Protean eGov Technologies Limited (PROTEAN) Q1 2027 Earnings Call Transcript

Good day, and welcome to Protein E-Governance Technology Q1 FY27 Earnings Conference Call hosted by Go India Advisors. As a reminder, all participant clients will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Pushpamani, Head Investor Relations, Protein E-Governance Technologies. Thank you, and over to you, ma'am.

Thanks, Sanya. Good evening, everyone. I welcome you all to the Q1 FY27 results discussion. You must have received the results, press release, and the investor presentation of the company, which is available on BSC, NSC, and as well as on the company's website. As usual, we will start the forum with the opening remarks by our MD and CEO, followed by CFO, and then we will open the floor for the question and answer session. If any of you, your questions remain unanswered, you may reach out to us afterwards. The management on today's call would be represented by Mr. Ajay Rajan, Managing Director and CEO, Mr. V. Ishwaran, Whole Time Director and COO, Mr. Rakesh Doshi, Chief Business Officer, Mr. Sandeep Mantri, Chief Financial Officer, and myself, Head Invest Relations. Before we begin, I would like to mention that some of the statements in today's discussion may be forward-looking in nature, and we believe that the expectations contained in these statements are reasonable. However, these statements involve a number of risks and uncertainties that may lead to different results. With this, I invite our Managing Director, Mr. Ajay Rajan. Thank you, and over to you, sir.

