Capillary Technologies India Limited H1 EBITDA Margin Rises to 17%

Capillary Technologies India Limited lifted H1 FY27 adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) to Rs 88.88 crore, 116% above H1 FY26, and its margin to 17% from 11%. Reported profit after tax was Rs 12.37 crore after a Rs 33.39 crore cyber-fraud provision recorded in Q1 FY27.

How did Capillary's H1 FY27 revenue and adjusted EBITDA change?

Capillary's revenue from operations rose 47% year on year to Rs 528 crore in H1 FY27, while adjusted EBITDA increased 116% to Rs 88.88 crore. The adjusted EBITDA margin increased to 17% from 11% in H1 FY26, a rise of 6 percentage points. Organic revenue grew 23% to Rs 318 crore, or 15% at constant currency.

Inorganic revenue rose faster than organic revenue, increasing 107% to Rs 210 crore in H1 FY27 from Rs 101.4 crore in H1 FY26. Organic revenue increased from Rs 257.8 crore to Rs 318 crore over the same period. Thus, inorganic revenue supplied Rs 108.6 crore of the Rs 168.8 crore increase in total revenue, while organic revenue supplied Rs 60.2 crore.

The Q2 FY27 result also showed higher operating profit: adjusted EBITDA was Rs 44.86 crore, up 103% year on year, with a 17% margin. Q2 revenue from operations was Rs 271.35 crore, up 51% year on year, compared with adjusted EBITDA of Rs 22.08 crore and a 12% margin in Q2 FY26.

What drove Capillary's adjusted EBITDA margin expansion?

Capillary attributed the increase to higher-margin revenue from existing customers, operating leverage in non-cost-of-goods-sold costs and migrations of acquired customers to its platform. Its presentation said more than 90% of the H1 FY27 margin growth came from the organic business, including migrated customers. Migrated customers contributed Rs 22.6 crore of incremental adjusted EBITDA and pure organic operations contributed Rs 22.7 crore.

The remaining Rs 2.5 crore contribution came from inorganic operations, primarily a turnaround associated with SessionM and Kognitiv revenue. Capillary said every Rs 100 of new organic revenue generated Rs 44 of adjusted EBITDA in H1 FY27. Subscription gross margin was 67% in both H1 FY27 and Q2 FY27, despite SessionM revenue being added at lower gross margins.

About 60% of Capillary's costs are linked to technology, sales and marketing, and corporate functions rather than cost of goods sold. These non-cost-of-goods-sold expenses increased 34% in H1 FY27, below the 47% increase in revenue from operations. Capillary also said customers moved from acquired platforms can shift from about 30% gross margin to about 65% after migration, and it completed its first AI-powered customer migration in Q2 FY27.

How did the cyber-fraud provision affect Capillary's H1 profit after tax?

Capillary's H1 FY27 profit after tax was Rs 12.37 crore, with a 2% margin, after a Rs 33.39 crore exceptional loss related to a cyber-fraud incident in Q1 FY27. Capillary said it had provided for the loss pending a potential insurance settlement. Profit after tax was Rs 1.03 crore, or a 0.3% margin, in H1 FY26.

The exceptional item produced a difference between the two FY27 quarters. Capillary reported a Q1 FY27 loss after tax of Rs 9.55 crore, then profit after tax of Rs 21.92 crore in Q2 FY27, equal to an 8% margin. The Q2 result compared with profit after tax of Rs 0.29 crore and a 0.2% margin in Q2 FY26.

Capillary's reconciliation reported H1 FY27 EBITDA of Rs 91.54 crore before its adjustment items, compared with Rs 39.82 crore in H1 FY26. Depreciation and amortisation rose to Rs 44.5 crore from Rs 36.37 crore, which Capillary linked to the Rewards, Brierley, Kognitiv and SessionM acquisitions. Employee stock option plan expenses were Rs 8.72 crore and finance income, asset-disposal profits, fair-value and foreign-exchange gains totalled Rs 11.39 crore in the adjusted EBITDA reconciliation.

What do Capillary's recurring revenue and new contract figures show?

Capillary ended Q2 FY27 with annual recurring revenue (ARR) of Rs 1,085.4 crore, up 51% from Rs 717.3 crore in Q2 FY26 and above Rs 765.4 crore at FY26 year-end. Capillary attributed the increase to the SessionM acquisition, net revenue retention (NRR) and new annual contract value (ACV).

Trailing-12-month new ACV was Rs 93.3 crore in Q2 FY27, up 79% year on year after excluding one large healthcare customer from the prior-year base. Management said the majority of new wins were anchored on its aiRA artificial-intelligence stack. Organic NRR was 116% in Q2 FY27, or 109% at constant currency.

For the trailing 12 months ended September 30, 2026, Capillary reported total NRR of 111%, organic NRR of 116% and inorganic NRR of 94%. Capillary said the lower inorganic figure reflected migration dynamics for acquired operations. It said Kognitiv and SessionM cohorts could deliver retention metrics comparable with the organic business after their platform upgrades are completed.

What did Capillary report on cash generation and FY27 targets?

Capillary reported cash and bank balances of Rs 573.82 crore at September 30, 2026, compared with borrowings of Rs 44.72 crore. Net cash generated by operating activities in H1 FY27 was Rs 113.34 crore. Capillary calculated operating cash flow at 128% of adjusted EBITDA, with that measure adding back the Rs 33.39 crore exceptional loss.

Management said Capillary was on track for its earlier FY27 guidance of Rs 1,065 crore in revenue and Rs 172 crore in adjusted EBITDA. H1 FY27 revenue of Rs 528 crore was close to half the revenue target, while adjusted EBITDA of Rs 88.88 crore exceeded half the target. Capillary also reported return on capital employed of 7% and cash return on invested capital of 29%, calculated for the trailing 12 months ended September 30, 2026.

Conclusion

Capillary's H1 FY27 results show operating profit expanding faster than revenue, with adjusted EBITDA rising 116% to Rs 88.88 crore and the margin reaching 17% as revenue increased 47% to Rs 528 crore. The Rs 33.39 crore cyber-fraud provision made reported profit after tax, at Rs 12.37 crore, materially different from the adjusted EBITDA outcome.

The next measures to watch are management's FY27 targets of Rs 1,065 crore in revenue and Rs 172 crore in adjusted EBITDA, progress in Kognitiv and SessionM customer migrations, and any potential insurance settlement for the cyber-fraud provision. Capillary said SessionM reached break-even in Q2 FY27 and H1 FY27, while additional migrations are planned in coming quarters.