Ahead of IPO, Capillary Tech sees steady India business even as overseas growth outpaces; AI and M&A remain key focus areas

Ahead of IPO, Capillary Tech sees steady India business even as overseas growth outpaces; AI and M&A remain key focus areas

Capillary Technologies India Ltd, which opens its Rs 877-crore IPO on November 14, says its India operations remain stable and profitable even as global markets now drive a larger share of revenue. The company attributes India’s lower contribution to faster growth in Europe and the US, not a slowdown at home.

When asked about why the growth pace has started to shrink, founder and CEO Aneesh Reddy told Moneycontrol, “India is very important for us — we work with some of the country’s biggest brands, from Tata Digital to IndiGo and Metro Brands."

“The share looks smaller now only because other regions have grown faster. India continues to grow and generate good margins for us.”

Capillary now earns about half its revenue from Europe, with the rest split between Asia, the US and the Middle East. “What you’re seeing is faster scaling in the US and Europe,” Reddy said. “India used to be 100 percent at one point; those markets have just grown faster.”

The company serves over 410 brands across 47 countries, including 19 Fortune 500 clients. According to its RHP, Capillary reported Rs 598 crore revenue in FY25, up 13 percent YoY, and Rs 359 crore for the six months to September 2025, up 25 percent YoY. Gross margins stand at around 65 percent, with annual churn at 5–6 percent.

“AI is a big differentiator for us, and clients are paying for these features now,” Reddy said, referring to Capillary’s cloud-native SaaS suite — Loyalty+, Engage+, Insights+ and Rewards+. The company’s net-revenue retention exceeds 100 percent, suggesting expansion within existing accounts.

“We’re probably the preferred choice for many large Indian enterprises when it comes to loyalty,” Reddy said, noting that the company continues to bring newer products such as its Rewards platform to the Indian market.

While India’s relative contribution has moderated, Reddy said the firm is still “winning larger, better, public-market clients in India,” with margins comparable to global peers.

Reddy said the company’s third growth engine remains inorganic expansion. “If we can buy capabilities at 0.5 to 2.5 times revenue instead of building them over 18 months, that’s efficient,” he said. Capillary has completed four acquisitions in four years — Brierley, Persuade, Kognitiv and Tenerity assets — and plans to use part of the IPO proceeds for future deals.

CFO Anant Choubey said margins have held steady after past integrations. “Our 65 percent gross margins have been stable. About 20 percent of tech spend is currently capitalised, and that should normalise to 5 to 6 percent,” he said.

Nearly 80 percent of Capillary’s workforce is based in India, largely in product and engineering roles, while a majority of revenue is earned overseas — a mix that keeps operating costs competitive but adds some foreign-exchange exposure. Employee costs make up around 45 percent of total expenses, according to the RHP.

Post-listing, founders are expected to hold about 17–18 percent, with Peak XV Partners (formerly Sequoia Capital India) and Avataar Ventures among early investors.

The company’s next test will be to maintain margin discipline while scaling AI-driven offerings and integrating new acquisitions — showing that an India-based SaaS platform can sustain global growth without losing its domestic footing.