eMudhra Limited (EMUDHRA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Akash, moderator for the conference call. Welcome to eMudhra Limited Q1 and FY 2026-'27 Earnings Conference Call. We have with us today Mr. Venkatraman Srinivasan, Executive Chairman; Mr. Kaushik Srinivasan, Whole-Time Director; Mr. Arvind Srinivasan, Director; and Mr. Ritesh Raj Pariyani, Chief Financial Officer. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Venkatraman Srinivasan. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining Q1 investor and analyst call today. We are pleased to report a strong start to FY '27. During the quarter, our total income grew by 28% year-on-year to INR 1,925 million, while EBITDA increased by over 40% to INR 504 million, taking our EBITDA margin to 26.2%. Profit after tax grew 28% year-on-year to INR 320 million with PAT margin remaining healthy at 16.6%. Of the 28% growth in total income, approximately 13% was contributed by the Cryptas acquisition, while the balance reflects healthy organic growth across our core businesses, led by continued strength in our Enterprise Solutions portfolio. Enterprise Solutions remained our primary growth engine, growing approximately 50% year-on-year and contributing 65% of total income, while our services business also delivered growth of around 5% year-on-year, supported by new customer additions in the United States. International markets now contribute 66% of our revenue, and we continue to see encouraging momentum across Europe, North America, the Middle East and Africa. Europe was particularly encouraging this quarter. Through Cryptas, we achieved our first sale of eMudhra's CertiNext certificate lifecycle management platform to a large German data center customer. While also securing the first emSigner deployment integrated with PrimeSign Trust Services for an Austrian city municipality. This is an important milestone as it validates product market fit and demonstrated our ability to successfully cross-sell the broader eMudhra platform into the Cryptas customer base. Cryptas contributed approximately INR 200 million of revenue during what is typically a seasonally weak quarter in Europe. Our Trust Service business saw a temporary decline during the quarter following the transition to a new global security standard for digital signature tokens, which comes into effect in September. As customers and channel partners prepared for this transition, demand for legacy tokens reduced, resulting in a temporary impact on Trust Service revenue during the quarter. We expect this to normalize as the industry completes the transition. On the innovation front, our R&D investment remains tightly aligned with the evolving cybersecurity landscape. During the quarter, we introduced cryptographic bill of materials or CBOM analysis within CertiNext, enabling enterprises to discover where cryptography is deployed across their IT environment and helping them prepare for the transition to post-quantum cryptography. We believe increasing regulatory and industry focus on post-quantum readiness, together with the need for organization to inventory and modernize their cryptographic assets create a significant long-term opportunity for our certificate life cycle management and PKI platform. We also continued to strengthen our broader product portfolio with AI-powered capabilities in emSigner and the commercial launch of PrivaTrust consent management model. Looking ahead, we continue to believe that cybersecurity and AI are becoming increasingly interconnected as enterprises deploy AI at scale, trust, identity and cryptography become foundational infrastructure. Our 5 platform strategy positions us well to capitalize on the structural trends while continuing to expand internationally. Finally, from an outlook perspective, our guidance remain unchanged from what we shared in the previous quarter, that is to achieve an organic growth of 18% and work towards achieving a PAT growth of 25%. We remain focused on driving profitable product-led growth, expanding our international footprint, executing our UAE trust service launch and maintaining disciplined EBITDA and PAT margin while continuing to invest in innovation. With that, let me hand over to our CFO, Mr. Ritesh Pariyani to walk you through the quarter's numbers.

Thank you, Chairman. Good afternoon, everyone. I'm pleased to share the highlights of our Q1 FY 2027 financial performance. Our total income for Q1 financial year 2027 was INR 1,925 million, marking a 27.8% year-over-year growth. Gross profit for the quarter grew 36.4% year-over-year to INR 1,103 million with a margin of 57.3%. EBITDA for the quarter was INR 504 million, registering a 40.4% year-over-year growth with a margin of 26.2% Profit after tax for the quarter was INR 320 million, reflecting a 27.9% year-over-year growth with a margin of 16.6%. Now coming to segment performance. The Enterprise Solutions segment generated revenue of INR 1,623 million, while the service revenue was INR 284 million. That concludes my remarks. Thank you, and we may now open the floor for the question and answer session.

