Just an update
Not invested
dr.vikas
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A Pioneer in Digital Public Infrastructure and Digital India
Brief Introduction
Protean E-Gov is the only company in India offering all facets of digital identity and leading the way in the development of Open Digital Ecosystems, data stacks, cloud, and InfoSec services. It maintains dominant leadership across the domains of Tax, Pension and Identity services. Within that, in the Pension Services, this is the most accretive in terms of the gross margin.
Company largely serves the BFSI sector, capital market participants in enabling these transactions, be it for account opening, be it for supporting capital market transactions above a certain value, be it for supporting any property purchase, wherever the PAN card is required for validation. So, this aspect of digital identity is run on a database that the company manages for the nation.
Currently, Protean is involved in five specific digital infrastructure sectors. They are contributing and powering ONDC, which is supporting e-commerce and mobility. Also, likewise involved in providing foundational digital infrastructure interventions as a technology service provider in the space of agriculture, health, education and skilling (Huge Opportunity in Future)
Another important aspect for the Company under ODEs (Open Digital Ecosystems) is the data exchange foundational layer, which is in the form of the account aggregator. That is where the company has an operational account aggregator license and they are building a business on top of their digital identity business to provide data analytics and data exchange services. Last but not the least, looking at these three verticals, the fourth one is clearly about Powering Enterprise Digitization.
Company has a diversified customer base of over 1,500 corporates.
FY24 Revenue
- 80% of our revenues are transactional, while the remaining around 20% is annuity based.
- More than 65% of our revenues come from B2C segments,
around 20% from B2B segments with corporates as clients and
Only 12% of the revenues are dependent on government billings.
Current Business and New Verticals
Top line is largely contributed by three large businesses, two of them being on the e-governance platform front, which is taxation and Pension.
- Taxation
- Being the central record-keeping agency for pension services. (Higher Gross Margins)
- Provisioning of Digital Identity.
- New Verticals - Open Digital Ecosystems, second is on Data Stack (GOI Big Focus) and third is on the entire Cloud and Infosec services (RBI Big Focus) and Fourth being Going International.
For ONDC - Company is the only technology service provider which powers the entire network. the entire search runs on our gateway,
- Company is also providing enterprise tech providing capability to buyer and seller applications to integrate into the gateway, providing adapter services, and also at the same time building applications, seller applications, buyer applications, which is basically a model in which the company designs, builds the technology, has a design and implementation cost, and then it runs like a SaaS model. (Holds 5.56% in ONDC)
- The network uses interoperability, common rules of engagement at the network-level and dynamic, digital contracts to allow Network Participants to coordinate their actions to successfully complete orders on the Network and fulfil them.
- This is a digital infrastructure play and it will be very similar and akin to what NPCI does with UPI.
Taxation Services
The company’s primary work in this segment is the issuance of fresh PAN cards, re-issuances, updating of PAN CARD and running of the TIN Facilitation Centres and PAN Centres across India. The finance minister Nirmala Sitharaman said that PAN will be made as a single business identifier for each company making it a document acceptable to all departments or ministries at the Central & State level.
PAN: 3-player market – Leading cumulative market share of 63%. Today, the company manages over 74.7 crore PAN records
Growth Drivers
- Growing use cases leading to high usage of PAN.
- PAN being the single identifier for businesses and any financial transaction.
- More than 1.2 cr youth enters the workforce every year.
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50crs Indian population doesn’t have a PAN Card yet.
- Financial Aid schemes including Pradhan Mantri Vidya Lakshmi Karyakram require PAN to avail.
Pension Services
The company-built India’s first Digital Pension Infrastructure and is currently India’s largest CRA for NPS and APY. As a CRA, Protean established IT infra, handles administration & customer service functions for all subscribers.
Pension penetration in the country continues to be in single digits. Company continues to maintain a 100% market share in the Atal Pension Yojana (APY) and an aggregate market share of 97% across both the schemes i.e. NPS and APY. This is a 3-player market with Protean having a leading market share of 97%
Till date company has issued 480mn+ PAN Cards – the first digitally verifiable ID, 11.9bn+ Online PAN verifications.
New Thrust and other Drivers - Company has received a major thrust during the recent budget announcement with the widening of the National Pension Scheme (NPS) coverage to approximately 40 crore minors. This makes NPS a more inclusive lifecycle instrument promoting savings from an early stage.
