PAN-demonium Averted: Protean eGov Unfazed by IT Dept’s PAN 2.0 Snub

Image Source: Business Standard

Protean eGov Technologies, a leading India e-governance company, saw its shares undergo a sharp sell-off when the company announced that it was not shortlisted by the Income Tax Department for the second stage of the PAN 2.0 project. In spite of the market response, company officials have given the stakeholders the assurance that there would be no operational effect on its current PAN-related offerings.

Market Reaction and Announcement

Shares of Protean eGov Technologies fell to the 20% lower circuit on May 19, wiping all this year's gains and closing 22% lower on a year-to-date basis
The steep fall came after the company announced that it was not shortlisted for the next stage of the Request for Proposal (RFP) for the PAN 2.0 project by the Income Tax Department.

About the PAN 2.0 Project

The PAN 2.0 project is the Income Tax Department's massive technology overhaul project that seeks to redesign, develop, implement, operate, and maintain the PAN systems.
Protean eGov had bid in the RFP process but was told they would not proceed to the next level.

Management's Response

In a formal statement, Protean eGov Tech explained that the PAN 2.0 scheme is mainly a technology upgrade and that its exclusion has "limited or minimal impact" on on-going PAN processing and issuance services under the existing mandate with the Income Tax Department.

The firm asserted that its core PAN operations and delivery of services to citizens are not impacted.

Business Impact and Analyst Views

PAN business accounts for a major part of Protean's revenue-50-61% as per recent reports.
Brokerage house Equirus labelled the news as negative on account of the segment's contribution to top line and cash generation, but others view limited near-term financial impact as core business keeps going.
Of six analysts who cover the stock, five have a "buy" rating while one has a "hold" rating.

Company Fundamentals and Growth Prospects

Protean eGov controls a 64% market share of PAN card issuances and recorded 33% revenue growth in the PAN segment during FY22-FY24.
The company attributed sustained traction from government schemes and the Aadhaar-PAN linkage deadline deadline, as PAN penetration in India remains below 40%, with scope for future expansion.

Next Steps and Communication

The management arranged for an analyst call to tackle concerns and offer additional clarity on business prospects.
Protean eGov indicated it would report any subsequent developments or news on the PAN 2.0 project as and when they happen.

Sources: Capital Market, CNBC TV18, MarketScreener, Samco, Economic Times, Moneycontrol, Business Today, Capital Market News