Protean eGov Technologies Ltd (Protean) is a leading provider of technology solutions, playing a key role in India’s e-governance and “Digital India” initiatives. The company commands a strong market presence across various sectors, particularly in tax infrastructure, where it holds over 60% market share in TIN/PAN issuance. In the retirement segment, as a Central Recordkeeping Agency (CRA), it captures 92% of the market for the National Pension Scheme (NPS) and holds a full 100% share in the Atal Pension Yojana (APY). In the identity authentication space, Protean provides services including Aadhaar authentication, PAN verification, e-KYC, and e-Sign. The demand for these services is steadily increasing, driven by the government’s emphasis on Aadhaar and PAN authentication for all transactions and onboarding processes.
The company’s offerings are broad, highly specialized, and largely annuity based. 75-80% of its revenues come from transaction-based services, while the remaining 20-25% stem from annuity-based sources. Looking ahead, Protean is focused on expanding its expertise in India Stack, open digital ecosystems, and cloud services, which are expected to significantly enhance its financial performance in the near future.
Over FY24-27E, we expect Protean’s revenue/ EBITDA/ net earnings to grow at a CAGR of 22.2%/ 47.1%/ 33.7% to INR 1,611 cr/ INR 285 cr/ INR 233 cr respectively, while EBITDA and net margins are expected to improve by 752bps to 17.7% and 341bps to 14.4%. Protean maintains a net debt-free balance sheet and consistently generates positive FCFF due to its minimal capex needs. This is expected to enhance its balance sheet strength and improve key financial metrics. As a result, return ratios – RoE and RoIC – are expected to improve by 883bps to 19.3% and 1665bps to 24.8% respectively by FY27E.
Given the leading position of Protean in various services, strong revenue growth outlook, scope for profit margin expansion and negative net debt, we remain positive on the stock. We initiate coverage with a BUY rating and a DCF based price target of INR 2,880 (50.2X FY27 P/E), representing an upside of 50.2% in the next 24 months.