Protean 2Gov Technologies Limited.

About the Company:

Protean provides a comprehensive range of IT solutions in tax modernisation, social security and welfare, digital identity, education and skill financing, data solutions, and cloud and infosec services, catering to diverse consumer segments and impacting various sectors of the economy. It plays a vital role in establishing multiple foundational

Digital Public Infrastructure (DPIs) for Open Digital Ecosystems (ODEs). As one of the key IT-enabled solutions companies in India and chief architects and implementers for some of the most critical and large-scale technology infrastructure projects in the country with the aim to improve the delivery of public services and empower the residents.

Over the years, Protean solutions have led to the identification of bottlenecks in government services, increased transparency and efficiency, improved access to information, redefined public services

delivery, and led to a reduction in service delivery costs, while ensuring financial inclusion. The company collaborates with the government and has extensive experience in creating digital public infrastructure and developing innovative citizen-centric e-governance solutions.

Business Segments:

1) TAX SERVICES

Protean offers acceptance and processing of PAN applications, issuance of fresh PAN cards, re-issuances, updating of PAN CARD, and running of the TIN FCs and PAN Centres across India and the company also issues Tax Deduction and Collection Account Number (TAN). Protean operates over 4.42 lakh PAN/TIN facilitation centers and strategic network entities covering 18,000 locations across 36 states and Union territories in India. The largest issuer of India’s Digital Tax Identity with a cumulative 63% market share with the rest shared with UTI Infrastructure TechnologyServices Limited.

Revenue Contribution and Financials:

The segment contributed 55% of FY24 revenue and 54% in Q2FY25, respectively, and grew at 21% QoQ and saw a sequential degrowth YoY for the last 2 Quarters on the backdrop of a high base attributable to the high volumes in the previous year driven by the Aadhaar-PAN linkage deadline.

Key Growth Drivers:

Increasing use case of PAN: PAN is mandatory for Digital and Property transactions, government schemes, foreign trips, etc.

Largely underpenetrated population: Population of ~100crs. older than 18 years of age, only 50% of which own a PAN card, and at the current PAN card issuance pace, it’ll ~ take 6-7 years to bridge this gap.

Increasing trend in workforce formalization, and increased employment among youth, ~1.2 crs. Youths enter the workforce every year all of whom will be requiring a PAN card.

An increase in the no. of online PANs issuance over offline bodes well for Protean in the form of margin expansion in the future as the offline issuance involves a 25-30% commission.

Revenue Model:

Asset Ligth, Prepaid B2C model with transactional revenue. Protean earns revenue from the customer for services provided like new issuance, and updation of new PAN through online or offline channels and earns no revenue from the IT department.

Risks and Challenges:

Growth from new PAN issuances has an upper limit of around 7-8 crore annually, roughly equivalent to the average number of new PANs issued in India. Margins are low for services beyond new issuances, and soon, 80-90% of India’s adult population may already possess PAN cards. As this threshold approaches over the next few years, most revenue will increasingly come from lower-margin, non-issuance services, shifting the focus away from new issuance growth.

PAN issuance is cyclical and correlates the employment rate and job creation rate with heavy reliance on government schemes**.**

Recognition of any proxy identity card for PAN by the GoI in the future will hurt Protean’s business.

A few Financial aid from the government require PAN.

2) SOCIAL SECURITY AND WELFARE: Protean acts as the Central Recordkeeping Agency (CRA) for the National Pension System (NPS) and the Atal Pension Yojana (APY) and establishes IT infra, handles administration & customer service functions for all subscribers. India’s largest CRA for NPS and APY with a 92% market share in NPS and 100% market share in APY. Protean onboarded 3.6 mil subcribers in Q2 along with 826 corporates.

Revenue Contribution and Financials:

The segment contributed 28% of FY24 revenue and 31% in Q2FY25 and grew at 6% QoQ saw sequential growth of 13% YoY in Q2.

Key Growth Drivers:

Private Sector Opening Up to Pension as an Investment Option – Only 6% of private sector employees in India have pension coverage in India currently compared to 70% in the US.

Huge Headroom for Growth – There are only around 7.6 crore pension accounts (NPS & APY combined) as compared to around 54 crore Jan Dhan accountsand India has the lowest per capita pension assets in the world.

Introduction of NPS Vatsalya – Proposed NPS for minors from 0 – 18 years of age group which will Significantly widen the NPS coverage to ~40 crs minors and the company has added 25,000 subscribers till 30th September.

Increased the threshold for NPS contribution by employers for private sector employees from 10% to 14% under the new tax regime, making NPS a more lucrative instrument for saving, and can see increased money coming into NPS.

Strong positive sentiment towards pension schemes in India due to the increase in inflation in recent years.

Revenue Model:

This segment serves B2B, B2C, and B2G clients through an annuity and transaction-based revenue model. Revenue is split into three categories: (1) fees for new account openings, (2) transaction fees for each deposit and withdrawal, and (3) annuity based on the total customer base. Approximately 95% of this revenue is recurring, while the remaining 5% is one-time income.

Risks and Challenges:

Cyber security Risks

Dependence on the 2 government pension schemes and any shift in people’s preference from NPS/APY to other schemes.

3) IDENTITY SERVICES: Protean has been authorised by Unique Identification Authority of India (UIDAI) as an Authentication Service Agency (ASA) and Authentication User Agency (AUA) for providing Aadhaar Authentication Services to various entities. Protean has also been authorised by UIDAI as KYC Service Agency (KSA) and KYC User Agency (KUA) for providing Aadhaar-based e-KYC services to various entities. e-KYC is a unique service through which Know Your Client (KYC) process can be performed electronically using the Aadhaar database with explicit authorization by the Resident.