- Private Sector Opening Up to Pension as an Investment Option – Only 6% of private sector employees in India have pension coverage in India currently, compared to nearly 70% in the U.S., the opportunity for expansion is significant.
- There are only around 7.6 crore pension accounts (NPS & APY combined) as compared to around 54 crore Jan Dhan accounts.
- The Budget 2024, increased the threshold for NPS contribution by employer for private sector employees from 10% to 14% making NPS a more lucrative instrument for saving.
- The nascent stage of the pension industry in India and the strong support provided by the government, company remains very optimistic about the future growth in this line of business.
Identity Services
Adoption of digital payments, digital lending and increased penetration of digital processing of documents across governments and private organisations have created multiple use cases and fostered demand for E-KYC, E-Sign, Online Pan verification and Aadhaar Authentication services. The identity services business saw exceptional growth of 62% in FY24.
Protean continues to be uniquely placed as the only company offering all four facets of digital identity, thus providing corporations a single stop for enabling various digital journeys.
Vertical Integration - As a part of their strategy to enable vertical integration of services, Protean has created significant assets in the application space powering end-to-end enterprise digitization. They have launched a host of innovative products like multi-sectoral API marketplace, digital documentation suite, AI-based Reg-tech and analytics solutions to enhance efficiency, improve accuracy, reduce risks and provide a seamless digital experience
Under digital identity, Company operates as a licensed service agency for UIDAI, offering e-KYC and e-authentication services. And lastly, they are a certified authority for e-Sign, which is today used to sign any document digitally using Aadhaar as a validating or authenticating ID (PAN verification, e-KYC, e-Auth and e-Sign)
Growth Drivers
- Many government schemes require an active PAN card, so verification and authentication becomes important.
- Large Volume of Transactions: While the per transaction revenue might be nominal, these verifications occur on a very large base, allowing for high volume growth.
- Growth of Fintech Industry: The expanding fintech sector, driven by new entrants and significant investments, is expected to increase the demand for digital verification services as more diverse offerings emerge.
- Large Unaddressed Headroom: With only 2% of the population as regular digital transactors, the growing e-commerce ecosystem is likely to encourage broader adoption of digital payments, boosting the need for digital verification.
New Business and Products
India’s visionary DPI framework is built on open standards and protocols, Protean continues to expand its multi-sectoral reach towards ecommerce and transport, coming under the vertical of ONDC; Education and Skilling coming under ONEST, which is Online Network for Education, Skill, and Transformation; Agriculture; and Health.
Over the last few years, the Company has accelerated investments in people, products and technology, and built centres of excellence in open source and open standards tech stacks, contributing to multi-sectors ODEs at an infrastructure and innovation level.
Agristack - It establishes a robust framework for seamless data exchange between farmers, government bodies and private entities. This stack is being created as a DPI, a Digital Public Infrastructure, which is designed to revolutionize the data management and information sharing within the Agri sector, leading to enablement of multiple use cases starting from agri-lending to agri-marketplaces to insurance and advisory. This is already under pilot with more than 10 State governments engaged in enabling multiple use-cases.
- ProteanX - Company has launched ProteanX, which is supporting digitally verifiable credentials. This is a future-ready solution, enabling individuals and organizations to create, verify and store credentials using blockchain-based technology. The Use cases, whether it is with regard to sharing your information in the form of certificates, sharing your information in terms of your land records in the Agristack. As long as you have verifiable data, you are able to secure and consume services using the digital public infrastructure.
- eSign Pro – It Supports Digital Signature and Stamping. It will be helpful for sectors like BFSI, Real Estate, Healthcare, Education, and enables you to digitize documents like customer onboarding, legal agreements, student certificates, and records, at a fraction of the cost. It will enable creation of paperless journeys, and company anticipates a widespread adoption of eSign Pro.
Multi-Opportunities
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There has been a concerted focus to take India Stack global, leveraging core multi-sectoral DPI competence in the Indian context. The Company has focused on creating competence in open-source technologies and becoming a certified partner. The company aims to extend its expertise in implementing large-scale, data intensive projects across international markets, with a focus on sectors such as taxation, digital identity, social security, and open digital ecosystems.
