Capillary Technologies operates a cloud-native loyalty platform that serves as the system of record for enterprises managing membership, points, and rewards. Over 90% of revenue comes from the loyalty stack, with subscription gross margins of 66% overall and upwards of 75% for the organic business. The company counts 465 brands and 25 Fortune 500 customers, with geographic revenue split roughly 60% US, 15% Europe, and 25% Asia. Net revenue retention is 111% overall (116% excluding one large healthcare customer), reflecting usage-based pricing and cross-selling. The competitive backdrop is fragmented, dominated by agencies rather than pure software providers, and Capillary has secured leadership recognition in Forrester and Gartner evaluations. Q1 FY27 adjusted EBITDA margin was 17-18% overall (20%+ organic), up from roughly 10% a year earlier, indicating a business that is still early in its margin expansion journey but already leveraging costs.
The persistence of these economics rests on switching costs that are unusually high for enterprise software. The average customer integrates Capillary across nine distinct touchpoints, and the platform acts as a transaction-level ledger that undergoes annual audits, making replacement disruptive and risky. The company also holds pricing power through per-member and per-transaction contracts, allowing periodic inflationary increases. On the acquisition front, Capillary has demonstrated a repeatable model: it buys loyalty software businesses at 0.3-0.5x revenue, then migrates their customers onto its own stack, lifting gross margins from roughly 30% to 65-70% post-migration. The recent acquisitions of SessionM and Kognitiv are being executed on this template, with SessionM adding $32 million ARR from 45 customers, all of whom have agreed to transition to Capillary paper. This is not a commodity business; it is a niche where scale, technical depth, and migration capability create durable advantages.
The inflection point is the integration of acquired platforms, which will unfold over the next 18-24 months. Management has committed to completing Kognitiv migrations by September 2027, with the first customer going live on September 1, 2026, and SessionM migrations starting at the end of 2026 or early 2027, taking 12-18 months. As these customers move onto Capillary's platform, their gross margins should rise from ~30% to 65-70%, and management expects SessionM to reach 35-40% EBITDA margins within two years. The organic business continues to grow at a 15-20% clip, and aiRA, the AI assistant with 26 live customers and about $2.5 million ARR, is targeting 5-10% of total revenue in FY27. By early 2028, revenue should comfortably exceed the FY27 guidance of INR 1,065 crores (which management says it will beat), potentially reaching INR 1,200-1,300 crores as organic growth compounds and acquired revenue is consolidated. ARR, which stood at INR 1,026 crores in Q1 FY27, could move past INR 1,300 crores as the migration-driven NRR uplift kicks in.
Management has a track record of delivering on promises. In February 2026, no explicit FY27 guidance was given, but by May, the company guided to INR 1,000-1,050 crores, and by August, it raised that to INR 1,065 crores with a commitment to "definitely beat" the number. Historical execution supports this: ARR grew from INR 608 crores in FY25 to INR 765 crores in FY26 to INR 1,026 crores in Q1 FY27, a 34% year-on-year increase. New ACV grew 75% year-on-year (excluding one large healthcare customer), and the company closed the SessionM deal in May 2026, ahead of expectations. On the cost side, headcount grew only 1% in FY26 while revenue grew 23%, and the company generated INR 150 crores of operating cash flow against adjusted EBITDA of INR 107 crores. Management has also been disciplined in capital allocation, acquiring competitors at very low revenue multiples and funding these with internal cash flow. The one blemish is a cyber-fraud incident that caused a INR 34.5 crore exceptional loss, but no customer data was exposed and an insurance claim is pending.
The earnings path is visible: FY27 guidance calls for INR 1,065 crores of revenue and INR 172 crores of EBITDA (16% margin), with management expecting to beat. For FY28, if migrations proceed on schedule, EBITDA margins on the combined book could expand to the mid-20s as acquired gross margins rise toward 70% and non-COGS costs continue to grow slower than revenue. The sessionM server costs alone represent ~50% of its revenue versus Capillary's 7-9%, offering potential savings of $6-8 million over the next few quarters even before full migration. The main falsifier is execution risk: any delay in Kognitiv or SessionM migrations (which have firm deadlines) would postpone the margin upside, and customer concentration remains a concern, with the largest customer dragging down overall NRR. Additionally, aiRA is still early, with only about 10 of 26 live customers paying, and enterprise sales cycles average nine months, making quarterly ACV lumpy. If Capillary hits its migration deadlines and maintains NRR above 110%, the business should compound earnings at a 30%+ clip over the coming two years; if migrations slip, the margin story stalls, but the underlying organic franchise remains intact.
companyname: Capillary Technologies India Limited ticker: CAPILLARY sector: Loyalty and customer engagement SaaS (B2B enterprise software) Capillary Technologies is an Indian-headquartered SaaS company, incorporated in 2012 and listed on BSE and NSE in November 2025, that builds the software layer for customer loyalty programs (FY26 annual report). Loyalty, as the company defines it, is any long-term retention mechanic: points, tiers, memberships, subscriptions, rewards. The platform tracks eve...
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FY27 revenue guided at INR 1,000–1,050 crores driven by SessionM acquisition integration
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