Protean is the sole provider of all 4 facets of digital identity verification i.e. 1. Aadhaar Authentication,2. Online Pan Verification (OPV),3. eSign and 4. eKYC.

Revenue Contribution and Financials:

The segment contributed 12.6% of FY24 revenue and 11% in Q2FY25 which contracted from 14% in Q1 and contracted at 14% QoQ on the backdrop of pricing pressure.

Key Growth Drivers:

Government Tailwind: Strong push towards digital India.

Large Volume of Transactions: While the per transaction revenue might be nominal, these verifications occur on a very large base, allowing for high volume growth.

Large Unaddressed Headroom: With only 2% of the population as regular digital transactors, the growing e-commerce ecosystem.

Growth of Fintech Industry: The expanding fintech sector, is driven by new entrants and significant investments.

This sector is expected to grow significantly over the upcoming years on the back of the rapid adoption of digital authentication, verification, and utilization, witnessing large-scale volume growth with Protean having a significant market share in most services offered.

Larger emphasis on paperless and cashless transactions.

Revenue Model:

B2B, Transaction fees per transaction/authentication.

Risks and Challenges:

The company’s growth is limited by the volume of transactions it facilitates, a factor over which it has no direct control.

Margin compression is due to increased competition and the company plans to mitigate this by building vertical integration of value-added services for digital onboarding, doing credit surrogates, credit scoring, and digital lending leveraging their account aggregator license.

Cyclical in nature and depends on government spending on schemes.
4) Others:

Protean eGov’s offerings span several Open Digital Ecosystems (ODEs), including platforms like ONDC, which supports areas such as e-commerce, mobility, agriculture (Agri Stack), health, education, and skills (ONEST). The Vidya Lakshmi portal, developed by Protean, serves as a central platform for student education loans, mandated by the RBI for public and scheduled banks. By March 2024, it registered ~42 lakh students, with 17.6 lakh loan applications. Protean’s Vidyasaarathi portal also manages online scholarship distribution, processing ~40,000 scholarships for students. Management guidance to increase revenue share from another category to 25:75 with 25% revenue share from non-core business in 2-3 years.

CLOUD & INFOSEC as a part of the push to make in India cloud and green cloud which caters to IaaS, Daas, Paas, and Staas.

Data Stack is a collection of technologies and tools used to collect, store, process, analyze, and visualize data.

ONDC is an open network for digital commerce that will establish open, inclusive, and competitive marketplaces online, creating choice and opportunity for everyone, by everyone.

Other projects include:

1. RISE with Protean- This platform targets streamlining the discovery and application of digital assets like APIs, micro-services, and user journeys, thereby enhancing API use and its integrations for businesses in India.

2. Protean X (Digitally verifiable credentials): ProteanX is a future-ready solution, that enables individuals and organizations to create, verify, and store credentials using blockchain-based technology. ProteanX enables a secure and tamper-proof digital record of one’s Identity, documents, certificates, and qualifications issued by a trusted source such as a university, employer, government, etc. on a distributed ledger 3. eSign Pro 3. Workflow Management System for Central Board of Film Certification (“CBFC”) engaged Protean as the “Implementation Agency” for the Design, Development, Implementation, Hosting, and Maintenance of the Online Film Certification Application Processing System and the CBFC website. This agreement was renewed on January 1, 2022, for a period of 3 years. It also facilitates the CBFC Officials to process the application, by providing a web-based interface to capture end-to-end application approval workflow for the departmental users associated with the certification process, including the screening of short films. Digitization of old paper certificates issued by CBFC before the launch of this system was also undertaken and has been completed.

Account Aggregator: Leverage its existing relationships with Banking and other financial sector organizations to offer Account Aggregator services that will help offer consent management to citizens and consented fetching of data to various regulators from RBI, SEBI, IRDA, and PFRDA regulated entities to promote greater financial inclusion.

Revenue Contribution and Financials: Contributed 12.6% of FY24 revenue and 11% in Q2FY25 which contracted from 14% in Q1 and contracted at 14% QoQ.

Key Growth Drivers:

Huge headroom for growth with only less than 2% of the Indian population using eCommerce

India’s cloud adoption is currently at 6.0% which is lagging behind the global average of 7.9% and is almost half the US, and UK adoption levels of 11.4 %

Favorable Government policies, increase in consumer demand, and digital transactions in India.

The requirement of RBI to store payment data in the local cloud could push the demand for Indian cloud operators.

Market leader and huge customer base increase the opportunity for upselling and cross-selling various value-added products like the data stack, Rise by Protean, eSign Pro, etc.

A push from GoI to export India’s Digital Public Infrastructure to another country could be a huge growth driver in the future. The Management confirmed talks with African, Middle Eastern, and South East Asian countries but was not able to commit to any quantitative figures.

Foray into exports can accelerate growth being high margin business(>20%)

Revenue Model:

Protean eGov receives reimbursement from ONDC for infrastructure services that enable network functionality and charges one-time fees for application development and design as a tech provider. For back-office support, Protean uses a SaaS model based on transaction volume. Transactional revenue has yet to be fully monetized in 3-4 quarters. Additionally, Protean plans to charge transaction fees each time a buyer connects with a seller on the platform.

Risks and Challenges:
Mostly one-time projects followed by maintenance of infrastructure.
Intensive competition in Cloud and infosec business.
Cyber attack
obsolescence of technology.

its most likely a placement to mutual funds and institutions. usually happens when intitutions approach company because market doesnt have enough liquidity. Plus i think the selling promotor is also a PE fund.