Thank you, Kushpa. Good evening, everyone, and thank you for joining us for our Q1FI27 earning call. Within two months into the organization, it's a privilege for me to be here in the first interaction with you as the MD and CEO of Protein. For those who don't know me, I have spent over three decades in banking between 21 plus years with Deutsche Bank, a large global bank, and close to nine years in Yes Bank, one of India's most digital savvy banks. Most of my experience has been spent building and scaling businesses, and at one point, as you're all aware, rebuilding one. I have been part of the management team that helped ride Yes Bank through the 2020 crisis, rebuilding the franchise, and most importantly, rebuilding the trust with customers, regulators, and investors. That experience taught me two things that are directly relevant to the role I took over at Protein. First, that institutions are ultimately valued for the trust they hold. And second, that innovative mindset with the right product solutioning, disciplined execution, sharp capital allocation, and relentless focus on profitability is what helps build a strong franchise. Few organizations have had the privilege of contributing to platforms that touch the lives of millions of citizens. While simultaneously supporting economic growth and institutional transformation, for over three decades, Protein has been that quiet custodian of India's digital trust, having built digital public infrastructure at population scale for the country, and now taken steps towards globalizing these capabilities in line with India's vision of becoming a global exporter of DPI. To put some tangibility in this statement, let me share some numbers. Protein has issued more than 58 crore PAN cards till date, opened more than 9 crore pension accounts across NPS and Atal Pension Yojda, completed over 1,500 crore online PAN validations, 250 crore eKYC transactions, 400 crore Aadhaar authentications, and 70 crore e-signs till date. This proves that the real infrastructure is not always the servers or the APIs. It is the trust earned transaction by transaction, and that trust is Protein's moat, which we have earned over 30 years. Coming to the agenda of this call, I would like to use this opportunity to not only share the Q1 financial update, but given that it's my first investor call, I'm sure all of you would like to hear from me about the future we intend to create. Protein possesses something truly special, talented and a committed team with deep institutional knowledge and a legacy of building innovative population-scale DPI over three decades. At the same time, I also see that the organization at an important infraction point. The opportunities before us are immense, but so are the expectations of our customers, regulators, shareholders, and the ecosystem partners. So, the next phase of our journey will require us to combine our legacy strengths with newer ideas, sharper and more agile execution, stakeholder centricity, and a focus on outcomes. So, let me start with sharing with you some immediate strategic priorities that I have set for myself. First is deepening the core franchise with sharpened execution. We are continuously reviewing our portfolio and will allocate capital and bandwidth towards businesses where returns are the strongest. Our focus will be on high-margin businesses and product profitability by building adjacencies around our core strength, which is the DPI. Second, we are closely relooking at our cost structures and using AI to drive efficiency across the organization. While also embedding AI into making our product solution more intelligent and intuitive. Third, we are sharpening our approach towards international expansion in a very focused, partnership-led model in a defined set of geographies with sharply identified solutions. In order to do all this, we will also pursue inorganic growth opportunities that create long-term strategic value, strengthen our capabilities, and contribute meaningfully to our top line, but more importantly, our bottom line. The earlier chapter of India's DPI story was about building the foundational rails. We saw solutions around identity, payments, data, and, as you're aware, Protein helped build several of them. The Karthi is now... I am entering into the second chapter, which is all about value-added sectoral services and AI-driven intelligence that ride on these rails. And I am putting deliberately thrust on AI here, since DPI and AI can create together something which is profoundly different. A living public infrastructure that is predictive, personalized, preventive, and more importantly, citizen-first. AI can enable services to find citizens. We have now spent some time on our Q1-FI27 performance before I get into the details of the near-term, medium-term, and long-term strategy for protein, because that, I'm sure, is something that each one of you would like to hear, you know, given this is the first call. So, on Q1, we followed on a way. Q1 has been a mixed quarter for Protein. We reported a resilient and steady operating performance in terms of revenue from operations, which grew 19% year-on-year to 251 crores. EBITDA stood at 28 crores in Q1 compared to 45 crores in similar quarter in FI26. This reflects a decline of 38% year-on-year and an EBITDA margin of 10%. The margin for this quarter was primarily impacted by some upfront investments worth Thank you. The implementation of some of our prestigious RFP-led mandates. In addition, we also saw the margins getting affected by cost inflation driven by ongoing geopolitical tensions, which resulted in higher procurement costs for technology, hardware, white goods, and the key inputs required for some of these projects. Since these mandates are currently in the deployment phase and have not yet reached steady-state revenue generation, the associated costs were incurred ahead of revenue realization, temporarily impacting the profitability. On a normalized basis, however, excluding these investments, the EBITDA for the quarter would have been approximately 46 crores, which would have translated to EBITDA margin of around 17.2%. The company remains confident that these investments will begin contributing meaningfully to revenue in the coming quarters, which will result in improved operating leverage and margin recovery. Moreover, our balance sheet continues to remain strong with zero debt and more than 800 crores of cash and marketable securities. This gives us the flexibility to absorb these costs and also invest in strategic opportunities that will help us boost our product capabilities and resulting revenue and profitability. I'll give you some details on the way businesses have delivered. Our tax services, which is a source of transactional revenue for us, remain largely stable year-on-year, despite an industry-wide decline in PAN insuances. This temporary decline in industry volumes can be attributed to certain change in income tax rules, which required applicants to submit additional documents for date of birth proof. Since Aadhaar was no longer accepted for this purpose, post Honorable Supreme Court judgment, this change led to a non-digital flow, thereby causing a 12% decline in overall PAN issuances in the country. Despite this, however, Protein showed resilience in its distribution capabilities, and we gained 275 business points in market share, moving from 59% in FI26 to 62% in Q1 FI27, while we issued over a crore PAN cards. Our CRA services, which generates both annuity and transactional revenue, continues to present a significant long-term opportunity. We onboarded around 3.9 million new