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There was equally strong focus on creation of DPI apps and enablement of various MSME services, including credit, leveraging the data DPI. With regard to agriculture, there were call outs on land record digitization, creation of crop registries and issuance of Bhu-Aadhaar, identity linked to land holding. All these initiatives therefore become very convergent with the thrust that the Company has in the area of building, providing and contributing for digital public infrastructure.
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The central bank has asked payments facilitators such as Visa, MasterCard, Google or WhatsApp to ensure that data related to payment systems operated by them are stored only inside the country which gives a boost to the Protean’s business of Digital Cloud and Infosec Services (Article Link).
Since Protean already has tie-ups with many other banks for their other services like E-KYC, they can leverage their new line of business and can gain further momentum in the line of DPI. -
A New type of Service – IaaS – Infrastructure as a Service and has Multiple use cases not only limited to Financial Inclusion or Social Security but now expanding to different sectors like Real-estate, Agriculture, land records, Healthcare, Education etc. So, the room for growth is very high.
Business MOAT as per my Understanding
- Any sector which mandates digital onboarding of customers, Naturally, it means a strong business case over there because any e-KYC and e-authentication is a line of business which company provides to the market to enable any of these entities
- Infrastructure - There is significant entry barriers for any new participant to suddenly come in and build their entire infrastructure. (Till date done almost 7 billion online PAN validations. And at times in a single day, supported more than 10 billion transactions in a day) Company runs a PAN India network of 166,000 points of service for PAN.
- With extensive experience in collaborating with the government, Protean has played a crucial role in creating digital public infrastructure and has been a trusted partner. Company also has the largest subscriber base across B2C, B2B, B2G.
- End Customer being majority revenues from non-government allows for negative working capital prepayment of services directly from consumers
- GOI has now enlisted Protean under its Development Partnership framework, this will help the company to go international. This becomes natural Strength for the company.
Current Valuations
As of FY24 the company has EPS of 24 Rs and trades at a PE of around 80.
Though given the past growth the stock looks expensive, the increasing use case of their existing products, launch of new innovative products, low penetration of different products like PAN, Pension etc, opening of new business verticals (NPS Minor) and launch of new business like Data Security etc will drive the growth ahead.
What we should look at here is that with the increase in the number of new pensions, pan cards – volume growth will drive the business and margins can also expand (from ET Now Interview).
I personally feel that given the Market capitalisation of around 7000cr and the opportunity size of expanding the services to global and even at homel is lucrative. Currently in talks with around 14-15 countries, the company is having specific focus in Africa and SouthEast Asia and are constantly engaged in early advocacy with key stakeholders to enable them on their path to digital transformation.
Source – AR, Concall, ET Now, NDTV Profit, Economic Times, Management Interviews.
6 Likes
This company’s is more of narratives than actual fundamentals/financials.
- Margin is pretty less for an IT company. No point of MOAT if one is working at those margins.
- Profit growth has been almost negligible in the last two years.
- 92 P/E, most probably it can only decrease from here (No scope of re-rating).
Some questions:
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Can someone provide their own profit CAGR estimate? I see a lot of fellow VP’ers are commenting things like “Huge Growth Potential” etc. , but it will be really helpful if you can share your estimates.
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One thing I like a lot here is ProteanX and Digital Signing of documents, leveraging blockchain. In fact I had worked on an exact same project in university. However, tbh it’s pretty easy to make up frameworks like this, what advantage does Protean have over any other company which offers this service? The government wants multiple vendors.
6 Likes
Agree with Ascendant.
A company reporting such weak operating numbers in a weak markets would ideally get punished. It is quite puzzling that the stock is not reacting negatively to such poor numbers!
- Revenue declined -7% YoY
- EBITDA declined -14% YoY
- PAT declined -14% YoY
The non-ONDC business is 25-30x 1-year-forward P/E multiple business, given weak growth
Can other senior VP members shed some light on how big really the ONDC opportunity can be for this company? Some math around this would be helpful. Finding it a bit hard to wrap my head around the how the market is valuing this company.
Discl: not invested, tracking
2 Likes
Protean eGov Technologies OFS: NSE Investments is set to divest up to 20.3 per cent of its stake through an offer for sale (OFS). Set a floor price of ₹1,550 per equity share.
