Provisioning (Allowance for expected credit loss)
| Expected Credit Loss | FY’18 | FY’19 | FY’20 | FY’21 | FY’22 | FY’23 | FY’24 |
|---|---|---|---|---|---|---|---|
| Beginning Balance | - | 1.19 | 1.19 | 11.82 | 41.02 | 70.29 | 77.21 |
| Amts written off | - | - | - | - | 1.19 | 10.63 | |
| Net remeasurement of loss allowance | 1.19 | - | 10.63 | 29.20 | 30.46 | 17.55 | 38.91 |
| Balance at the end | 1.19 | 1.19 | 11.82 | 41.02 | 70.29 | 77.21 | 116.12 |
What is remeasurement of loss allowance
So I have compiled these figures from previous yrs balance sheet. Basically it is an account for expected credit loss/allowance for doubtful debts. So the net re-measurement of loss allowance is the provision/allowance for doubtful debts expense the co. reports in PnL. So if you go ahead and check the PnL this figure matches:
Thanks.
e8095005-794c-4f1b-a8c2-81d201cee42c.pdf (1.5 MB)
What would be causing them a loss on credit? What does this mean? Sorry for a stupid question
Expected Credit Loss (Protean e-gov).docx (431.0 KB)
This should help^
In short: The ITD dept. still needs to pay protean and for that they’ve created provision
Budget 2024 announcements which could potentially benefit the company ( causing recent rise in stock price).
What is the outlook for this stock in near future?
India is among the countries with the lowest per capita pension assets in the world.
Large Headroom for Growth
Reported Consolidated quarterly numbers for Protean eGov Technologies are: Net Sales at Rs 196.54 crore in June 2024 down 10.83% from Rs. 220.41 crore in June 2023.
Quarterly Net Profit at Rs. 21.09 crore in June 2024 down 34.52% from Rs. 32.21 crore in June 2023.
EBITDA stands at Rs. 34.37 crore in June 2024 down 26.64% from Rs. 46.85 crore in June 2023.
Protean eGov EPS has decreased to Rs. 5.21 in June 2024 from Rs. 7.96 in June 2023.
How should we interpret these results? Sunrise sector with so much headroom for growth and yet another quarter reporting decline in sales and profit
If you believe it’s a sunrise sector, then no need to stress about quarterly fluctuations, on a longer horizon growth will come lumpy.
Protean e-gov Q1’FY25 concall highlights
PAN Card Issuance
Pension services
Identity Services
ODE’s/DPIs (Open Digital Ecosystems/Digital Public Infra)
ONDC
ONEST (Education & Skilling)
Agristack
Further govt policies and support can greatly influence the Open platforms
Others
Certainly the company has good growth avenues in the future, I had asked about the potential revenues Protean could receive from ONDC but they didn’t really answer. So I wanted to ask here how do you feel about the valuation of the company? I feel like its a bit expensive right now but wanted to hear everyone’s thoughts. Is it still a good buy at CMP of 1700-1800 (PE: ~80)
As per mgmt they now expect 8-10bps of GMV of transaction from Ondc which I think is quite low from what they earlier expected of 50-150bps
ONDC and NPCI are not comparable. ONDC can never replace or wrest sizeable market share from new age e-commerce aggregation platforms like Swiggy, Zomato, Bigbasket, Amazon or Flipkart. These companies take ownership for the end-to-end supply chain and enable the consumer to track the purchase, offer dispute resolution as well. In case of ONDC, the consumer is at the mercy of the service provider. Investors should consider this instead of just believing the management commentary
Yes it wont replace but still the number of transactions there are growing. Its not just about replacing these established apps its more like these apps themselves will get listed on ONDC to offer interoperable services. If you see Namma Yatri has seen a lot of good traction which is completely operated on ONDC apart from that all other apps are just going to use ONDC as a complementary platform.
there are may services in ondc …it will benefit sellers as well as buyers on cost of service,which can drive business to a scale…even i can see friends are aware of ondc n using it…it will take time for adoption
Few of my takeaways from Q1 FY25 of Protean eGov Technologies
Protean eGov Technologies appears well-positioned to capitalize on India’s ongoing digital transformation. The company’s core businesses in tax services, pension administration, and identity verification continue to show strength, with pension and identity services growing at double-digit rates. While tax services saw a temporary slowdown due to election activities, management expects this segment to rebound. The company is also making inroads into new high-potential areas like digital commerce (ONDC), agriculture, education/skilling, and healthcare through its involvement in building digital public infrastructure.
𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:
Protean is strategically expanding beyond its traditional government services into more innovative areas. Key initiatives include developing the Agristack for agriculture data exchange, launching ProteanX for blockchain-based verifiable credentials, and introducing eSignPro for end-to-end digital document signing. The company is also pursuing international opportunities, with active engagements in 12 countries and 18 potential deals in the pipeline.
𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:
The overarching theme is India’s push towards digitalization across sectors. This is evident in the growth of digital identity services, increasing pension penetration, and the development of open digital ecosystems like ONDC for e-commerce. The trend towards paperless, digital processes is driving demand for Protean’s newer offerings like eSignPro.
𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:
Strong government support for digital initiatives provides significant tailwinds. The recent budget emphasized development of digital public infrastructure across sectors like agriculture, education, and healthcare - all areas where Protean is building capabilities. Increasing internet and smartphone penetration in India also bodes well for adoption of digital services.
𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:
The main headwind appears to be the cyclical nature of some government-related business, as seen in the temporary slowdown in PAN card issuances due to elections. Dependency on government contracts and policy decisions could lead to occasional volatility in revenues.
𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:
A key concern is the timeline for monetization of new initiatives like ONDC. Management indicated that while they are currently reimbursed for infrastructure costs, a transaction-based revenue model is expected in the future once the ecosystem reaches critical mass. For international expansion, management acknowledged the long sales cycles but expressed optimism about near-term breakthroughs.
𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:
In core areas like PAN card issuance and pension administration, Protean enjoys dominant market positions. For newer digital offerings, the competitive landscape is still evolving. The company’s long-standing relationships with government entities and experience in building large-scale digital infrastructure could provide an edge.
𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:
Management refrained from providing specific numerical guidance but expressed confidence in growth prospects across both traditional and new business lines. They expect the online channel for PAN issuance to continue growing, which should benefit margins.
𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:
With a strong cash position of over 700 crore rupees and zero debt, Protean is well-positioned for inorganic growth. Management indicated they are actively seeking acquisition opportunities that could provide faster go-to-market capabilities or access to cutting-edge technologies.
𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:
Key opportunities lie in the massive untapped potential for digital services in India, particularly in sectors like agriculture and education. The main risks include execution challenges in scaling up new initiatives and potential shifts in government policies or priorities.
𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐂𝐥𝐢𝐦𝐚𝐭𝐞:
The regulatory environment appears largely supportive, with government initiatives aligning closely with Protean’s focus areas. However, the company’s heavy reliance on government-related business means it remains vulnerable to any adverse policy changes.
𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:
The growth in areas like digital identity services and pension subscriptions suggests positive customer adoption. For B2B offerings like eSignPro, management indicated early traction with corporate customers, particularly in the financial services sector.
Disclaimer: This is a general analysis and does not constitute financial advice.
My 2 cents,
If you look at it, the pan-issuance on an average is around 6-7 crores new pan-issuances every year over the last few years, pan not being a statutory identity because you don’t generally get a PAN card when a child is born unlike Aadhaar. Today, there is a huge population out there, maybe over 50 crore people in the country who don’t have a PAN card.
So, as people come into either their first employment or they are opening their first bank account, the PAN card becomes a relevant document for issuance. This is what we have consistently seen over the years. As I mentioned earlier, while at times there have been certain initiatives or deadlines like Aadhaar-PAN linkage or some other DBT cases happening where number of PAN cards have spiked, but around 7-8 crore is what we are seeing as a growth factor for PAN card issuance year-on-year.
Today we have almost 2,80,000 plus sellers who are there and this is the ecosystem that has got created. Similarly the number of transactions on ONDC are growing significantly. These are the various cases where we are seeing that ONDC adoption and penetration is growing in the country.
Atal Pension Yojna Protean has 100% market share. And of the total accounts new accounts opened under the Atal Pension Yojna was around 1 crores accounts in FY23 now growing to 1.2 crores accounts in FY24. So there is definitely close to a 20% growth over there. The second is in terms of the NPS accounts, so there also we have seen almost a similar growth in terms of maybe around 15 lakh new subscribers who have come. And if we look at the overall end of period accounts, the overall accounts have grown to around 7.2 crores total accounts.
Disc: Invested
With the move away from NPS to UPS what is the expected impact on protean?
