Protean eGov shares slump 20 percent on not being shortlisted by tax department for PAN 2.0 project

"We were informed by the Income Tax Department (ITD) that we have not been considered favourably for the next round of RFP selection process," the statement said.

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E-governance solutions provider Protean eGov Technologies has not been shortlisted by the Income Tax department to design and develop PAN 2.0 project, the company said in an exchange filing, sending shares sharply lower by nearly 20 percent on May 19.

"We were informed by the Income Tax Department (ITD) that we have not been considered favourably for the next round of RFP selection process," the statement said. The company had participated in the RFP bid proposal for the project, which was for technology revamp, including Design, Development, Implementation, Operations and Maintenance of PAN systems at the Income Tax Department.

The management said it sees limited impact on current services. "...at present, it appears to have limited or minimal impact on our ongoing PAN processing and issuance services under the existing mandate with the ITD," the company statement added.

"We have reached out to the tax department to seek further clarity on their stance. As of now, we see limited impact," Managing Director Suresh Sethi said during an investor call.

Equirus Securities has forecast a bigger hit, downgrading the stock to 'Sell'.

"While the impact (this fiscal year) may be muted, we expect a 75%-100% collapse in this revenue stream over the next 2-3 years," Reuters quoted Equirus Securities.

ICICI Securities said Protean was the leading contender 'by a distance' for PAN 2.0 and losing out 'creates uncertainty on PAN business outlook over (the) medium term'.

PAN services accounted for 61% of Protean's business in H1FY25, and it has a 64% market share in cumulative Pan issuances. The segment revenue grew 33% between FY22 and FY24, on the back of growing number of PAN cards issued.

During FY24, new PAN issuances by Protean were higher, driven by the Aadhaar-PAN linkage deadline and certain broad-based government schemes launched during the year. The management had in January said that they see 'significant headroom' in the business as the PAN card penetration in India is still below 40%.

Protean had in January said the new PAN 2.0 project is aimed at improving the IT stack on which the card is issued. "...while we act as the agency for collecting the subscribers or the applicant's data and we pass it on to ITD, the core stack on which the PAN number is issued and the deduplication and everything is done is running on the IT stack. So, the primary objective is to refresh the IT stack. And along with it, naturally, they are looking at it 360 degrees to say what would be the new way of application, straight-through processes. And that's what really the new stack is all about."

The company did not specify the revenue implications during its December earnings call, if it did not fail the bid for PAN 2.0. "...how the distribution services work, how the citizen services work at the last mile, that will have its own sort of workaround to it," said Protean eGov, adding, "...it's difficult to currently put out a revised revenue model or a business model around it. We'll
have to see more clarity as the project gets implemented."