2 Likes
I bought this during ipo. But I have no clue why this is rising. I know the ondc opportunity but I think it’s not a UPI moment. I’m asking myself not to sell because of all the narratives but isn’t it quite opposite to being an investor. they didn’t prove anything till now. I can be completely wrong but without any fundamentals backing, been a bit sceptical about this position.
Happy to be countered. Here to learn.
4 Likes
Protean 2Gov Technologies Limited.
About the Company:
Protean provides a comprehensive range of IT solutions in tax modernisation, social security and welfare, digital identity, education and skill financing, data solutions, and cloud and infosec services, catering to diverse consumer segments and impacting various sectors of the economy. It plays a vital role in establishing multiple foundational
Digital Public Infrastructure (DPIs) for Open Digital Ecosystems (ODEs). As one of the key IT-enabled solutions companies in India and chief architects and implementers for some of the most critical and large-scale technology infrastructure projects in the country with the aim to improve the delivery of public services and empower the residents.
Over the years, Protean solutions have led to the identification of bottlenecks in government services, increased transparency and efficiency, improved access to information, redefined public services
delivery, and led to a reduction in service delivery costs, while ensuring financial inclusion. The company collaborates with the government and has extensive experience in creating digital public infrastructure and developing innovative citizen-centric e-governance solutions.
Business Segments:
1) TAX SERVICES
Protean offers acceptance and processing of PAN applications, issuance of fresh PAN cards, re-issuances, updating of PAN CARD, and running of the TIN FCs and PAN Centres across India and the company also issues Tax Deduction and Collection Account Number (TAN). Protean operates over 4.42 lakh PAN/TIN facilitation centers and strategic network entities covering 18,000 locations across 36 states and Union territories in India. The largest issuer of India’s Digital Tax Identity with a cumulative 63% market share with the rest shared with UTI Infrastructure TechnologyServices Limited.
Revenue Contribution and Financials:
The segment contributed 55% of FY24 revenue and 54% in Q2FY25, respectively, and grew at 21% QoQ and saw a sequential degrowth YoY for the last 2 Quarters on the backdrop of a high base attributable to the high volumes in the previous year driven by the Aadhaar-PAN linkage deadline.
Key Growth Drivers:
Increasing use case of PAN: PAN is mandatory for Digital and Property transactions, government schemes, foreign trips, etc.
Largely underpenetrated population: Population of ~100crs. older than 18 years of age, only 50% of which own a PAN card, and at the current PAN card issuance pace, it’ll ~ take 6-7 years to bridge this gap.
Increasing trend in workforce formalization, and increased employment among youth, ~1.2 crs. Youths enter the workforce every year all of whom will be requiring a PAN card.
An increase in the no. of online PANs issuance over offline bodes well for Protean in the form of margin expansion in the future as the offline issuance involves a 25-30% commission.
Revenue Model:
Asset Ligth, Prepaid B2C model with transactional revenue. Protean earns revenue from the customer for services provided like new issuance, and updation of new PAN through online or offline channels and earns no revenue from the IT department.
Risks and Challenges:
Growth from new PAN issuances has an upper limit of around 7-8 crore annually, roughly equivalent to the average number of new PANs issued in India. Margins are low for services beyond new issuances, and soon, 80-90% of India’s adult population may already possess PAN cards. As this threshold approaches over the next few years, most revenue will increasingly come from lower-margin, non-issuance services, shifting the focus away from new issuance growth.
PAN issuance is cyclical and correlates the employment rate and job creation rate with heavy reliance on government schemes**.**
Recognition of any proxy identity card for PAN by the GoI in the future will hurt Protean’s business.
A few Financial aid from the government require PAN.
2) SOCIAL SECURITY AND WELFARE: Protean acts as the Central Recordkeeping Agency (CRA) for the National Pension System (NPS) and the Atal Pension Yojana (APY) and establishes IT infra, handles administration & customer service functions for all subscribers. India’s largest CRA for NPS and APY with a 92% market share in NPS and 100% market share in APY. Protean onboarded 3.6 mil subcribers in Q2 along with 826 corporates.
Revenue Contribution and Financials:
The segment contributed 28% of FY24 revenue and 31% in Q2FY25 and grew at 6% QoQ saw sequential growth of 13% YoY in Q2.