subscribers during the quarter. We captured 95% of incremental subscriber additions. And I am also proud to share that we onboarded more than 1,000 new corporates, the highest ever in a single quarter since inception. We continue to hold a dominant 97% share across NPS, APY, and UPS, and are the primary CRA for the unified pension schemes. Another encouraging development has been the NPS Vatsalya, which gained strong traction following revised guidelines offering greater withdrawal flexibility, while the total scheme subscriber base itself crossed over 2 lakhs, 78,000 of that was added by Protein during the last quarter itself. So while maintaining full focus to retain and grow our government segment, where we hold dominant position, we will accelerate our growth in the non-government segment, where overall market penetration is low, but the annuity opportunity is the largest. Our highest ever corporate onboarding in a single quarter is the early proof of that focus. More importantly, the Retirement Registry as a Service is a business where we will leverage our two decades of dominant experience and double down internationally, enabling governments across the world to modernize the retirement system using India's and Protein's proven experience. Third is our identity services, which is a strong source of transactional revenue. We delivered 16% revenue growth year on year, supported by 20% combined volume growth. So we remain the only company in the country, which offers all four foundational identity services, and we are well positioned to remain and grow as a preferred partner for the BFSI ecosystem, which is primarily driving these volumes. I want to call out here that businesses like eSign and more importantly eSign Pro, which is the complete digital documentation workflow solutions, from workflow to stamping to signing, this is a unique mode for Protein and is a massively scalable and a very, very profitable opportunity, both domestically and internationally. BFSI especially and every government, enterprise, and institution has the opportunity and need to digitize this documentation workflow. So I remain very, very confident that we will be able to monetize eSignPro in the going future very, very well. I am also encouraged by our new initiatives which continue to deliver robust outcomes. This contributed 17% of our quarterly revenues as compared with 10% in FI26. This is in line with our stated objective to diversify our businesses and revenue lines, and this will continue to remain a key focus area. Some of the drivers here will be the strategic mandates like Sursize, CKYC, Bhima Sugam, Aadha Seva Kendra, the AgriStack. So these are not only core DPI implementation, most importantly, each of them significantly opens up adjacent value-added opportunities for us where we can monetize on top of some of these initiatives. A quick update on the Aadhaar mandate. We have rolled out 75 ASKs across 24 states and union territories as of July 26. We expect to complete the implementation by Q3, and revenue from these centers has already commenced, and it gives us visibility into a recurring transaction-based revenue stream. So, this is the, you know, some of the numbers on performance in terms of the quarterly numbers. Sandeep will provide more details in terms of that. But I would like to spend some time now in terms of our forward strategy. So, as I think about our present and futures, I am seeing Protein's business through three important pillars. The pillar number one would be scaling our DPI proposition. Through DPI 2.0, which is about strengthening the trusted platforms that has defined Protein's legacy and accelerating the new foundational digital rails across sectors such as financial service, insurance, agri, health, education, commerce. So more sectoral will be the focus on DPI 2.0. The second pillar for us would be monetizing our core capability through solutioning for the enterprise digital ecosystem. This we will do by building value-added AI-driven intelligence layer on top of those foundational rails delivered by a bundled solution-led approach which solves meaningful problems for governments, institutions, and enterprises. The third... Our strategic pillar would be our global expansion, which is taking India's and Protein's BPI capabilities to the global markets. Each of these pillars, as you would realize, presents significant opportunities, and we will ensure that we innovate responsibly, more importantly, deliver consistently, and execute with speed, all while maintaining financial discipline. So, let's see. Thank you. That a government can adapt for its own needs. For three decades, you will realize that Protein has built nearly most of these blocks today, whether it is digital identity, master registries for citizens, consent-based data sharing across frameworks, real-time verification services, secure data exchange, pension systems, tax administration platforms. Compliance were designed. All of these, Protein has had role to play in all of these, right? But when you look at the DPI box approach, we package these now as a modular, interoperable, configurable, and scalable stack. The objective is to take the benefit of a bundled citizen service proposition. Accelerate implementation while retaining flexibility and ownership rather than just commissioning a DPI built from scratch. So, this approach we will deploy both in India as well as in the international markets. And this will be a very differentiated but a more comprehensive approach where the intent will be a ready to deploy digital foundation rather than spending time on a multi-year integration program. In terms of our approach to monetize the DPI and creating value for the ecosystem, we will also move from a product selling approach to a solution-led approach. The future of DPI, I believe, will be defined by how effectively we convert the access which we are creating into outcomes. And this, I believe, that success will be measured by how effectively our platforms improve lives. And expands opportunity for citizens and businesses. The rails that we built carry enormous volumes, and I alluded to some of those volumes at the starting of my session, but volume on its own is not value. If we simply chase more transactions of the same kind, we will grow revenue, but the margins will not grow. And I'm sure a lot of you have, you know, thoughts on that, right? So that is exactly what I am planning to address via this. So this is not the business we intend to build. We want to build a business where the margins are profitable. So let me make this whole approach that I mentioned about with, you know, let me make it real with two examples. Today if you look at a bank. And for us, you know, banks, banking, or financial institutions actually, you know, reflect a very, very large, significant opportunity, which is where the fintechs, you know, are building a lot of solutions, right? So that is exactly what, you know, we would like to do. So today, you need to look at a bank. It operates today in terms of onboarding customers digitally, but for that, they take e-KYC from one. They may take document verification and execution from another partner. They may take fraud and AML screening from a third partner. They may take a bank statement analysis from a fourth partner, e-signing and stamping of documents from a fifth partner, and CKYC reporting from a sixth partner. Then they build and maintain the plumbing between all of them. And that fragmentation is expensive for them, it is fragile, and it accumulates technical debt, which in every handoff between systems becomes a target for a customer