The Protean EGOV share price was locked in a 20% lower circuit yesterday and fell another 8% today. The company, in a recent exchange filing, informed that the Income Tax Department (ITD) has issued a Notice for Request for Proposals (RFP) inviting bids for the selection of a Managed Service Provider (MSP) for the Design, Development, Implementation, Operations, and Maintenance of its PAN 2.0 Project.
The Company had participated in the RFP bid proposal for the aforesaid project, but the Income Tax Department (ITD) informed the company that their proposal had not been considered favorably for the next round of the RFP selection process. But, the question is why a single RFP rejection is causing a significant damage to the company’s operations, and the stock is on a lower circuit?
A look at Protean EGOV’s operations
Protean EGov is involved in the business of developing citizen-centric and population-scale e-governance solutions. Services include e-governance solutions, system integration, business process re-engineering, data center co-location, and IT consulting services for citizens, corporates, and the Government.
The company is modernizing the direct tax infrastructure, providing a tax identity to citizens and corporates (issuance of PAN card), strengthening the old-age social security infrastructure (National Pension System, NPS & Atal Pension Yojna – APY), promoting financial inclusion by contributing to the India Stack by enrolling citizens for National Identity and enabling the BFSI sector by providing Aadhaar-based identity authentication and eSign services.
The company commands a strong market presence across various sectors, particularly in tax infrastructure, where it holds over 65% market share in TIN/PAN issuance. In the retirement segment, as a Central Recordkeeping Agency (CRA), it captures 92% of the market for the National Pension Scheme (NPS) and holds a full 100% share in the Atal Pension Yojana (APY).
Protean plays a pivotal role in modernizing India’s digital infrastructure by:
- Overhauling the direct tax system with projects like PAN issuance and the Tax Information Network (TIN).
- Strengthening old-age security by building core IT infrastructure for the National Pension System (NPS).
- Enabling universal social security, especially for unorganized workers, through Atal Pension Yojana (APY) technology.
- Supporting India Stack, offering API-based, presence-less, paperless, and cashless solutions, including Aadhaar-based services and e-Sign capabilities.
- Enhancing access to education financing via platforms like Vidya Lakshmi and Vidyasaarathi.
- Driving open digital ecosystems (ODE) such as ONDC across multiple sectors, including e-commerce, healthcare, and agriculture.
- Developed cloud-managed services (IaaS, DaaS, PaaS, and SaaS) for businesses.
In Q2 FY25, the company’s platform Open Network for Digital Commerce (ONDC) entered the financial services sector with the launch of a new vertical enabling Open Finance, it also unveiled a new product called Protean LIFE under the ODE platform. In July 2024, it launched a new digital signature and stamping product, eSignPro.
Protean EGOV share price outlook
The Protean EGOV share price was locked in the lower circuit yesterday after the company disclosed that it was getting out of the race to participate in the Pan 2.0 operations. Pan 2.0 is a project, part of the PAN 2.0 initiative, that includes the design, development, operations, and maintenance of the PAN system—a business segment where Protean has long been a major player.
The Pan 2.0 project’s budget is roughly Rs 1,440 crore; getting this deal would have cemented Protean’s place at the centre of India’s tax‑tech landscape for years. Though Protean tried to reassure investors that this would have minimal impact on its operations, as the current Pan issuance and other related services will go on as usual but market thinks otherwise.
Protean Egov in a statement said, “In our understanding, this is a project for technology revamp which includes design, development and other aspects of PAN systems at the income tax department and at present, it appears to have limited or minimal impact on our ongoing PAN processing issuance services under the existing mandate with the Income Tax Department”. The management also emphasized that PAN 2.0 mainly targets the online segment and will take at least two years to come online.
This is why the market is worried about this recent development, close to half of Protean Egov’s revenue is from tax services (Pan and related services), and the rest from pension and identity services. The market is always forward-looking, and it was almost certain that the Pan 2.0 deal would come to the company, given its dominant position (close to 65% market share) in current pan-related services, and it was reflected in its share price.
This deal win would have cemented the company’s footing in citizens’ digital services and would have provided clear revenue visibility for the coming years. But now that it is clear that the company is out of the Pan 2.0 deal race, the market is reassessing its value. Here is what we can predict-
- As the management pointed out, there will be no immediate effect of this as the current Pan operations will go on as it is, so there might be no effect on revenue in FY26.
- From FY27, the company may start losing revenue as the current Pan operations will move towards conclusion, and Pan 2.0 kicks in. From FY28, it may lose 100% of the revenue from tax services.
- Protean is already missing its projected growth in revenue, compared to FY24, where it did a revenue of 882cr, it will do a revenue of 850cr in FY25 (despite considering 20% QoQ growth in revenue)
- Given that its revenue grows by 15-17% in FY26, it may do a revenue of 977- 1,000cr in FY26. Going by the average margin that the company is achieving, it will do an EPS of 22.5-23. In FY26, an EPS of 26-26.5.
- In FY27, it may lose 50% of the revenue coming from tax services, but we assume it will be able to achieve 15% growth in pension and identity services. So, an estimated 215 cr revenue will be foregone from FY27, the rest, estimated 575 cr revenue, will come from pension and identity services, 790 cr revenue in total, and an estimated EPS of 20. So a P/E of 52-53 (very expensive given the growth estimates, P/E based on above calculations)
- So, a target based on these estimates, we suggest a price of 660-700 (given a P/E of 33-35).
Protean Egov share price performance
Currently trading at 1,048, the Protean EGOV share price is down more than 45% YTD. In its limited trading history, the chart of the stock is weak, and investors should stay cautious. Weakness will increase once the stock breaches 950 and closes below it, and then it may test the listing price levels of 760-780. On the upside, 1,200-1220 will be a strong resistance, and further upside will only come above that level.
The stock that is making investors rich and the country proud, read.
Conclusion
Investors should watch the company and how it tackles the current situation. Protean has a great team, expertise, and execution capabilities. They may win a further project, either domestic or export, and completely offset the effect of the Pan 2.0 deal loss. Investors should keep the stock on the watchlist to track further development, but for now, getting out of the stock is a wise choice. Reason, if Protean does not secure further big orders, from FY28, 100% revenue from tax services may be extinguished.