Key Growth Drivers:
Private Sector Opening Up to Pension as an Investment Option – Only 6% of private sector employees in India have pension coverage in India currently compared to 70% in the US.
Huge Headroom for Growth – There are only around 7.6 crore pension accounts (NPS & APY combined) as compared to around 54 crore Jan Dhan accountsand India has the lowest per capita pension assets in the world.
Introduction of NPS Vatsalya - Proposed NPS for minors from 0 – 18 years of age group which will Significantly widen the NPS coverage to ~40 crs minors and the company has added 25,000 subscribers till 30th September.
Increased the threshold for NPS contribution by employers for private sector employees from 10% to 14% under the new tax regime, making NPS a more lucrative instrument for saving, and can see increased money coming into NPS.
Strong positive sentiment towards pension schemes in India due to the increase in inflation in recent years.
Revenue Model:
This segment serves B2B, B2C, and B2G clients through an annuity and transaction-based revenue model. Revenue is split into three categories: (1) fees for new account openings, (2) transaction fees for each deposit and withdrawal, and (3) annuity based on the total customer base. Approximately 95% of this revenue is recurring, while the remaining 5% is one-time income.
Risks and Challenges:
Cyber security Risks
Dependence on the 2 government pension schemes and any shift in people’s preference from NPS/APY to other schemes.
3) IDENTITY SERVICES: Protean has been authorised by Unique Identification Authority of India (UIDAI) as an Authentication Service Agency (ASA) and Authentication User Agency (AUA) for providing Aadhaar Authentication Services to various entities. Protean has also been authorised by UIDAI as KYC Service Agency (KSA) and KYC User Agency (KUA) for providing Aadhaar-based e-KYC services to various entities. e-KYC is a unique service through which Know Your Client (KYC) process can be performed electronically using the Aadhaar database with explicit authorization by the Resident.
Protean is the sole provider of all 4 facets of digital identity verification i.e. 1. Aadhaar Authentication,2. Online Pan Verification (OPV),3. eSign and 4. eKYC.
Revenue Contribution and Financials:
The segment contributed 12.6% of FY24 revenue and 11% in Q2FY25 which contracted from 14% in Q1 and contracted at 14% QoQ on the backdrop of pricing pressure.
Key Growth Drivers:
Government Tailwind: Strong push towards digital India.
Large Volume of Transactions: While the per transaction revenue might be nominal, these verifications occur on a very large base, allowing for high volume growth.
Large Unaddressed Headroom: With only 2% of the population as regular digital transactors, the growing e-commerce ecosystem.
Growth of Fintech Industry: The expanding fintech sector, is driven by new entrants and significant investments.
This sector is expected to grow significantly over the upcoming years on the back of the rapid adoption of digital authentication, verification, and utilization, witnessing large-scale volume growth with Protean having a significant market share in most services offered.
Larger emphasis on paperless and cashless transactions.
Revenue Model:
B2B, Transaction fees per transaction/authentication.
Risks and Challenges:
The company’s growth is limited by the volume of transactions it facilitates, a factor over which it has no direct control.
Margin compression is due to increased competition and the company plans to mitigate this by building vertical integration of value-added services for digital onboarding, doing credit surrogates, credit scoring, and digital lending leveraging their account aggregator license.
Cyclical in nature and depends on government spending on schemes.
4) Others:
Protean eGov’s offerings span several Open Digital Ecosystems (ODEs), including platforms like ONDC, which supports areas such as e-commerce, mobility, agriculture (Agri Stack), health, education, and skills (ONEST). The Vidya Lakshmi portal, developed by Protean, serves as a central platform for student education loans, mandated by the RBI for public and scheduled banks. By March 2024, it registered ~42 lakh students, with 17.6 lakh loan applications. Protean’s Vidyasaarathi portal also manages online scholarship distribution, processing ~40,000 scholarships for students. Management guidance to increase revenue share from another category to 25:75 with 25% revenue share from non-core business in 2-3 years.
CLOUD & INFOSEC as a part of the push to make in India cloud and green cloud which caters to IaaS, Daas, Paas, and Staas.
Data Stack is a collection of technologies and tools used to collect, store, process, analyze, and visualize data.
ONDC is an open network for digital commerce that will establish open, inclusive, and competitive marketplaces online, creating choice and opportunity for everyone, by everyone.