drop-off. And I have seen it for 30 years on the other side, that this is a real-life situation which every financial institution in the country today grapples with. So, this is where Protein with its dominance in some of these foundational products will adopt a client-centric approach by bundling the right combination of our platforms, APIs, and most importantly, the delivery capability to deliver an end-to-end solution. So when you look at what I spoke earlier, all the underlying components, whether it is identity, verification, consent, signing, the registries, everything gets configured differently for each customer, and this changes the conversation from selling a product to owning an outcome. By bringing together all this technology domain expertise and execution capabilities into an integrated solution, we not only achieve scalability of our offerings, we deepen our customer relationship, we create a greater stickiness, and most importantly, we build sustainable, profitable, high-margin business. Another example, if I may take, is a retail lending, and this is where maximum volumes are seen by banks, MBFCs, etc. Now, when a customer applies for a personal loan on a lender's app, this is where our CKYC solution with Aadhaar authentication can help establish the identity in seconds. Then with the customer consent, Protein's account aggregator can pull a back statement. Which our analyzer can convert into an income cash flow view for the underwriter. Through our eSign Pro, the sanction letter loan agreement can be generated from a template, stamped with the relevant state eStamp, and then eSign with the Aadhaar, making the lender ready for disbursement. Now, this is where Protean in a consented and intelligent framework with one journey, one contract, one integration can help eliminate that friction which today exists across every financial journey. Earlier, what used to be multi-vendors, multi-month integration program can become a very seamless one-step integration. So that's the whole point, right? The building blocks don't change, but the configuration does. We are also, how does it impact our margins? We are moving from being priced per API call to being priced per journey, per outcome, which becomes a very different conversation fundamentally on value and which leads to better margin improvement. So our mix shifts from higher margin value-added services and away from just pass-through volume, which currently is, you know, what's the case. Also, more importantly, the client's thickiness improves and which is where, you know, our product penetration also improves with the ecosystem. So in summary, we intend to move from volume and growth to value creation, better margins, better profitability, deeper, long-lasting customer relationships, and everything that we build in this layer will be distributed through a multi-sector API service platform, which we will deliver in a sandbox-enabled, ready-to-consume workflow. And why do I believe that protein... It is most uniquely placed to creating this digital ecosystem on top of the foundational DPI days because we own or operate almost every component required end-to-end under the relevant regulatory license. And for the rest, we always, you know, can have a partnership approach where we bring in the right partner and in due course, maybe the right acquisition to bring it in-house. The third pillar will be our international strategy, and this we will be very deliberately focused and prioritize a smaller number of geographies where the need is real, funding is identifiable, and where our reference credentials adds value, you know, for Protein. More importantly, we will enter it in a light touch model, which is partnership-led, capital light, and we will work with multilateral institutions and local system integrators, you know, in those locations. The more important part is the whole DPI in a box approach, which I detailed about. I see a big opportunity for us to contribute to the global digital transformation initiatives, you know, from a portfolio perspective. The theme of India's model of digital democracy will be a generational opportunity in my mind as positioned as India's national trust architect for which India protein will be one of the most natural carriers for the globe. Another area that I would like to draw attention for everyone is the CKYC mandate, which we are building for them. And I believe this will be a game changer mandate. Today, a citizen must prove who they are again and again to the bank, insurer, mutual fund, every financial institution. Same documents, same friction, same cost, every time. Vision of CKYC is simple. Prove it once and with consent. Carry that trust everywhere. Build trust once. Reuse it a billion times. And this is what Protein is building under the CSI mandate. Maintaining the next generation central KYC record registry. API first, cloud native overall, which is migrating over a billion plus records backed by all the four financial regulators. But that's only one side of the equation, which is the sovereign record of the financial identity. The equally or more valuable side is the other side. Because once the registry is modernized, every regulated entity in the country will need to connect to it to search, download, on top of it. That side also, not only the KYC APIs, We have a broader API stack to give comprehensive proposition to our BFSI customers who are going to be the biggest users of this. We are not only building the database, we are building the on-ramps onto it, and while the registry was a fee mandate, the on-ramps will be a mix of recurring opportunity. So, operating the trust registry and monetizing the access layer, that is what we intend to replicate across all our infrastructure assets. So, this is going to be the approach on every DPI mandate that Protein is running to. I also want to assure everyone that we are also reviewing our portfolio through clear capital allocation lens. Some of our businesses will depend on the pace at which wider ecosystem matures, but while we may decide to stay passively invested, we will calibrate our incremental energy towards some of these initiatives where we see immediate revenue maximization. Cloud and account aggregator, both are, in today's day, a small business for now, but remain strategically relevant assets for us, and we are very actively sharpening the commercial model for both of them. Our METI certified sovereign cloud in particular is genuinely differentiated for mission-critical and regulated workloads, and it is an important enabler of this sovereign by design proposition we take to our government customers. Our approach here will be to look at strategic partnerships and investments, which will build a clear path to scale and profitability. So to conclude, Protein has spent 30 years quietly, reliably building the foundations of India's digital future. That work has made us India's national trust architect. Our ambition now is to carry that role forward from building rails to building the intelligence layer above them. And from India to the world. My commitment to you is to pair these three decades of trust with sharper execution, stronger profitability, more importantly, a bolder ambition, and in doing so, create durable, long-term value for all our stakeholders. I would also encourage you to go through our investor presentation, where we have articulated our forward strategy and long-term growth roadmap in more detail. And I really thank you sincerely for the confidence in Protein, and I would hand over to CFO Spandeep Mantri to take you through additional details on the financials.

