Bengaluru-based Capillary Technologies India, a provider of enterprise-grade SaaS (Software as a Service) solutions in the loyalty sector, has launched its ₹877.5-crore initial public offering (IPO) amidst globally normalizing SaaS valuations, as investor scrutiny over profitability and cash flow increases.
The IPO, which totals ₹877.5 crore, comprises a fresh issue of ₹345 crore (59.8 lakh shares) and an offer for sale (OFS) of ₹532.5 crore (92.3 lakh shares) at the upper end of the ₹549-577 price band. The selling shareholders in the OFS include CTIPL (the promoter entity) and Trudy Holdings (an investor). The company intends to allocate the proceeds from the fresh issue primarily towards cloud infrastructure (₹143 crore), product development and research and development (₹71.6 crore), computer hardware (₹10.3 crore), as well as inorganic growth and general purposes. At a post-issue share base of 7.93 crore, Capillary’s implied market capitalization is ₹4,576 crore. The IPO closes on November 18, with current subscriptions at 29 percent.
Capillary is supported by prominent investors such as Sequoia Capital, Warburg Pincus, Norwest Venture Partners, and American Express Ventures. It is positioning itself as a global AI-driven loyalty and customer engagement platform with a growing presence in North America and a diversified client base. The company’s financials indicate a significant scale-up over the last three years, transitioning from loss-making to profitability, as evidenced by operations in FY25.
Nonetheless, there are concerns about decelerating growth in certain areas, heavy contributions from inorganic channels, and mixed cohort signals. Valuation multiples based on FY25 data (7.5x EV/sales) and annualized H1FY26 (6.3x) exceed those of many established global SaaS firms, thereby raising caution among investors. Given the high valuations, the risk-reward scenario appears unfavorable, leading to recommendations for potential investors to consider skipping the IPO for now.
Business Overview
Loyalty programs have significantly evolved, moving from manual systems to AI-driven SaaS solutions. The period between the 1980s and 2000s relied heavily on physical tracking and agency execution. The 2010s saw the introduction of tech-enabled programs with early analytics, while the 2020s have ushered in cloud-native, low-code platforms that provide real-time segmentation and predictive analytics. This shift is reflective of changing consumer behavior, which now prioritizes value, personalization, and immediate rewards, prompting brands to modernize.
Founded in 2012 by Aneesh Reddy Boddu, Capillary develops software designed to help major brands retain customers. Its platform tracks shopping habits, runs reward programs, and sends personalized offers via various channels, ultimately enhancing customer recognition and encouraging repeat purchases.
Capillary’s platform includes modules like Loyalty+ (the core engine), Engage+ (personalized engagement), Insights+ (analytics and segmentation), and Rewards+ (catalogue and redemption). Clients pay Capillary a recurring subscription fee that aligns with usage, supplemented by one-time setup fees and campaign-based charges.
As of now, the firm employs 730 people and serves over 410 enterprise clients, including 19 Fortune 500 companies across 47 countries, with 1.8 billion consumer profiles on its platform. Clients span various sectors such as retail, consumer packaged goods, BFSI, telecom, healthcare, energy, and automobiles. North America represents Capillary’s largest revenue source, contributing 56 percent, followed by APAC at 25 percent and EMEA at 19 percent.
Capillary operates within the $17 billion global loyalty management and customer engagement market, which is projected to grow at a 10 percent CAGR through 2029.
The broader SaaS sector has witnessed valuation compressions from previous peaks, as companies that went public at revenue multiples of 15-30x—such as Freshworks—now trade significantly lower. This trend indicates potential challenges within the SaaS marketplace in light of AI disruptions.
Financial Highlights and Growth Drivers
Over the last three years, Capillary’s financial profile has exhibited rapid revenue growth and improved profitability, albeit with questions regarding sustainability. Net revenue grew by 52 percent in FY23, followed by a 133 percent increase in FY24, but has since slowed to 24 percent in FY25 and 25 percent in H1FY26.
Annual recurring revenue (ARR), which measures the total value of recurring contracts, saw over a two-fold rise in FY24 but decelerated to an 11 percent increase in FY25, with expectations of reaching 18 percent in FY26.
While adjusted EBITDA improved from negative figures in FY23 and FY24 to ₹74.5 crore in FY25, and is projected at around ₹80 crore in FY26, net profit after tax (PAT) has been significantly variable, moving from losses in FY23 and FY24 to a modest ₹13.3 crore profit in FY25, with H1 FY26 reporting just ₹1 crore.
As of September 30, 2025, the company held borrowings of approximately ₹89 crore and cash reserves of ₹60 crore. Negative operating cash flow in two of the last three fiscal years suggests that cash conversion has yet to stabilize, although H1FY26 displays promising trends.
Capillary identifies two primary growth levers: organic expansion and inorganic acquisitions. Organic growth primarily originates from existing customers, and partner channels are becoming increasingly significant, as 64 percent of new customers in H1 FY26 were sourced through system integrators. Net Revenue Retention (NRR), indicative of product stickiness and pricing power, rose from 113 percent in FY24 to 121 percent in FY25, although it slightly eased to 115 percent in H1 FY26.
Subscription revenue is approaching 90 percent of recurring operating revenue. The company adopts a ‘farming-led’ model to intensify customer retention within established accounts, enhancing predictable growth, albeit slowing new customer acquisition. Consequently, customer acquisition cost (CAC) has stabilized at about 18 percent during FY24-25, significantly lower than FY23 levels.
Capillary’s growth strategy has also involved acquisitions in the U.S. loyalty technology space, integrating companies such as Persuade (September 2021), Brierley (April 2023), Rewards+ (June 2023), and Kognitiv’s U.S. assets (May 2025). The valuation multiple for Persuade was noted at 4.8x, whereas others ranged between 0.4x and 0.6x. The mergers and acquisitions strategy aims to onboard acquired customers onto Capillary’s platform, thus leveraging synergies. In FY25, these combined entities contributed ₹435.1 crore in net revenue post-migration, accounting for over 70 percent of total revenue.
Capillary’s CAC payback period improved from 16 months in FY23 to 14 months in FY24, before reverting to 16 months in FY25; however, this metric sharply rose to about 31 months in H1 FY25 and H1 FY26, suggesting that recent customer cohorts are generating returns more slowly, hinting at weaker unit economics in the near term.
Valuation Insights
With a valuation at the upper end of the ₹577 price band, Capillary’s market capitalization stands at approximately ₹4,576 crore, translating to an EV/sales ratio of 7.5x for FY26 and 6.3x when annualizing H1. The company’s P/E ratio lacks significance due to its inconsistent PAT.
In comparison with global SaaS benchmarks, Capillary’s EV/sales multiple is on par with or exceeds those of major players such as Salesforce (5.7x), Adobe (6x), and SAP (7.1x). In contrast, it is substantially higher than peers like Zeta Global (3.4x) and Freshworks (3.4x), as well as Indian counterpart Zaggle (3.1). The absence of a valuation discount compared to several established global SaaS companies—most of which have longer histories of profitability—renders Capillary’s high valuations unattractive. For its valuation to be sustainable, the company must maintain exceptional levels of execution.
Published on November 15, 2025.
