Agree that management’s guidance hasn’t been great. Be it margins or completion or capex. I will like to point out a couple of things wrt margins. Raw materials prices esp rice prices has been the biggest dampener so far. This was the first quarter of increasing margins after a long time.
Rice prices and maize prices would be 2 major factors deciding margins. International rice prices have already started coming down. There may be a disconnect between the indian and International prices. Good monsoon along with increased acreage under paddy cultivation would mean lower prices after Kharif harvest( Oct to Dec). We may see some decrease in food inflation this year.

Discl: Invested and biased

Few of my takeaways from Q1 FY25 of Protean eGov Technologies

Protean eGov Technologies appears well-positioned to capitalize on India’s ongoing digital transformation. The company’s core businesses in tax services, pension administration, and identity verification continue to show strength, with pension and identity services growing at double-digit rates. While tax services saw a temporary slowdown due to election activities, management expects this segment to rebound. The company is also making inroads into new high-potential areas like digital commerce (ONDC), agriculture, education/skilling, and healthcare through its involvement in building digital public infrastructure.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:

Protean is strategically expanding beyond its traditional government services into more innovative areas. Key initiatives include developing the Agristack for agriculture data exchange, launching ProteanX for blockchain-based verifiable credentials, and introducing eSignPro for end-to-end digital document signing. The company is also pursuing international opportunities, with active engagements in 12 countries and 18 potential deals in the pipeline.

𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:

The overarching theme is India’s push towards digitalization across sectors. This is evident in the growth of digital identity services, increasing pension penetration, and the development of open digital ecosystems like ONDC for e-commerce. The trend towards paperless, digital processes is driving demand for Protean’s newer offerings like eSignPro.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:

Strong government support for digital initiatives provides significant tailwinds. The recent budget emphasized development of digital public infrastructure across sectors like agriculture, education, and healthcare – all areas where Protean is building capabilities. Increasing internet and smartphone penetration in India also bodes well for adoption of digital services.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:

The main headwind appears to be the cyclical nature of some government-related business, as seen in the temporary slowdown in PAN card issuances due to elections. Dependency on government contracts and policy decisions could lead to occasional volatility in revenues.

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:

A key concern is the timeline for monetization of new initiatives like ONDC. Management indicated that while they are currently reimbursed for infrastructure costs, a transaction-based revenue model is expected in the future once the ecosystem reaches critical mass. For international expansion, management acknowledged the long sales cycles but expressed optimism about near-term breakthroughs.

𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:

In core areas like PAN card issuance and pension administration, Protean enjoys dominant market positions. For newer digital offerings, the competitive landscape is still evolving. The company’s long-standing relationships with government entities and experience in building large-scale digital infrastructure could provide an edge.

𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:

Management refrained from providing specific numerical guidance but expressed confidence in growth prospects across both traditional and new business lines. They expect the online channel for PAN issuance to continue growing, which should benefit margins.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:

With a strong cash position of over 700 crore rupees and zero debt, Protean is well-positioned for inorganic growth. Management indicated they are actively seeking acquisition opportunities that could provide faster go-to-market capabilities or access to cutting-edge technologies.

𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:

Key opportunities lie in the massive untapped potential for digital services in India, particularly in sectors like agriculture and education. The main risks include execution challenges in scaling up new initiatives and potential shifts in government policies or priorities.

𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐂𝐥𝐢𝐦𝐚𝐭𝐞:

The regulatory environment appears largely supportive, with government initiatives aligning closely with Protean’s focus areas. However, the company’s heavy reliance on government-related business means it remains vulnerable to any adverse policy changes.

𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:

The growth in areas like digital identity services and pension subscriptions suggests positive customer adoption. For B2B offerings like eSignPro, management indicated early traction with corporate customers, particularly in the financial services sector.

Disclaimer: This is a general analysis and does not constitute financial advice.

Few of my takeaways from Q1 FY25 of Indigo Paints

Indigo Paints delivered industry-leading growth of 7.8% in a challenging quarter, though management admitted this fell short of internal expectations. The company saw robust 47% growth in its subsidiary Apple Chemie, signaling strong momentum in the construction chemicals segment. However, weakness in the key Kerala market dragged down overall performance. Management expressed cautious optimism about demand revival, noting strong sales in July.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:

The company is doubling down on digital marketing to complement its TV advertising. It’s also expanding its waterproofing and construction chemicals portfolio, aiming for 8-10% revenue contribution in the medium term. Indigo continues to focus on expanding its dealer network and tinting machine installations to drive growth.

𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:

There’s a clear shift towards value-added and differentiated products. Indigo is leveraging its technological edge from subsidiary Apple Chemie to develop superior quality waterproofing solutions. The company is also seeing traction in its economy range of distempers, indicating demand across price points.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:

Gradual recovery in rural demand could boost sales of economy products. Recent price hikes of ~2% by the industry should aid margin recovery. Growing focus on waterproofing and construction chemicals presents a sizeable growth opportunity.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:

Subdued consumer sentiment continues to impact discretionary spending. Raw material cost volatility remains a concern. Intense competition among established players is putting pressure on channel discounts.

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:

Analysts probed about the impact of new entrants like Birla Opus. Management downplayed concerns, citing historical precedents of new players struggling to gain significant market share quickly. They emphasized Indigo’s 25-year survival instinct and ability to compete against giants.

𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:

While dismissing immediate threats from new entrants, management acknowledged fierce competition from the top 4 players. Indigo aims to differentiate through superior product quality, especially in waterproofing, and better execution on the ground.

𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:

Management refrained from providing specific guidance but expressed hope for sharp uptick in both top-line and bottom-line from Q2 onwards. They cautioned that July’s strong performance may not necessarily continue in August and September.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:

Indigo has completed major capex with its Tamil Nadu plant and is now expanding capacity at Jodhpur. Management expects these investments to meet requirements for the next 4 years, indicating a shift towards sweating existing assets.

𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:

The waterproofing and construction chemicals segment presents a significant growth opportunity. However, the company faces risks from potential prolonged demand weakness and margin pressure due to competitive intensity.

𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:

Management noted subdued market conditions but saw encouraging signs in July sales. They remain cautiously optimistic about demand recovery in the coming quarters.

That does make sense. But its a bit sad that management doesn’t put up any commentary on their new hospital’s progress.