Thank you, Ajay. First of all, let me welcome you to Protein and the first earning goal of Protein. Very detailed explanation, quite helpful. And my last two months experience is quite enriching. Thank you for clearly. The construction industry in India continue to benefit from it.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to review yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rohan M, from Equirus Security. Please go ahead.

Good evening, sir, and thanks for the opportunity. Sir, firstly, during your opening remarks, you already talked about inorganic growth opportunities. So, which segments or which areas are you exploring those opportunities?

We are actually right now, as I mentioned to you, looking at all opportunities which Thank you. These particular objectives that I have mentioned. So, you know, right now, you know, we are focusing on something which will either help me on my top-line, bottom-line, or reducing my cost through automation.

Sure, sir. Sir, second is on Aadha, Seva, Kendra, with respect to all the roll-outs that are expected in various districts. So, is the people cost already baked in into this quarter numbers, or can we expect the employee expenses to go up further? And does the 1Q number also factor in the wage, the salary hikes that the organization would have taken?

Yeah, so I, you know, for Aadhaar Seva Kendra, people have been backed up for most of the Aadhaar Seva Kendra, but still there are, you know, quite a few Aadhaar Seva Kendra, which are yet to be, you know, operational in quarter three. So for those Aadhaar Seva Kendra, the cost will come in, you know.

So what kind of an increase can we expect by 3Q on employee expenses?

On the employee expenses on account of IRR?

So overall employee expenses by 3Q, just to get a sense.

Overall employee expenses I would not be able to tell you right now because there are a lot of, you know, Aadhaar Seva Kendra where we are still going on and, you know, there will be a lot of changes as I rightly said in, you know, in strategy toward building, you know, cost initiatives and, you know, achieving more and efficient, you know, initiatives to reduce the cost of population. However, the cost will accept Aadhaar. The cost will accept Aadhaar Seva Kendra employees. The cost will remain more or less safe.

