eMudhra

eMudhra reported a robust Q2 FY26 with total income of INR 174.95 crores, a 22.6% year-on-year increase. EBITDA for the quarter was INR 43.33 crores, translating to a 24.8% margin and 28.1% YoY growth. Net profit reached INR 26.44 crores, with a 15.1% net margin and 18.6% YoY growth. For the first half of FY26, total income was INR 325.57 crores (INR 3,255.7 million), up 37% YoY, with PAT at INR 51.47 crores (INR 514.7 million), growing 27.1% YoY and maintaining a 15.8% margin.

The company strengthened its cybersecurity portfolio with the acquisition of AICyberForge Inc., a US-based company specializing in key and secrets management. Additionally, the integration of Cryptas, acquired on July 1st, is underway. Cryptas contributed INR 22 crores to Q2 FY26 revenue but reported a PAT loss of INR 1.56 crores. Management expects Cryptas to turn profitable within the next two quarters as integration efforts and cross-selling initiatives mature.

The product business is a key growth driver, with the lead pipeline growing by 20-30%. Significant traction is observed in the Middle East, Africa, and the Far East (particularly the Philippines). In the US, the product business is also expected to pick up, with negotiations underway for 5-6 major deals, each potentially exceeding $1 million, and 2-3 expected to materialize in the current quarter. This product-led growth is crucial for maintaining the overall growth trajectory.

The US service business, which contributed approximately INR 40 crores in Q2 FY26, has remained stagnant. This is attributed to H1B visa policy challenges and the increasing impact of AI on staffing needs. To mitigate these risks, eMudhra is diversifying its product business, focusing on local hiring of citizens and green card holders, and expanding into multiple countries to reduce dependency on a single market.

eMudhra's R&D efforts are focused on converged identity, data privacy, and generative AI. The company is capitalizing approximately INR 54-55 crores for product development in FY26, earmarked for three key areas: data privacy stack, emSigner enhancements (BFSI verticalization, voice authentication, remote signing), and CERTInext improvements. New products, including mobile PKI and post-quantum cryptography features, are expected to be launched by March-April 2026, enhancing existing product offerings rather than being sold as standalone products.

Net cash flow from operating activities for H1 FY26 was INR 54.58 crores. The company reported a negative working capital adjustment of INR 20.73 crores, primarily due to increased volume leading to higher trade receivables and payables. Despite significant cash usage for acquisitions (INR 95 crores for Cryptas and AICyberForge) and capital expenditure (INR 30 crores), the cash balance at FY26 end is projected to be INR 125-140 crores, up from the current INR 102 crores, indicating sufficient liquidity without the need for further capital raising.