Capillary Technologies IPO: Complete Investor Guide
The much-anticipated initial public offering of Capillary Technologies India Limited opened for public subscription on Friday, November 14, marking a significant moment for the software-as-a-service sector. The IPO will remain open for investors until Tuesday, November 18, providing a five-day window for subscription.
IPO Structure and Financial Details
The Capillary Technologies IPO comprises a combination of fresh issue and offer for sale components. The company plans to raise ₹345 crores through a fresh issue of 60 lakh shares, while the offer for sale component involves 92.3 lakh shares valued at ₹532.50 crore. The price band has been fixed between ₹549 to ₹577 per equity share, making it accessible to a wide range of investors.
Leading the IPO process are book-running lead managers JM Financial, IIFL Capital Services, and Nomura Financial Advisory and Securities (India) Private Limited. MUFG Intime India Pvt. Ltd. has been appointed as the registrar for the issue, ensuring smooth processing of applications and allotments.
Important Dates and Timeline
Investors should mark their calendars for key dates in the IPO process. The share allotment is expected to be finalized on Wednesday, November 19, with successful bidders receiving their shares on Thursday, November 20. Those who don't receive allotment will get their refunds on the same day. The company's shares are scheduled to list on both BSE and NSE on Friday, November 21.
Prior to the public offering, Capillary Technologies demonstrated strong institutional interest by raising ₹394 crore from anchor investors on Thursday. This pre-IPO placement indicates confidence among qualified institutional buyers despite mixed retail sentiment.
Company Profile and Business Model
According to the Red Herring Prospectus, Capillary Technologies is an artificial intelligence-based cloud-native SaaS company that primarily serves enterprise customers worldwide. The company operates in the rapidly growing loyalty management market, offering AI-driven solutions that have helped it achieve an impressive Net Revenue Retention rate of 112-143%.
The company has established a significant global footprint with presence across 47 countries and serves 413 brands through its diversified portfolio. Particularly noteworthy is its strong traction in the competitive US market, demonstrating the scalability of its business model.
Financial Performance Analysis
Capillary Technologies has shown a remarkable financial turnaround in recent years. The company reported a net profit of ₹14.15 crore in FY25, marking its first profitable year after significant losses in previous periods. The company had suffered losses of ₹88.56 crore in FY23, which improved to ₹68.35 crore in FY24 before turning profitable.
Revenue growth has been substantial, with FY25 revenue reaching ₹598 crore. This improvement in profitability is attributed to operating leverage and successful integration of acquisitions, though the company has experienced negative cash flows in the past.
Market Response and Grey Market Premium
The initial market response to the IPO has been cautious, with the issue seeing minimal subscription by 10:10 am on the opening day. The grey market premium for Capillary Technologies shares on November 14 was nil, indicating that the stock might list at par with the issue price. This reflects investor concerns about the company's valuation and competitive positioning.
Expert Opinions and Investment Recommendations
Seema Srivastava, Senior Research Analyst at SMC Global Securities, provided a balanced perspective on the IPO. She highlighted the company's strong AI-driven SaaS platform and global market presence as positive factors, but expressed concerns about the steep valuation.
The post-issue price-to-earnings ratio ranges between 171 to 180 times, while the price-to-book value stands at 4.5 to 4.7 times. These multiples are considered high even by SaaS industry standards, raising questions about near-term listing gains.
Swastika Investmart has recommended avoiding this IPO, citing the company's history of losses and the substantial OFS component. The brokerage highlighted the competitive challenges the company faces from global giants like Salesforce, Adobe, and HubSpot in the crowded SaaS marketplace.
Key Risk Factors
Several risk factors warrant careful consideration by potential investors. The company has significant customer concentration risk, with the top 10 clients contributing nearly 56% of total revenue. This dependency on a limited client base could impact financial stability if any major clients discontinue services.
Other concerns include the company's reliance on continuous innovation and skilled talent retention, integration risks from previous acquisitions, and the aggressive valuation metrics. The substantial offer for sale component also means that a large portion of the IPO proceeds will go to existing shareholders rather than funding company growth.
Investment Verdict
The Capillary Technologies IPO presents a mixed investment proposition that requires careful evaluation. While the long-term growth story appears promising due to AI-led products and expanding global demand for loyalty management solutions, the high valuation and concentration risks make it suitable primarily for investors with high-risk appetite.
Conservative investors or those seeking short-term listing gains might consider avoiding this offering, given the nil grey market premium and expert concerns about valuation. As with any investment decision, potential investors should consult with certified financial advisors and consider their individual risk tolerance before applying.
