Capillary Technologies
IPO Size: Rs. 878 cr
- Rs. 345 cr fresh issue for Rs. 143 cr cloud infra, Rs. 72 cr product development, and Rs. 10 cr asset purchase
- Rs. 533 cr is offer for sale (OFS) – 93% by the promoter (68% to fall to 52%) and balance by investor Trudy (4.5% to drop to 3.3%)
Price band: Rs. 549-577 per share
- 75% reserved for institutions and only 10% retail, as loss in FY23 and FY24
M cap: Rs. 4,576 cr, implying 19% dilution
IPO Date: Fri 14th Nov to Tue 18th Nov 2025, Listing Fri 21st Nov 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Bengaluru-based SaaS Company
Capillary Technologies is a 14 year old provider of software as a service (SaaS) to B2B customers, for their end-customer and channel partner loyalty and engagement management. Serving 110 customers, it garners ~56% of Rs. 500 cr revenue from North America and 25% from Asia Pacific.
Small Scale and Poor Margin
FY25 topline was at Rs. 481 cr, with profit before tax of Rs. 11 cr, implying 2% margin. H1FY25 topline stood at Rs. 360 cr with profit before tax (PBT) at just Rs. 52 lakh. EBITDA margin exclude amortised technology cost and hence are an inaccurate measure of profitability.
2nd attempt at IPO
Company had earlier filed DRHP in Dec 2021. Since then, it has undertaken 4 acquisitions, which have increased topline from Rs. 115 cr in FY21, but marred bottomline, with PBT dropping from FY21’s Rs. 17 cr.
Since its establishment in Mar 2012, Capillary has raised nearly Rs. 600 cr in capital. Annulising H1FY26 revenue leads to a capital efficiency ratio of just 1x, which does not indicate any ‘technology leverage’ in business. In addition, it seeks additional growth capital in the IPO.
Exorbitant Pricing
M cap and enterprise value of Rs. 4,580 cr, leads to a revenue multiple of 7.1x, on H1FY26 annualised basis, which is seen exorbitant. Although not an exact peer, fintech SaaS player Zaggle is profitable, yet trading at 3.4x revenue on larger topline of Rs. 1,500 cr topline and 7% net margin.
SaaS businesses are generally profitable only on scale. Capillary has been in existence for over 13 years, and even after 4 acquisitions, barely Rs. 650 cr topline and break even at bottomline is unimpressive. Company itself has made acquisitions at 1- 2x revenue, then justifying 7x for itself is too ambitious.
18th Nov 2025 at 10:22 am
18th Nov 2025 at 04:59 am