Capillary subscription revenue rises 55% to 94.3% of sales

Capillary Technologies India Limited reported H1 FY27 subscription revenue of Rs 497.67 crore, up 55% year on year from Rs 321.1 crore and equal to 94.3% of sales, versus 89.4% a year earlier. Capillary also reported 116% organic net revenue retention, compared with 94% for acquired businesses that remained unmigrated or were being migrated.

How did Capillary’s subscription revenue change in H1 FY27?

Capillary’s subscription revenue rose by Rs 176.6 crore, or 55%, to Rs 497.67 crore in H1 FY27 from Rs 321.1 crore in H1 FY26. The presentation rounds the H1 FY27 subscription total to Rs 497.7 crore in its six-month performance summary, while the revenue-stream table reports Rs 497.67 crore.

Capillary said the increase reflected core-platform adoption, migration of legacy service contracts to subscription arrangements and a deliberate shift away from one-time service revenue. It also attributed the higher mix to recurring revenue in new annual contract values, a measure of the value of contracts signed over a year.

Subscriptions represented 94.3% of H1 FY27 revenue, increasing from 89.4% in H1 FY26. Other services, comprising installation work, contributed Rs 29.91 crore or 5.6% of H1 FY27 revenue, while campaign services contributed Rs 0.42 crore or 0.1%; Capillary described installation revenue as subject to seasonal fluctuation and campaign services as reducing.

What does Capillary’s 116% organic NRR show?

Capillary reported organic net revenue retention, or NRR, of 116% for the trailing 12 months ended September 30, 2026. The company defines organic revenue as all revenue from customers on the Capillary platform and identifies organic NRR as its clearest retention measure for the expansion levers operating within that customer base.

Capillary identified three expansion channels behind organic NRR: platform-usage overages and cost-of-living adjustments, product and feature upsells and cross-sells, and customer expansion into new geographies, brands or business units. It said new-logo wins in travel, automobile, hospitality, food and beverages also supplemented growth, as H1 FY27 revenue increased 47% year on year.

Organic NRR exceeded Capillary’s total NRR of 111% by 5 percentage points in the trailing 12-month period. The total measure includes acquired assets that are not yet on the Capillary platform, whereas the organic measure excludes those assets; Capillary reported annual recurring revenue, or ARR, of Rs 1,085.4 crore at Q2 FY27, up 51% year on year.

Why was Capillary’s inorganic NRR 94%?

Capillary’s inorganic NRR was 94% for the trailing 12 months ended September 30, 2026 because it covers acquired assets that have not yet migrated to the Capillary platform or are in the migration process. Management said the below-100% result reflected expected migration dynamics rather than the retention profile of customers already using its platform.

The company said cohorts from its Kognitiv and SessionM acquisitions can be expected to deliver retention metrics comparable with the organic business only after their platform upgrades conclude. The presentation does not give a completion date for those upgrades, leaving migration progress relevant to the gap between 116% organic NRR and 94% inorganic NRR.

Capillary disclosed that, across past acquisitions, about 70% of revenue had been retained after migration. It also said margins on the retained base improved from loss-making or break-even to about 40%; this is a historical outcome from prior integrations rather than a stated target for Kognitiv or SessionM.

How did the subscription mix relate to Capillary’s H1 FY27 earnings?

Capillary’s 94.3% subscription mix accompanied 47% year-on-year revenue growth in H1 FY27, while operating expenses grew 38%. Management attributed the difference partly to scale and integration synergies across acquired businesses, including early optimisation in functions below gross margin.

Adjusted earnings before interest, tax, depreciation and amortisation, or Adjusted EBITDA, increased 116% to Rs 88.88 crore in H1 FY27 from Rs 41.06 crore in H1 FY26. Adjusted EBITDA margin increased to 17% from 11%, while Capillary said high amortisation reflected recent acquisitions including Rewards, Brierley, Kognitiv and SessionM.

Operating cash flow was Rs 113.34 crore in H1 FY27, calculated after adding back a Rs 33.39 crore exceptional loss in Q1 FY27. Capillary said that loss related to a cyber-fraud incident and remained subject to a potential insurance settlement; its disclosed operating cash flow equalled 128% of Adjusted EBITDA.

What will Capillary’s next disclosures need to show?

Capillary said it remained on track for earlier FY27 guidance of Rs 1,065 crore in revenue and Rs 172 crore in Adjusted EBITDA. H1 FY27 Adjusted EBITDA of Rs 88.88 crore represented 52% of that full-year guidance, while the company’s H1 revenue growth was 47% year on year.

Management also said it would ramp implementation teams to accelerate acquired-customer migrations. At September 30, 2026, Capillary had 752 employees, down 1% quarter on quarter, with engineering and research and development accounting for 71.9% of headcount and customer success accounting for 15.6%.

Conclusion

Capillary’s H1 FY27 results show that subscriptions became a larger part of reported revenue, reaching Rs 497.67 crore and 94.3% of sales, compared with a 89.4% share in H1 FY26. Organic NRR of 116% indicates expansion among customers already on the Capillary platform, while the 94% inorganic measure reflects the different position of acquired customer bases during migration.

The next results will show whether Kognitiv and SessionM platform upgrades advance toward the retention profile management expects after completion. Capillary’s progress against FY27 guidance of Rs 1,065 crore in revenue and Rs 172 crore in Adjusted EBITDA, alongside its stated implementation-team expansion, will provide further evidence on migration execution and recurring-revenue growth.