Protean EGov Technologies Ltd - A Play on the ONDC, Digital Policies

Protean eGOV Technologies Limited (PETL), was incorporated in December 1995 and was previously known as NSDL e-Governance
Infrastructure Ltd. The company is engaged in the business of developing citizen-centric and population-scale e-governance solutions for
more than 2 decades. It has developed & implemented some of the most crucial technological infrastructure in India. The major service
offerings include PAN (Permanent Account Number) issuance, CRA (Central record-keeping agency) for NPS (National Pension System)
and APY (Atal Pension Yojana), e-KYC (Know Your Customer), e-Sign, Aadhar authentication, supporting digital blocks for ONDC (Open
Network for Digital Commerce) platform, improving accessibility to education financing through digitally powering platforms like ‘Vidya
Lakshmi’ and ‘Vidyasaarthi’ amongst others. As of 30th June 2023, it has managed 19 projects spread across 7 ministries & autonomous


Tax modernization- These include services like implementing the TIN (Tax Information Network), PAN issuance & verification:
The TIN entrusted by the Government since 2004 is a repository of nationwide tax information and creates an electronic ledger for
each taxpayer providing complete details of taxes paid and a 360-degree view of tax collected and deducted at source.
In terms of PAN, it issues & prints PAN cards through its various service centres and provides verification services. Entities who
avail those verification services are mostly housing finance companies, insurance companies, banks, financial institutions,
educational institutions established by regulatory bodies, government agencies, stock exchanges, commodity exchanges and
clearing corporations.
• CRA (NPS)- Since December 2007, the company maintains centralized records of all the NPS subscriber details, provides reports and
dashboards to various stakeholders for effective decision-making, establishes the IT infrastructure, handles administration and
customer service functions for all subscribers of the NPS. It provides all these services to the Central and State Governments
including their autonomous bodies and public sector banks.
• CRA (APY)- APY provides old age income security for the working poor and is focused on encouraging and enabling them to save for
their retirement. To address the longevity risks among workers in unorganized sector and to encourage them to voluntarily save for
their retirement, the company acts as the CRA for managing the administration and customer services for APY subscribers.

National Identification- It provides services like Aadhar registrations, authentication, e-KYC, and e-Sign facilities. It has been
entrusted by the UIDAI (Unique Identification Authority of India) as a registrar for Aadhar cards. Sectors like BFSI (Banking, Financial
Services and Insurance) are their major customer requiring verification services.
• GST Services- It offers GST (Goods & Sales Tax) verification services to validate GST records, monitor GST filing history along with an
API (Application programming interface) based integration to the GST Network. The company’s APIs makes it easier to file for GST
and e-invoicing.
• Education financing solutions- The company developed an online portal for the Government projects like ‘Vidya Lakshmi’ and
‘Vidyasaarthi’. The Vidya Lakshmi initiative is an education loan portal developed under the guidance of Ministry of Finance and
Ministry of Education and the Indian Banks’ Association. Under this, students can avail of education loans through scheduled banks
and the platform acts as a gateway through which students can apply for loan. The Vidyasaarthi initiative provides underprivileged
students financial assistance via corporate-funded scholarships. Students seeking education scholarship can search and apply for
various education finance schemes that they are eligible for on the portal.
• ONDC- The ONDC is a digital project of the government to redefine the e-commerce landscape and to standardize the process of onboarding retailers on e-marketplaces for selling products through an online channel. The company has been an early contributor and
supporter of building the digital landscape of the ONDC platform.

Transaction fees- Majority of the revenue comes from this
segment (~₹584 cr). Whenever the company issues or re-issues
PAN & TIN, any consumer opens an account in the NPS or APY,
it collects fees on the same which could be either in annuity
form or a fixed one-time. It also earns on the total subscriber
base of the pension. In terms of identification, every e-KYC,
verification as well as e-Sign leads to a transactional revenue
for the firm.
• Accounts maintenance fees- Remaining of the revenue (~₹157
cr) comes from the general digital maintenance of its
customers. The repository of taxpayers, pensioners, even the
overall tech data stack of providing data insights, analytics and
digital on-boarding generates income for the company.

In terms of the company’s major business of PAN and TIN issuance, as well NPS and APY, it has no listed peers and thus enjoys a high
market share. The rest of the market share belongs with Government entities and portals.

The domestic IT service revenue would grow by a CAGR of 7%-9% from 2023-2027. The growth would majorly be led by
technology and platform upgradation, and e-governance initiatives of the central and state governments. Further, the government
and its various agencies are expected to remain the largest contributor to domestic IT revenue.
• The PAN Card in India is mandatory to file tax returns in India. The number of PAN cards as of FY22 in India stood at ~61 crore and
is expected to rise annually by ~5-6 crore to reach 88-90 crore of cards by FY27. PAN card allotment is expected to be driven by
expansion in taxpayer base, growth in financial inclusion, thereby mandating the usage of PAN cards, working age population, GDP
growth, and increasing contribution of the formal economy.