Okay. So just to ask, Adhavi, out of the $69,000, what would be the cost of Aadha Seva Kendra right now?

I can't specifically tell you because we are not disclosing segments, you know.

And on the Aadha Seva Kendras which have gone live, in terms of the revenue trends there, If you can just touch base on for the centers which are already operational for more than one month, like how is the margin that is shaping up and are the revenues in line with what was the original expectation when the contract was awarded to us? This is the district mapping of ABCD.

Rohan, very early to say right now, because the Adhaar Seva can be operational for last 3-4 months, so I think we need to see the trend for at least one more quarter, and then we can provide some visibility on what kind of revenues, you know. But having said that, the initial estimates are in line with our expectations.

So, we had always, Rohan, envisaged the ramped up portal because once the setup happens, you know, it takes a certain bit of time for, you know, for people to start coming in and volume getting ramped up. So, whatever estimates that we had done at the time of the RFP, you know, the initial assessments are more or less in line with those expectations. So the numbers seem to be on target, and that's in line with what we had expected. And maybe since you asked specifically on the inorganic, I'll give you a little more color on that. See, for us, the overall BFSI segment will be, you know, one of the most focused segment from an enterprise value creation perspective. So, in my entire speech, I also alluded to the intelligence layer that we are creating. So, a lot of the DPI that we have created in terms of benefit to the citizens, you know, it will eventually have to be through culmination of some financial services, you know, for citizens or enterprises. Very broadly, Roan, the acquisition that we will look at will be in this space so that it fastens our go-to market towards delivering some of those solutions and start quickly generating revenue and, more importantly, start generating profitability by us, having the enablement to deliver some of those solutions to the enterprises or BFSI segment in a very fast GQ.

And lastly, on the PAN 2.0 readiness, would we need to make any changes in the process or the offerings that we do or maybe the people team structure? Is there something required at our end so whenever PAN 2.0 goes live, we get some share of the revenue?

Very early to say, right now, I think PEN 2.0 is still, you know, away. So, PEN 2.0, as of now, we are not required to make any changes in our platforms, but we will see how things operate.

Yes, and again, you know, from a clarity perspective, I think, you know, in the earlier calls also, this has been discussed and shared that a lot of the volumes, or in fact, bulk of the volumes continue to come through assisted model. And even if you look at this quarter, while, you know, it was an aberration because of the form friction, but, you know, the volumes every quarter, we have only seen increasing in the assisted mode, which is basically our core distribution capability. And more importantly, if you see, even in a falling overall number quarter, which is this quarter, where the overall number went down, but protein share increased close to almost 275 business points, increase in protein share happened. While, you know, we will look at more visibility in terms of how exactly PAN 2.0 will pan out, but we remain confident that, you know, we will remain relevant in this piece, of course, but, you know, more clarity on that as the date, you know, comes in, I think we'll get more clarity around that time.

And we want to further answer your question on employee benefit. Our endeavor will be to see that we create a scalable organization so that when we grow from here, we need not to hire additional people to deliver the projects or the revenue. At the end of the year, I think we will see some cost reduction while it may be offset by the increments that we give.

The next question is from the line of Deepak Agarwal from Param Capital. Please go ahead.

Yeah, good evening, sir. Am I all right, Bhadzha?

Yeah.

So my question was, like, as investors, generally people would want to see consistency. So the fact is, if you see over the last 5-7 years, we have grown from about 800 growth top line to about 1000 growth in the last 5-6 years. I'd love to hear the thought in terms of where do you think this margin profile is sustainable. So, obviously, we are investing ahead of, as we have mentioned in the press, please, as well, for newer projects. In the longer run, where do you see the EBITDA margin for the overall entity stabilizing?

So, you know, Deepak, unfortunately, this quarter was affected, impacted by, you know, one-timer, which was about 18 crores. So, it's consistent. to make some of these investments to create a better future for, you know, for the I am not so worried about one quarter record, but I am more excited about the future.