[Operator Instructions] The first question comes from the line of Surbhi Soni from Bellwether Capital.

I wanted to understand about the PrivaTrust platform. Is this product live? And if you can help us understand what kind of deployment opportunities you are seeing for this platform as of now?

Yes. So product, as you know, comprises of many modules. It is mainly to cater to the data privacy and consent management. We're already live with consent management capabilities, which we are demonstrating and showing a lot of -- doing a lot of pilots, proof of concepts and very soon a few wins as well. Of course India, as you know, there's a DPDP Act and people have to implement large organizations basically get, I think, time till the end of the year or sometime next year and many other organizations that we implement. But the product capabilities also involve additional capabilities of how do you discover and classify the personally identifiable information in your landscape that includes storage and files, folders, databases, et cetera. So these are the incremental modules that will very soon be kind of launched, it will encompass consent management, data discovery, data classification and also how do you handle personal data in the context of when you send it to third-party vendors like your CRM vendor or whatnot.

Got it. And see, this is like a new addition to our product stack, right?

Yes.

So how should we think about over a 3 to 4 years, what's the kind of opportunity for this kind of platform and not just from an India perspective because you cover a lot of other regulations in Europe, China, et cetera. So how should we think about opportunity in India? And when do you even plan to take this product abroad?

Immediately, the focus is India because there's a DPDP Act and people have to comply and anyone dealing with personal data and particularly those that are B2C focused have to kind of do it more quickly. And those that are large, obviously have a time line. So it is -- I mean so we are working towards opportunities. We may get a better sense of the direction in a quarter or two, at which point we may be able to sort of quantify where this can help. But obviously, the TAM is large because everybody in India has to implement. And slowly, once we get some foothold here, we will take it to other markets where these privacy regulations are forming or more nascent in their adoption.

Got it. Very clear. Also, you mentioned in the press release about the trust services in UAE. So by when do you expect to get the QTSP license in UAE? And if you can just help us understand what exactly are we building here? Is it like Aadhaar equivalent eSign along with pass or is it something beyond that?

This is Arvind here. To answer the first part of your question, we're essentially the final step of the process to getting the license in terms of license application and such. So we expect that to be completed sometime towards the end of this quarter to beginning of next quarter, where upon completion, we should be able to launch the respective service. From what it is, it is basically similar to signing the eSign Aadhaar eSign type in India, but with a local identity ecosystem, predominantly meant to be sold to the local market for the banking and several other segments that we operate in.

Okay. So just for my understanding, since we have a large banking customer base already there, does this product actually complement our emSigner offering in U.S.

Yes, it's meant to complement our emSigner offering in UAE. But obviously, the process of embedding these banks and regulated entities is a time process. It will happen over a duration. So we are in the early works of getting that set up and up and running in terms of the process of go-to-market.

Okay. So it's more like a retail product, but will also get integrated with emSigner. Is that understanding correct?

I'm sorry.

So it's more like a retail Aadhaar equivalent signature and then will get integrated with emSigner also.

It's not a retail product. It is enterprise oriented in the UAE market. The technical characteristics of the product are similar to an eSign product here. But the actual market for this product is not a retail-oriented offering. It is enterprise-oriented offering.

Even here, Surbhi, if you see Aadhaar eSign, though finally the retail customer sign, the sale is predominantly to banks and the NBFCs and all that. So similar thing will happen there also.

Sir, on the trust side, I have one question. With this CCA mandate to move to FIPS 140-3, right, what I understand is that these tokens manufacturers need to recertify themselves. So just wanted to understand the supply issue that we faced here. Were we able to solve that? Is it largely behind us? And from Q2 onwards, can we see the trust business in the normal course of growth?

No, in the token, mainly the ePass token was the major token, then Proxkey token. But Proxkey I don't think they are getting recertified. But the ePass token, they have submitted the application for recertification, everything is done. So it is a little bit pending from CCA side. So then the other one new token called Innate token, which is already certified, but they are not able to produce in volumes. So that's where the capacity is very low. So mostly by September, the ePass will be able to get certified and then again, it will start -- the token volume will increase.

Got it. Just one last question. I wanted to understand how much was the revenue for Cryptas in this quarter?

INR 20 crore.

The next question comes from the line of [ Pankaj Sachdeva from AWIS Capital ].