The individual taxpayer base in India stood at 8.2 crore as of FY19 and is expected to reach 17 crore by FY27, thereby growing by a
CAGR of 9%-10%. Over 60% of India’s population is in the working age bracket of 15-59 years and this bracket is expected to grow
to above 60% in the next decade. The overall working age population is expected to reach ~94 crore by 2026.
• The number of subscribers for NPS and APY stood at 5.2 crore as of FY22 and is expected to grow by a CAGR of 16%-17% to reach
11-15 crore. The total Assets of NPS and APY stood at ₹7,366 billion during FY22 and the same is expected to grow by a CAGR of
23%-24% to reach ₹20,000-₹21,000 billion by FY27.
• The volume of Digital transactions as of December 2022 stood at 43.4 billion and is expected to grow by a CAGR of 40%-42% to
reach ~425 billion by FY27. As the digital transactions rise, the need for e-authentication, e-signs and others would rise in tandem.
The Government pushing for higher digital adoption with paperless operations would drive growth for digital authentication
• The ONDC platform went live in September 2022 and as of September 2023, it is present in more than 400 cities. It has onboarded
1.8 lakh sellers across the country with some renowned brands like Boat, Dunzo, PayTM, Delhivery and more. India has more than
19,000 e-commerce companies and by 2027 the ONDC platform could add 5.8 crore users to e-commerce, with the overall ecommerce penetration in overall retail reaching 11%.


Suresh Kumar Sethi is the Managing Director and Chief
Executive Officer of the company. He holds a bachelor’s
degree in engineering in electronics from Chandigarh. He
has over 30 years of experience in the financial services
industry. Prior to this role, he was the managing director
and chief executive officer of India Post Payments Bank.
Jayesh Waman Sule is the Whole-time director and the
Chief Operating Officer and has been associated with the
company since inception. He holds a bachelor’s degree in
commerce from the University of Bombay. He was
previously associated with NSDL and has over two decades
of experience in capital markets and IT-enabled services.

The company is substantially dependent on the Government entities and agencies for winning contracts, which adds a client type
concentration risk. Any inability of winning projects could adversely impact business operations.
• The company’s business model is manpower intensive, therefore the inability to attract and retain skilled manpower could
impact the operations of the business. The current low employee base of the company could be deemed insufficient in timely
completion of any projects.
• As they majorly deal with the Government, there could be instances of low pricing power which could lead to inaccurate pricing
structures that is not in tandem with the related costs.
• The company deals with highly sensitive data and any security breach could adversely affect the reputation and profitability of
the business.
• The company’s business model requires them to obtain, renew or maintain statutory & regulatory permits, licenses and
approvals, and any delay or inability in obtaining, renewing or maintaining such permits, licenses and approvals could result in an
adverse effect on operations.
• It relies on third-party providers for some of their software and equipment needs and thus any breakdown in such systems could
negatively affect the company’s operations, causing delays or termination of project work.





Latest Conference call findings

Financial Highlights:

  • Revenue growth of 29% YoY driven by taxation, pension services, and identity services
  • EBITDA of INR 126 crores, profit before tax of INR 104 crores, and profit after tax of INR 80 crores for the nine months ended December 2023
  • Explanation of flat growth in tax services in Q3 and increase in employee costs related to talent and technology investments
  • Provisioning explained as a conservative accounting practice related to government debt

New Products and Business Expansion:

  • Launch of new DPI in education and skilling, multi-sector API marketplace, and AI-powered C-KYC solution
  • Building strategic partnerships in international geographies across Africa and Southeast Asia
  • Focus on enabling democratic access to open digital ecosystems, data exchange, and enterprise digitization
  • Opportunities in Middle East and Africa regions for implementing technical stacks and public infrastructure
  • Role in agriculture with the Agri-stack framework and focus on education and skilling
  • Expansion in digital commerce, consumer and corporate tech space with SaaS models
  • Addition of a new ODE in education and skilling, and building on the data front with e-sign and e-KYC services
  • International business expansion with partnerships in African nations
  • Softly regulated pricing structure for government services

Operational Updates:

  • Expectations for stronger Q4 historically with other income from B2B services in open digital ecosystems
  • Seasonality in PAN issuance business with peak in Q2
  • Market share consolidation in tax services business
  • Margin profile expected to grow with new businesses offsetting investments
  • Adaptability of public cloud stack for government business opportunities
  • Headcount addition of around 10 people in Q3
  • ESOP cost of INR 4 crores in 3Q
  • Capitalized expenses for tech stack development around INR 50 crores

Future Plans:

  • Future plans to provide more information on ONDC and new businesses in presentations
  • Marketing plans for new products with targeted strategies

Overall, Protean eGov Technologies Limited is focused on expanding its business through new products, strategic partnerships, and international expansion while maintaining strong financial performance and operational efficiency.


Can someone explain why the employee benefit expense has gone up by ~50Cr (66% increase) in FY23 and ~50Cr in 9M FY24. Are these one time, or recurring? Looks like recurring for now. Any updates would be appreciated.

