Capillary Technologies IPO: Get Issue Date, Price, IPO Details at Kotak Securities

Capillary Technologies India Limited

Capillary Technologies India Limited


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Company Background

Capillary Technologies India Limited is a technology-first company and offers artificial intelligence (AI)-based cloud-native Software-as-a-Solution (SaaS) products and solutions such as automated loyalty management and customer data platforms (CDP) that enable its large enterprise customers (i.e., customers that typically contribute more than Rs 3.50 million a year in terms of revenues) to develop loyalty of its consumers and channel partners. The company’s diversified product suite and technology platform allow its customers to run end-to-end loyalty programs, get a comprehensive view of consumers and offer unified, cross-channel strategies that deliver a real-time omnichannel, personalized, and consistent experience for consumers.

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The company is the market leader in the Asia-Pacific region with a 39% market share in terms of loyalty management capabilities in 2020 based on the geographies in which the company operates (includes customer loyalty only and customer segments that the company serves but does not include employee loyalty) (Source: Zinnov Report). Capillary Technologies India has recently expanded its operations in the United States with the acquisition of Persuade Group in September 2021. It focuses on developing intellectual property and currently holds eight patents and 38 trademarks.

As of October 31, 2021, Capillary Technologies India served over 250 brands across more than 30 countries across India, United Arab Emirates, Saudi Arabia, Singapore, Indonesia, Malaysia, Thailand, United States, and China. Its customers and brands are diversified across verticals and jurisdictions. Its customers include businesses engaged in apparel, footwear, supermarkets, conglomerates, manufacturing and electronics, pharmacy and wellness, fine dining and Quick Service Restaurant (QSR), luxury and jewelry, entertainment, travel and hospitality.

Capillary Technologies India has a presence across the United States, India, Middle East, and Asia, in particular, South East Asia. As of October 31, 2021, the company had eight offices and provided services in over 30 countries. The company expanded its operations in the United States with the recent acquisition of Persuade Group in September 2021. As of October 31, 2021, the company served more than 875 million users (based on unique mobile numbers) and in Fiscal 2021, it processed 1,975.27 million transactions.

Let us now look at a few competitive strengths and strategies of Capillary Technologies India Limited...

Competitive Strengths

+ Market Leader in Consumer Engagement and Loyalty Management : Capillary Technologies India Limited is the market leader in Asia-Pacific region with a 39% market share in terms of loyalty management capabilities in 2020 based on the geographies in which it operates (includes customer loyalty only and customer segments that it serves but does not include employee loyalty). The company’s diversified product suite helps businesses drive customer loyalty and engagement. In terms of scale of operations and loyalty management capabilities, the company has become the market leader and is growing across the Asia-Pacific region by providing a best-in-class loyalty suite to its customers (Source: Zinnov Report). The number of consumers on the company’s platform has increased consistently over the years.

+ High Growth and High Margin United States Operations following Acquisition of Persuade Group : With the acquisition of Persuade Group, the company has a significant presence in the United States with 37 employees based in the United States, as of October 31, 2021. Persuade Group has multiple Fortune 100 and Fortune 500 companies as its customers. Certain customers of Persuade Group include Scheels and Hoya Vision. Its founders, John Tschida and Bill Jansen, have significant experience in the loyalty space. Capillary Persuade Group witnessed growth in revenue from operations by 51.82% from Rs 84.66 million in Fiscal 2019 to Rs 128.53 million in Fiscal 2020 and by 91.71% to Rs 246.41 million in Fiscal 2021. Further, Persuade Loyalty delivered improving Gross Margin – Blended of 74.13%, 75.65%, 78.47% and 82.46% for Fiscal 2019, 2020 and 2021 and in the three months’ period ended June 30, 2021, respectively. The company’s technology-first approach and the Persuade Group team’s experience is a strong combination that will allow the company to enhance its presence in the United States.

+ High-Quality and Diverse Long-Term Customer Relationships : The company serves a number of customers that include both enterprise and small and medium sized businesses across industries and geographies. As of October 31, 2021, it served enterprise customers including 12 Global Fortune 500 companies’ present across 30 countries. Certain of its key customers include TATA, Adani, Petron, Dominos, Jotun, Aditya Birla Fashion Limited, Arvind Fashions Limited, ASICS, Puma Sports India Private Limited, Hoya Vision and Scheels. The company has a history of high customer retention and derives a significant proportion of its revenues from repeat business built on its successful execution of prior engagements. Capillary Technologies India Limited’s customers operate across a range of verticals including apparel, footwear, supermarkets, conglomerates, manufacturing and electronics, pharmacy and wellness, fine dining and QSR, luxury and jewelry, entertainment, travel and hospitality. The strength of its relationships with the customers allows the company to generate additional revenues through up-selling and cross-selling opportunities.

+ Scalable Cloud-Based Infrastructure : The company’s technology infrastructure is built on a scalable, cloud-based architecture that allows its customers to process large volumes of data on a real-time basis and ensure high-speed and stable performance on a large scale to accommodate and support the increased complexity and diversity of its business operations. The company’s cloud platform is built to integrate seamlessly with the customer’s existing technology stack. As of October 31, 2021, the company’s cloud platform hosted over 875 million consumers, and processed over 0.97 million loyalty transactions per hour, and over 41 million consumer communications per day, excluding its US operations. As of October 31, 2021, the company had 159 employees excluding its US operations who develop, manage and maintain its platforms to ensure its customers are able to provide smooth, stable and secure loyalty programs to its consumers.

+ Experienced Leadership Team backed by Marquee Investor Base : Capillary Technologies India Limited is led by a team of experienced professionals with extensive experience in the loyalty and CRM space. Its senior management team’s expertise and industry relationships have helped the company to grow its operations. The company’s Executive Director and CEO, Aneesh Reddy Boddu has extensive entrepreneurial experience and has been recognized by Fortune India as a “Forty under 40” leader. He was also the co-founder of the Entrepreneurship Cell at the Indian Institute of Technology – Kharagpur and has also been awarded the Distinguished Alumnus Award by the institute. The company has also benefited from investments by affiliate entities of Sequoia Capital, Avataar Ventures, and Filter Capital as its Promoter, as well as by Swanland Investment Ltd., an affiliate of Warburg Pincus.

Key Strategies

Here are a few strategies Capillary Technologies India Limited has for its business:

To focus on its Go-to-Market Strategy on Larger Enterprises in Asia
Focus on improving Net Revenue Retention (NRR) in Asia to achieve Higher Growth in the Region
Drive Expansion through addition of New Verticals
Grow organically in the United States
Further Acquisitions in North America and other Western Markets
Continue to Invest in its Platform to Support Large Enterprises, New Verticals, New Geographies and Enable more Artificial Intelligence (AI) use-cases for its Customers

Capillary Technologies India’s Financials

And finally here’s a look at key financials of Capillary Technologies India Ltd.

Revenue from operations

Particulars (in Rs. million)

Particulars (in Rs. million)

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You can read more about Capillary Technologies India Limited and its IPO from the company’s draft red herring prospectus (DRHP) here.