Bengaluru-headquartered Capillary Technologies India, an enterprise-grade SaaS (software as a service) tech provider in the loyalty domain, has launched its ₹877.5-crore IPO at a time when SaaS valuations have normalised globally, and investor expectations around profitability, cash flow and unit economics have become more stringent.
Capillary’s public issue totals ₹877.5 crore, consisting fresh issue of ₹345 crore (59.8 lakh shares) and offer for sale (OFS) of ₹532.5 crore (92.3 lakh shares) at the upper end of the ₹549-577 price-band. The selling shareholders in the OFS are CTIPL (promoter entity) and Trudy Holdings (investor).
The company plans to deploy funds from fresh issue mainly towards cloud infrastructure (₹143 crore), product development and R&D (₹71.6 crore), computer hardware (₹10.3 crore) and inorganic growth and general purposes. At a post-issue share base of 7.93 crore, Capillary’s implied m-cap is ₹4,576 crore. The IPO closes on November 18. So far, it has been subscribed 29 per cent.
The company, backed by the likes of Sequoia Capital, Warburg Pincus, Norwest Venture Partners, American Express Ventures, is presenting itself as a global AI-led loyalty and customer engagement platform with a growing footprint in North America and a diversified base of clients. Its financials show sharp scale-up over the last three years and margin expansion from loss-making to profitable operations (in FY25).
However, slowing growth in select parameters, heavy inorganic contribution, mixed cohort signals and valuation multiples based on FY25 (7.5x EV/sales) and annualised H1FY26 (6.3x) that sit above many global SaaS majors warrant caution. Its valuations are expensive and hence the risk-reward is unfavourable. Thus, investors can skip the IPO, and wait and watch for now.
Business
Loyalty programmes have evolved from manual, agency-run punch-card systems to today’s AI-driven SaaS platforms. The 1980s-2000s relied on physical tracking and outsourced execution. The 2010s introduced tech-enabled programs, CRM integration and early data analytics, though many brands still depended on agencies. Since the 2020s, cloud-native, low-code platforms with real-time segmentation and predictive analytics have replaced fragmented stacks, improving scalability and cost efficiency. Consumer behaviour has shifted toward value-seeking, personalisation and instant rewards, pushing brands to modernise.
Capillary, founded in 2012 by Aneesh Reddy Boddu, builds software that helps big brands have repeat customers. It tracks how people shop, runs reward point and gift programmes, and sends personalised offers across apps, websites and stores. This makes customers feel recognised and encourages them to buy more often from the same brand.
Capillary’s platform has multiple modules such as Loyalty+ (the main engine), Engage+ (personalised engagement and communication), Insights+ (analytics, segmentation, prediction) and Rewards+ (catalogue, redemption, fulfilment). Enterprises pay Capillary a recurring subscription fee tied to usage. Additional revenue comes from one-time set-up fees, campaign-based fees, cross-selling new modules etc.
In terms of client and geographic footprint, the 730-employee firm supports 410+ enterprise brands, 19 Fortune 500 customers, runs presence in 47 countries and has 1.8 billion consumer profiles on its platform. Customers operate in retail, consumer packaged goods, BFSI, telecom, healthcare, energy, automobiles and conglomerates. North America has become the company’s largest and most strategic region despite likely pricing pressure, with 56 per cent revenue, followed by APAC (25 per cent) and EMEA (19 per cent).
Capillary operates in the global loyalty management and customer engagement market, estimated at $17 billion in 2024 (source: Zinnov) and expected to grow at 10 per cent CAGR through 2029.
The broader SaaS sector has seen valuation compression from previous highs. Globally, SaaS companies that listed at 15-30x revenue, including Freshworks (32.9x TTM) in September 2021 at $10.1 billion that now trades much cheaper (4.4x) after a 66 per cent correction; Salesforce and Adobe shares are down 3 per cent and 30 per cent respectively in the last five years, indicating that the SaaS space is facing an AI disruption.