I have 2 very quick questions. One is relating to the trust services, which we have already spoken about. I just understood that the things are going to get streamlined by March -- sorry, by September. So this means that even the Q2 will get impacted both from top line and bottom line perspective. At least that's what my understanding is. Is that right? My related question to this is, is it only the matter which you explained is the reason for downfall? Or is there some competition pressure also which is kind of driving our volumes down?

If you see our general volume of token sale in the quarter was almost INR 8 crores, INR 9 crores that was the volume because this time and everybody was talking. This time, the partners are all not stocking it because it is expiring by September. That's why almost INR 5 crores to INR 7 crores volume got less. But that is in the token the profit is not much. So on an average, gross margin may be 10% or something like that. So that's where -- while the top line may continue to be less during the next quarter also, but the bottom line, it doesn't have much effect on the bottom line.

My second question, sir, is I know we have grown fairly well when it comes to international enterprise solutions. But when we get into segment profitability, the margins over there are far lower than what we see in the domestic side. So how do you see that over a period of time sir.

You see international, it consists of 2, 3 elements. One element is the services business, where obviously, because in the product business, gross margins are 70%, 75% in services business, it may be sometime 18%, 20% like this. So that is one area, which is, again, if you see last year itself, we have told it is around INR 150 crores kind of thing. Then the other thing, the Cryptas business, again, it is roughly around INR 100 crores business, which was not profitable at all. Gradually, it is improving. This year, we expect profit. And third is the our own product segment. So in our own product segment, the profitability is even better than the Indian business. But combining all these things put together, the overall profitability at segment-wise profitability limit becomes lower compared to the Indian segment profitability. But over time, with Cryptas again becoming profitable and our own product segment increasing over services segment, the profitability will improve. So this is one side. Second side is because it is a new attempt in several markets, several senior executives and the senior executives are very costly $200,000, $300,000 per person like that. So that is another thing. So that will again get offset when the volume improves. So over time, it is likely to improve.

Sir, the Q1 margin stood at almost like 20-odd percent, a little over 20-odd percent. What is the outlook we have for the whole '27?

Separately we have not put the profitability for that. But overall, we are expecting 25% growth on PAT and then 18% growth on the top line.

Got it, sir. Sir, my last question is that in one of the -- when I was going through the financials at one of the places it's saying that some of the subsidiaries contributed a consolidated net loss of almost like INR 4-odd crores. So what is this about? And are we expecting that to continue or it will settle down over a period of time?

Loss of how many crores?

INR 4 crores, sir.

INR 4 crore predominantly it will be the European subsidiary, BV because in BV, some legal expenses were incurred and all that. And now the Cryptas is under BV. So when Cryptas become profitable, it will also become profitable. And apart from Cryptas, independently in BV, we have appointed a senior salesperson in Rome and he is chasing several leads. If even 1 or 2 materializes, it will turn profitable. We are not expecting the loss to continue in the current year.

So as far as Cryptas goes, we are very confident of making it profitable in FY '27. Is that right?

Yes. Because already one sale to data center has happened of our CertiNext product and another sale along with primesign is one of the subsidiary of Cryptas. So that has also happened. So with that, we are very confident. And then the Cryptas product sale also happened in our other geography.

The next question comes from the line of Mr. Srinath V from Bellwether Capital.

Arvind just wanted to understand how is the outlook for the U.S. products business? Can you give us some qualitative understanding as to how the lead pipeline is? What are the new initiatives? Now we have rebranded both our products as well as our data center. We have now 3 locations that we are in. So now moving forward, how is the lead pipeline? What has been the broad feedback from the customers? That would be great.