From Feb Concall:
Mr. Sudeep Bhatia: So, that is what I had covered in my response to the previous question as well. So,
effectively, the employee cost has grown up by about INR 15 crores. And some of that is the natural
increase and based on the natural progression, because there is a 29 percent growth that you are
seeing in the revenues. So, some of that investment has gone into the business development and
ramping up some of the customer facing and operations kind of workforce. But at the same time, as
we mentioned, the company is growing from three business verticals to seven business verticals. And
these four business verticals, which are in the initial phases, do require some investment. And the
investment is going to be in the form of people and talent who will create these technologies and that
will sell in the marketplace. And second aspect is making sure that some of these products are readyfor demo when we go to the clients. So, effectively, these investments have resulted in this growth in
the employment cost. As we move forward from here. I mean, there are no significant plans to sort of
grow the employee base in the same proportion. So, you can expect almost sort of similar levels
plus/minus the economic changes.



Q4 Concall Updates

Business Overview:

  • Protean eGov Technologies Limited is a pioneer in building digital public infrastructure for over 28 years.
  • They have been a market leader in various sectors like e-governance, digital identity, and open digital ecosystems.
  • The company’s business is classified into four pillars: e-governance platforms, digital identity, open digital ecosystems, and enterprise digitization.
  • Sees themselves in a sweet spot due to the continued momentum in the Digital India story.
  • Core businesses have strong growth prospects and plenty of room for growth.
  • New lines of business like data stack, open digital ecosystems, cloud, and cybersecurity are being developed to complement and strengthen the existing business.

Financial Performance FY24:

  • Revenues grew by 19%, led by double-digit growth across all four business verticals.
  • Tax services business grew by 12% year-on-year.
  • PAN card issuance crossed 5 crores compared to 4.1 crores in the previous year.
  • Pension services reported a 14% growth with more than 1.37 crore accounts opened.
  • Identity services showed a staggering 62% growth driven by rapid adoption of digital payments and increasing penetration of digital processing.
  • Profit after tax was INR 97 crore, down 9% year-on-year due to investments in new business verticals and provisioning for sovereign debt.
  • Consolidated revenue from operations stood at INR 882 crore, growing by 19% year-on-year.
  • Adjusted EBITDA was INR 196 crore, reflecting 11% growth year-on-year.
  • Balance sheet position remains strong with cash and cash equivalents of over INR 700 crore.
  • Actively seeking inorganic growth opportunities to maximize returns to shareholders.

New Business Verticals and Developments:

  • The company expanded into agri and education & skilling sectors under open digital ecosystems.
  • Introduced core agri-stack and open network for education and skill transformation.
  • Launched RISE with Protean, a multi-sector API marketplace, and an AI-powered cKYC solution.
  • Engaged with multiple countries in Africa and Southeast Asia for international expansion.
  • Developing new lines of business such as data stack, open digital ecosystems, cloud, and cybersecurity.
  • Strong focus on the Digital India story and leveraging the India DPI framework for global opportunities.

Market Opportunities:

  • Global markets are showing interest in the India DPI story.
  • Interest in the India DPI framework by other countries to build their own DPIs.


  • Looking forward to a good FY’25.
  • Positive trend in all areas of the business.

Challenges and Risks:

  • Provisioning for sovereign debt impacting profitability, but expected to recover over the next two years.
  • Investments in new business verticals impacting margins in the short term, with a payback period of 18-24 months.
  • No specific challenges or headwinds mentioned by the management.
  • No mention of potential risks or concerns during the conference call.

Future Growth Expectations:

  • Optimistic about future growth opportunities in digital India and pioneering transformative technology at a population scale.
  • Expecting significant growth in revenues from new business verticals, international expansion, and cloud services.

Pls update on ONDC prospects for Protean.

Protean is the technology service provider that powers the entire network on which the ONDC ecosystem sits. This is just like UPI (Unified Payment Interface) being run by NPCI that enables the digital payments in the country.
At present, Protean provides the registry and gateway services to enable ONDC transactions for which it gets directly compensated by ONDC as a market institution. However, in the future, it could very well become a market participant compensated model just like the UPI. That’s because, by design, the government invests and creates the digital infrastructure and then the network participants pay for it on per transaction basis.
Another revenue opportunity from ONDC can be more on the lines of the SaaS model where Protean could be providing buyer and seller technology. The ONDC adoption and penetration is fast growing in the country and hence the revenue opportunity from it can be non-linear.


HDFC bank sold entire stake as soon as 6m lock-in post IPO was over. Will any others exit given lock-in is over now? This could result in pressure on the stock over the next few months.


Was going through the company. This is a tricky one with no promoter holding (HDFC proved that it need not be a problem).

In any software services / product company, the most important thing I look for (beyond financials) is how employees feel. It tells how good the culture is and how they are able to retain talents.

Reading through the employee reviews, it appears that it is almost operating like a government office with no incentives to work, huge politics, lots of holidays and lack of motivation. This bad review is also evident in LinkedIn insights where the median employee tenure is just 2.6 years.

If anyone is attending next earnings call, this question should definitely be asked (will try my best myself).

I feel that this company is enjoying the moat because of it’s monopoly in the area of operation. Lack of founders and lack of competition could make it a slow mover. Need to see what transpires in annual report and coming quarters.

Disc: Tracking


It’s a bulk deal transaction, not a market sale, Nippon is the strong fund too, and I see stock is moving quietly now