Financials, drivers
The company financial profile over the last three years shows rapid top-line expansion and improving profitability, but there is a question mark on its sustainability. Net revenue (revenue from operations less campaign service cost) grew 52 per cent in FY23, then 133 per cent in FY24 but slowed to 24 per cent in FY25 and 25 per cent in H1FY26.
Annual recurring revenue (ARR) is the total value of a SaaS firm’s recurring contracts over a year and shows how stable and predictable the business is. Capillary’s ARR after over a two-fold rise in FY24 slowed to 11 per cent in FY25. It is expected to improve to 18 per cent in FY26 (annualised).
Its adjusted EBITDA (EBITDA plus ESOP expenses minus all non-operating income) was in red for FY23 and FY24. The number stood at ₹74.5 crore in FY25 and is expected to be around ₹80 crore in FY26, assuming the H1 FY26 margin of 11.4 per cent holds. Similarly, after clocking losses at PAT level in FY23 and 24, FY25 showed a slim ₹13.3 crore profit. First-half FY26 PAT is again back to ₹1 crore.
As on September 30, 2025, Capillary has borrowings of about ₹89 crore and cash of ₹60 crore. Negative operating cash flow in two of the last three FYs indicates that cash conversion is yet to stabilise, though H1FY26 shows promise.
The company highlights two major growth levers: Organic expansion and inorganic acquisitions.
Organic growth remains driven largely by existing customers. Partner channels are becoming more important, with 64 per cent of new customers in H1 FY26 sourced through system integrators. Net Revenue Retention (NRR), a signal for product stickiness, pricing power and long-term revenue durability, strengthened from 113 per cent in FY24 to 121 per cent in FY25, although it eased to 115 per cent in the first half of FY26.
Subscription revenue now constitutes nearly 90 per cent of recurring operating revenue. The company’s ‘farming-led’ model deepens penetration within large accounts, creating predictable growth but tempering new-logo momentum. This also explains why customer acquisition cost (CAC) has settled at about 18 per cent in FY24-25, well below FY23-levels, as the business leans more on partners and existing customers.
Capillary has also expanded through acquisitions, particularly in the US loyalty-tech space, adding businesses such as Persuade (September 2021), Brierley (April 2023), Rewards+ (June 2023), and the US assets of Kognitiv (May 2025). While acquisition price/revenue multiple for Persuade was 4.8x, for others it was 0.4-0.6x. The M&A strategy centres on migrating acquired customers onto Capillary’s platform to capture synergies and lift contribution margins. In FY25, these acquired businesses contributed ₹435.1 crore in net revenue post-migration, accounting for over 70 per cent of total net revenue. Inorganic scale-up is, therefore, a core pillar of the company’s growth narrative. Post-migration, contribution margins have risen sharply for acquired entities.
CAC payback measures how long it takes for a company to recover its customer acquisition costs. Capillary’s payback improved from 16 months in FY23 to 14 months in FY24, before returning to 16 months in FY25. However, the figure jumps sharply to about 31 months in both H1 FY25 and H1 FY26. It suggests that recent customer cohorts are generating slower early returns, pointing to weaker unit economics in the near term.
Valuation
At the upper end of the ₹577 price-band, Capillary is valued at a market capitalisation of about ₹4,576 crore and EV of roughly ₹4,600 crore. This translates to EV/sales of 7.5x and 6.3x for FY26 (annualising H1). The P/E ratio is far less meaningful for this SaaS firm due to low and uneven PAT.
Compared with global SaaS benchmarks, Capillary’s EV/sales multiple sits near or above Salesforce (5.7x), Adobe (6x) and SAP (7.1x). It is also much more expensive than SaaS peers like Zeta Global (3.4x) and Freshworks (3.4x), as well as India-listed Zaggle (3.1). The lack of a valuation discount over several global SaaS peers, who have much longer track records of profitability and cash flow, is unattractive. For Capillary’s valuation levels to sustain, the execution bar needs to be set very high.
Published on November 15, 2025