And it's a very valid question from your side. And if you actually look at the whole way when I spoke about in the first 30 minutes, you will find that every approach. Be sure that... Thank you for doing that. Because then you are more curated, more customized, have a better proposition for the client. But more importantly, we move from being a transactional engagement for the client to a more solution-driven strategic engagement to the customer, which enables our margin improvement. So when you go and sell one product versus when you sell a bouquet of multiple products packaged as a solution, your stickiness, your margins, everything. And that is really what the approach, you know, will enable, and that is how, at least, you know, in my three decades of even banking experience, you know, we have worked on doing that, and that's a very proven, successful model. Of course, you know, held by some of the inorganic partnerships and acquisitions that I mentioned will be aimed towards making sure that you are generating higher margin in geographies where there is a better price point for some. So, like Sandeep very rightly mentioned, while, of course, you know, we do appreciate the fact that margins have, you know, pretty much been consistent or maybe to some extent deteriorated over the last few years. But what we can definitely look forward with this new approach and outlook is that, you know, we would like to double down on higher margin businesses. And that hopefully should reflect. Once you know the investment period is over, intangible, you know, financial outcomes for the company.

And as explained in my earlier calls as well, I see, you know, the margins are going to improve substantially from here in next two to three years. I think it will be a different margin trajectory.

Got it, got it, got it.

So, if you look at the... I hope how we will... Thank you.

Right, right. So, also, like, if you look at the E-Seva, Kaleraz, and we have been talking about, we have rolled out over, like, the last four months, again, from an investor context, that, although, obviously, it's a large volume business, but the perception is, it will generally be a substantially lower margin business, considering it is quite competitive, plus, it's far more physical, right, compared to a product and a technology stack. So your thought is, is it like, can it become really vague, and is it that the margin there will be substantially worse?

The margin in RR Devakandra would not be substantially low, but as I said, we have to see how the volume picks up in Q3 or Q4 when these centers are stable and operational. Then only we could really figure out what kind of margin we will earn. But having said that, I think these, as I earlier also said, these are not EBITDA-acritic, but at least they will generate sustainable, stable margins in the business. Other aspect to that is that we have to create adjacencies out of some of these projects which will deliver higher and profitable opportunities for us.

Water. Great, great, sir. Thank you so much. Thank you.

Thank you. The next question is from the line of Vinil Shah from Dalal and Roja. Please go ahead.

Good evening. Thank you for the opportunity. So my first question is that as we have already mentioned that due to our higher upfront cost investments in Q1, we have had some margin in time. So are there any additional costs expected in Q2 and the balance of FY27 as well?

None to my knowledge. The only thing which will have some temporary impact will be Adarshava Kendra. Otherwise, I don't see any such one-timers going forward. So I think margin will get stabilized from Q2 or Q3.

Okay, and sir, as we have mentioned that now we are trying to transition toward a solution selling organization. So the bouquet of services that we are offering, like the DPI in a box and all. So what is the internal timeline when the products will be ready, like it will be out from the testing phase and ready for commercialization?

These are, see, most of these products are already foundational products that we already The DPI in the box will be a modular approach of positioning these or selling this to the state governments, to international markets, etc. So, in terms of delivery, it is an approach which we will sell, and whenever deployment is required, it is immediately available for deployment in terms of, of course, the implementation. Timeline, which will obviously be there, but these are products and solutions that we have already built in some shape and form in various mandates that we have built so far.

Okay, sir. So, sir, any significant orders or customer that has already inquired about this, and we are looking at a good response from the customers about this?

Absolutely. Whether it is internationally or even in discussions that we are currently having with various states, large states, This approach is absolutely in line with what, you know, the way governments expect. The reason being, every state or government today would like to touch or improve the life of its citizens in every shape and form, right? Whether it is through a health solution or a agri solution or a DBT solution. So, you know, when you go and... Provide an overall package to someone, it is obviously there is high level of interest to look at, you know, that deployment, right? So, to your point, yes, there is interest when, you know, such approach is discussed, but like every large implementation, there will always be a lead time in terms of You know, pitch to conversion or pitch to agreement. It might also, you know, go through RFP process and et cetera. But as a concept level, this is really where we see that both from a government perspective as well from a company perspective and more importantly from a citizen perspective, such approach will become very meaningful and wholeful.