Yes. No, thank you for that. So I think the U.S. business on the product side, we see reasonably good growth in the lead pipeline and the initiatives that we're doing. So to quickly put some sort of view to this, I think we've already reiterated the university federation in common, which was something that we won last year. So more and more universities are getting onboarded into this, which brings greater brand visibility to us and to CertiNext brand within the context of the North American markets. So on the one side, we are trying to go deeper into that segment, see how further we can mine that particular segment for more of our offerings, more of our solutions, add-on things that we can position within the federation of the community and maybe other universities also outside of the federation. On the other side, we also have active initiatives going in and conversations in advanced stages on some IoT-related use cases on PKI, so these are sometimes industry agnostic. But in this particular case, some of them are in health care and some of them are different, but we see that we are able to add some value here with our stack in terms of bringing trust at a device level. Third major element that we're working on is general pipeline building and lead generation and activity actively in the upper mid-market segment and some of the lower enterprise segments within U.S. and we see some positive conversations there around SSL trust and all of these things. With the main agenda in U.S. being that with this coming off the 47-day expiry of SSL and then the post content shift and these sort of trends playing in, there is a general increased awareness around what we are doing and perception around our services and things that we have to offer. So I think the thing is that the local brand and the data center and everything you alluded was some of the baseline requirements for us to be able to have all these conversations and build a healthy pipeline and lead generation and get into these engagements as we are today.

Do you feel somewhere later this year or somewhere next year, we will start seeing better traction and slightly better clip of growth, especially in the U.S. products business as we settle as the incoming kind of get implemented. I just wanted to clarify, has that university business already started? Or is it something in the pipeline this year?

No, the university business has already started, and that has been ongoing. So I think generally, we have the growth rate in the enterprise segment of about 25%, which we are maintaining. The outlook is positive, but there are deal pipelines that take some amount of time in North America, especially when you talk into this segment. And obviously, there are several factors what we know beyond we may not, right? So we factor in all this when we say that we're growing at a certain rate. So I can say that the outlook definitely looks positive. The pipeline is growing well, and we have a captive client base that we can expand upon. So it's more meaningful in terms of what further we can achieve. But yes, so I think that we are in the right direction.

One more thing is that university network, already we are issuing 1,000 - 1,500 [ existing ] certificate every day. So we have already started the momentum has further improve.

Exactly.

Got it. Sir, just wanted to get a sense on seeing the deal wins on SecurePass, it looks like that business is actually growing faster than our top line. What is working for this business, especially in India? If you can highlight some key saliencies or use cases, want to understand privileged identity, privileged access management, where is the growth actually coming in? And again, here, could you give some sort of outlook as to how the next 12, 18 months look for these set of products, which seem to be growing on the pace of it seeing all the wins we have, sir?

Yes, SecurePass in India, I mean 2, 3 things, right? So one is there is compliance mandate by Central Bank and capital markets regulator on stronger authentication. So all banks and capital markets entities are forced to basically improve their cybersecurity posture. The second is the deal values are much larger than even CertiNext. So typical SecurePass for a large bank or a large government entity is in the range of INR 4 crores, INR 5 crores, INR 6 crores to start with and probably higher. And the third thing is privileged identity, privileged access management are again becoming compliance mandates, not only from regulation, but more from voluntary cybersecurity posture because many entities have recently experienced data breach. And typically, a data breach happens only when a critical administrator privilege or a credential gets compromised, right? So these are the 3 trends that are driving more and more SecurePass adoption locally. And which is why given the scale of implementation we have done here, we're also looking at taking it to adjoining markets like Philippines, Indonesia as well as Africa and to some extent, now recently, some conversations have started in Middle East as well. So the idea is to expand the reach of this product to other markets apart from India. Because many more deals in pipeline are there in the Indian context itself, where many are under RFP evaluation in various stages. But once international picks up, maybe the growth can be kind of maintained at a fairly aggressive clip for the product.

Here, if we were to implement the full suite, including PIM and PAM and the works, these deals over a period of time could be north of like INR 10 crore engagement per bank just to get a feel of how large each of these implementations can be?

Yes, that deal value is possible per large bank, right? So midsized bank may not have that kind of spending capacity, but definitely large bank, government, central government agency, critical data center installations, for state governments, et cetera, have that kind of deal value capacity for the product.

Got it. Last one on this, is defense also a market for this product? And have you been engaging with the government on this? Or is it largely banks and related?

No, Defense also because already we have a defense agency that is a customer where they have implemented identity access management across 200 applications that are internal. The conversations are going on with various other main defense as well as other sort of ancillary agencies of defense.

Just the last question on Cryptas. We needed to kind of in-source the CA code or I'm not technical. So some way we could backward integrate on the product so that we could save cost and also move some of the cost -- service cost to India so that we can support them from here. Have all those moving parts been put in place? And is that reduction in loss because of those initiatives? And where do you see all of this playing out from Cryptas loss management?