Other projects include:
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RISE with Protean- This platform targets streamlining the discovery and application of digital assets like APIs, micro-services, and user journeys, thereby enhancing API use and its integrations for businesses in India.
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Protean X (Digitally verifiable credentials): ProteanX is a future-ready solution, that enables individuals and organizations to create, verify, and store credentials using blockchain-based technology. ProteanX enables a secure and tamper-proof digital record of one’s Identity, documents, certificates, and qualifications issued by a trusted source such as a university, employer, government, etc. on a distributed ledger 3. eSign Pro 3. Workflow Management System for Central Board of Film Certification (“CBFC”) engaged Protean as the “Implementation Agency” for the Design, Development, Implementation, Hosting, and Maintenance of the Online Film Certification Application Processing System and the CBFC website. This agreement was renewed on January 1, 2022, for a period of 3 years. It also facilitates the CBFC Officials to process the application, by providing a web-based interface to capture end-to-end application approval workflow for the departmental users associated with the certification process, including the screening of short films. Digitization of old paper certificates issued by CBFC before the launch of this system was also undertaken and has been completed.
Account Aggregator: Leverage its existing relationships with Banking and other financial sector organizations to offer Account Aggregator services that will help offer consent management to citizens and consented fetching of data to various regulators from RBI, SEBI, IRDA, and PFRDA regulated entities to promote greater financial inclusion.
Revenue Contribution and Financials: Contributed 12.6% of FY24 revenue and 11% in Q2FY25 which contracted from 14% in Q1 and contracted at 14% QoQ.
Key Growth Drivers:
Huge headroom for growth with only less than 2% of the Indian population using eCommerce
India’s cloud adoption is currently at 6.0% which is lagging behind the global average of 7.9% and is almost half the US, and UK adoption levels of 11.4 %
Favorable Government policies, increase in consumer demand, and digital transactions in India.
The requirement of RBI to store payment data in the local cloud could push the demand for Indian cloud operators.
Market leader and huge customer base increase the opportunity for upselling and cross-selling various value-added products like the data stack, Rise by Protean, eSign Pro, etc.
A push from GoI to export India’s Digital Public Infrastructure to another country could be a huge growth driver in the future. The Management confirmed talks with African, Middle Eastern, and South East Asian countries but was not able to commit to any quantitative figures.
Foray into exports can accelerate growth being high margin business(>20%)
Revenue Model:
Protean eGov receives reimbursement from ONDC for infrastructure services that enable network functionality and charges one-time fees for application development and design as a tech provider. For back-office support, Protean uses a SaaS model based on transaction volume. Transactional revenue has yet to be fully monetized in 3-4 quarters. Additionally, Protean plans to charge transaction fees each time a buyer connects with a seller on the platform.
Risks and Challenges:
Mostly one-time projects followed by maintenance of infrastructure.
Intensive competition in Cloud and infosec business.
Cyber attack
obsolescence of technology.
5 Likes
Which company will be responsible for change in PAN with chip?
1 Like
How will it benefit this company?
If they win the RFQ for project it should bring in additional revenues is my understanding.
Protean eGov Technologies
Got approval from National Stock Exchange of India Limited for listing of 4,05,46,836 Equity Shares on the Exchange w.e.f. February 06, 2025.
Earnings call transcript released, here’s a quick summary:
- Financial Performance: Q3FY25 revenue of INR 202 crores reflects a slight YoY decline of 1%. However, tax services grew by 3% and pension services by 12%.
- Market Share Growth: Protean’s share of the PAN card market increased from 52.1% in Q3FY24 to 59.2% in Q3FY25 despite a 22% overall market dip.
- Pension Services: Onboarded 3.05 million new subscribers, maintaining a 97% market share in NPS and APY. Regulatory push expected to further increase pension penetration.
- Identity Services: This segment experienced a 17% YoY decline, driven by previous high volumes due to government schemes.
- Strategic Initiatives: Secured a INR 161 crores mandate for CKYC Records Registry 2.0 and launched marketing campaigns with actor Pankaj Tripathi.
- Future Outlook: Focus on digital transformation in India; management expects profitability from burgeoning annuity revenue streams and international opportunities in 19 countries.
Summary generated by FinDL
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