way the last three, four acquisitions have played, you should have another 5 million coming in as we integrate SessionM fully.

Detailed the financial expectations from the SessionM acquisition, including its current EBITDA (zero) and future contribution (INR 15 million), providing a clear metric for future performance tracking.

Asked by Disha Chordiya

FY27 Revenue Guidance Post-Acquisition Direct
With the acquisition having closed, we are comfortable that revenues will cross INR 1,000-1,050 crores in FY27.

Management provided specific revenue guidance for the next fiscal year, indicating the expected impact of the SessionM acquisition on top-line growth.

Asked by Disha Chordiya

ARR vs. Revenue and Impact of Inflation/New ACV Direct
this INR735 to INR765 is not all only inflationary increase or that part. Now, what happens is, let's say we won this large INR20 million contract, right, which we had announced last quarter. Now, not all of it goes live in the first quarter itself, right? It takes about probably six months, nine months to go live.

Clarified the difference between reported revenue and ARR, explaining how inflationary increases, metric expansion, and the staggered go-live of new ACV contribute to the ARR figure, offering insight into revenue recognition.

Asked by Bharat Gulati

M&A Strategy and Value Creation from Acquisitions Direct
So, we're really doing a roll-up of companies which were great earlier, right? Put it that way. ... It's a good win for us because fundamentally, you know, you're moving from a 20% margin platform to a 65%, 67% gross margin platform in Capillary.

Management articulated its M&A strategy as a 'roll-up' of smaller, lower-margin companies onto its high-margin platform, detailing the financial benefits and value creation process.

Asked by NGN Puranik

Value Proposition of Acquired Companies (Customer Access vs. IP) Direct
Mostly like 90% of the value comes from the customer access. Right, so just given loyalty is a very sticky business, I think getting access to sticky long-term revenues is the biggest goal.

Management clarified that customer access and sticky long-term revenues are the primary drivers for acquisitions, with IP/capabilities being secondary benefits, which is crucial for understanding their M&A rationale.

Asked by NGN Puranik

AI Stack Revenue Contribution and Pricing Model Direct
You know, we probably at about 4%, 5% of our revenues coming from the AI stack. ... we are looking to price it as a usage-based model. So, there's going to be the fixed fee for or the system of record type pricing for the base license for loyalty, and then you will have more usage-based revenues from the AI stack.

Provided insight into the current revenue contribution of the AI stack and its future usage-based pricing model, indicating a potential new growth lever.

Asked by NGN Puranik

Headcount Growth vs. Cost Growth Direct
If you look at year-over-year headcount, we've grown 1% while revenue has grown 23%. Now, what we have done is we have ramped up our sales teams in the US. So, our per-cost, you know, sales guys are expensive, right?

Explained the divergence between low headcount growth (1%) and higher cost growth (13-14%) by attributing it to strategic investments in higher-cost US sales teams, clarifying cost structure dynamics.

Asked by Bharat Gulati

2 min read 6 chapters

Detailed narrative

Strong Q4 and Full-Year FY26 Financial Performance

Capillary Technologies reported robust financial results for Q4 FY26, with revenue growing 26% year-on-year to INR 191 crores. For the full fiscal year 2026, revenue increased by 23% to INR 734 crores. Adjusted EBITDA for Q4 stood at INR 35.7 crores, a 28% YoY increase, resulting in a 19% margin. The full-year adjusted EBITDA reached INR 107 crores, up 43% YoY, with a 15% margin, demonstrating significant profitability improvements.

Strategic Acquisition of SessionM and Integration Outlook

The company successfully closed the acquisition of SessionM, Mastercard's merchant loyalty business, on May 1st, 2026. This acquisition brings a sizeable $35 million business with over 40 logos, including five Fortune 500 companies, acquired at approximately 0.5x revenue. Management expects SessionM to be break-even in year one, achieve positive margins in year two, and contribute around INR 15 million in EBITDA over the next few years, although it currently contributes zero.

Robust Net Retention Rates and Organic Growth Drivers

Capillary achieved an impressive overall Net Retention Rate (NRR) of 110% for FY26, with organic NRR at 114% and inorganic NRR at 94%. Organic growth is driven by platform usage, overages, inflationary increases (3-8% depending on geography), and product upgrades like the AI stack. The company aims to maintain a 115% organic NRR, translating to 10-11% growth from existing customers.

Future Profitability Targets and Cost Management

Management outlined a long-term target of 70% gross margin and a 25-30% steady-state EBITDA margin. While Q1 FY27 may see a slight dip in margins due to salary increments and initial SessionM integration, the core organic business is expected to continue its margin expansion. Overall cost growth was 14% against 23% revenue growth in FY26, indicating effective cost leverage, partly due to strategic investments in higher-cost US sales teams.

AI Stack Development and Usage-Based Pricing Model

The company's AI stack, aiRA, is gaining traction, with about a fourth of customers piloting it and contributing 4-5% of current revenues. Capillary is moving towards a usage-based pricing model for its AI stack, combining a fixed fee for the base loyalty license with additional revenues from AI usage. This AI-native approach is seen as a key differentiator and a significant growth driver for the future.

FY27 Revenue Outlook and New ACV Generation

With the SessionM acquisition now closed, Capillary is confident in achieving a revenue target of INR 1,000-1,050 crores for FY27. The company generated INR 121 crores in new Annual Contract Value (ACV) in FY26 and expects to add INR 70-80 crores in new ACV from new customers in the coming year, further bolstering its growth trajectory.

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