Great, sir. Thank you so much and all the best for our job, Peter.

The traction on the enterprise side

that they talked about, we are getting very strong tractions there. The pipeline looks very good and very well placed.

So that's on the other enterprise side where the composable layers have been created to offer as product solutions and journeys. On the government side, as you know, it's a mandate and RSP process that we are participating in. We are hopeful for some interesting events soon.

Okay, sir. Thank you.

Thank you. The next question is from the line of Madan Palodia from MKP Securities. Please go ahead.

Hi, sir. Thanks for the opportunity. I understand that you may not be able to provide the economics or the break-even for the Aadhaar Seva Kendra centers, but my question is, with relation to the return on capital employed, even at the break-even level or even slightly above the break-even level, if you could quantify something, and secondly, if you could quantify the amount of working capital we would require to put into that business, even at the break-even level, I think that would be really helpful, sir.

So, are you talking about Adar Sevak and the project?

Yes, the Adar Sevak and the project.

Because this is a managed operational project, so working capital will not be heavy in this, except the initial furniture offices which we need to set up. Otherwise, this is a monthly recurring revenue, and you know, all the routine expenses, except the CAPEX part, will be, you know, out of revenues.

Just a quick follow-up on that. So are you saying the billings from the government side are either on a monthly or a quarterly basis? Because I'm assuming when we are processing others, the upfront costs are hours here, right?

Monthly basis pay, we will, you know, bill on a monthly basis based on the volumes which are, you know, there for each month.

Alright. Thank you, sir.

And our experience also in, I think we are getting money in time from, you know, from government.

Thank you.

Thank you so much.

Thank you. The next question is from the line of Bhavi Chauhan from Care PMS. Please go ahead.

Thanks for the opportunity. Just two questions from my side. The first one is related to the other entity business that has witnessed a significant increase in this quarter. Could you provide that which segment have contributed to this?

You are talking about?

Yeah, new initiatives, I am talking about the other business, which have been grown from 11 crores to 42 crores in the world.

This is primarily because of the one RFP mandate, some revenue recognized because of that. Second one is Aadhaar, wherein we started recognizing the revenue, and third one is our new product, like Rise with Protein or E-Sign Pro, Where we started, you know, gaining some traction, and therefore the revenue, you know.

Could you quantify this?

I can't give a quantification or further breakdown of new initiatives because we are not disclosing any sub-segment for these. But these are the three key services within new initiatives which have resulted in the 42 crore revenue. Okay.

And the second question is related to the geopolitical issues which have been impacted, the margins. So, like, if I look at the financials, the system implementation and support maintenance expense have been grown significantly. So, is this related to the geopolitical issues? So, that I am not able to understand. That's how this cost is increasing related to.

Part of this increase is because of geopolitical price increase in various hardware, software, and technology.

So that is only the reason, right?

Yeah, that is the only reason.

And so, like, excluding that, you have said that the 18 crore's EBITDA, 18 crore's is impacted on the EBITDA.

18 crore is impacted on the EBITDA because we, as per accounting rules, we have to take these costs up front. We can't take these costs, you know, based on future revenues.

Okay, okay, got it. That's it for me. Thank you.

Good morning, everybody.

Thank you. Reminders for all participants, please press star and 1 to ask questions. Participant who wish to ask a question, please press star and 1. If there are no further questions from the participants, I hand the conference over to Ms. Pushpamani for closing comments.

Thanks, Kanya. On behalf of Protein, I would like to thank you all for taking time out, and also for your continued trust and support in us. We remain committed to delivering growth and value to our stakeholders. For any additional questions, please feel free to reach out to us, and we look forward to staying connected. Thank you.

Thank you.

On behalf of Go India Advisors, that concludes this conference. Thank you for joining us and you may now disconnect your lines.