Ladies and gentlemen, good day and welcome to the conference call hosted by Protean eGov Technologies Limited to discuss their latest business development. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Pushpa Mani, VP and Head IR from the company. Thank you, and over to you, ma'am.
Thanks, Michelle. Good afternoon, everyone. Before we commence the call, please note that this call is solely to discuss the development pertaining to PAN 2.0 RFP. We have our quarter four investors' earnings call scheduled on Thursday, and all the queries pertaining to results will be discussed there. If you have any queries unanswered during the call, you may reach out to us afterwards. The management on today's call would be represented by Mr. Suresh Sethi, MD and CEO; Mr. V. Ishwaran, COO; Mr. Sandeep Mantri, CFO; Mr. Bertram D'Souza, Chief Products and Innovation Officer; and myself, Ms. Pushpa Mani, Head Investor Relations. Before we begin, I would like to mention that some of the statements in today's discussion may be forward-looking in nature, and we believe that the expectations contained in these statements are reasonable.
However, these statements involve a number of risks and uncertainties that may lead to different results. With this, I invite our MD, Mr. Suresh Sethi, to address us all. Thank you, and over to you, sir.
Thank you, Pushpa. Good afternoon, everyone. We just wanted to take this opportunity to update you with regard to the update we had with regard to the PAN 2.0 RFP, which had been put out by the Income Tax Department. Over the weekend, we received feedback that our current bid has been considered unfavorably at this stage. We have reached out to the tax department to seek further clarity. While we are in the process of doing that, we wanted to just share with you that that is the status as of now. With regard to the PAN RFP 2.0, as we've earlier mentioned, the RFP was with regard to design, development, integration, and management of the tax ITD systems, which today we don't manage. This is a system which is used for allotment, updation, and correction of the PAN data, which is today run by the ITD department.
We currently have a mandate from the Income Tax Department with regard to the processing and issuance of PAN cards, primarily meaning that we collect the data from the individuals who are seeking a PAN card or any PAN card update, and the same information is sent to the Income Tax Department for them to then do the allotment and issuance. We, as of now, see limited impact on that. The RFP, as we see it, would anyway take around another couple of years for implementation. Currently, at present, we do not see any immediate operational impact on our current PAN business. I would like to open it for questions with regard to this. Over to you, please.
Thank you very much, sir. We will now begin with the question-and-answer session. Anyone who wishes to ask questions may press star and one on the touch-tone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Prakash Kapadia from Spark PWM. Please go ahead.
Yeah. I wanted to clarify, you know, you mentioned in your opening remarks about the PAN 2.0 project. Is this right understanding if PAN 2.0 is more of an IT-related project and the operational modalities currently which we are doing in terms of issuing PAN cards, dispatching PAN cards is not part of the scope of work of PAN 2.0 Refresh? Is that understanding correct? If not, then you know, can you just highlight the difference as to, you know, what is the scope of work and how is it being currently done? That will help clear a lot of doubts.
Sure, Prakash. Prakash, I'll just give a little bit of background. We received the mandate for PAN issuance in 2002, 2003. This mandate was given for collection of citizen data, which is towards the application of the PAN card, and then sharing it with the Income Tax Department, where the Income Tax Department then does the allotment of the PAN card number, which means they do all the deduping of data and everything to ensure everybody has a unique card. That was at the ITD end. The work that we do in line with the fact that this is a citizen-centric national ID, we have both channels today where we have a huge distribution network where we provide assistance services. We have a network of almost 400,000 agents across the country where any citizen can go and submit their PAN card application.
There are also today direct channels on which you can directly apply for a PAN card. This is about processing of the PAN data and then getting the PAN card issued to you. The PAN 2.0 RFP is to do a tech revamp of that entire tech stack which the ITD has. That, in a way, is not directly linked to the entire distribution and application process for the PAN card. Therefore, we are saying that while it is a separate IT project, as of now, as we see it, it does not impact the distribution and the processing part of it. Currently, almost three-fourths of our applications are today still processed in an assisted mode, which means somebody is using the help of an agent to be able to submit the application, which is passed on to the Income Tax Department.
That distribution is something which we today run as a multiple product distribution, PAN services being one of them. Plus, that answers the question to an extent.
Right, right. You know, we've been hiring a lot of employees upfront to, you know, build execution capabilities. Obviously, this is across the line of businesses and multiple business revenues we have. Is, you know, the employee cost and some of the increases which we've seen was in anticipation of this too also, mtlb the PAN 2.0 coming to us? You know, we were pretty gung-ho and confident given our leadership and whatever work we've done, we should be a very strong contender to the PAN 2.0 project. What I'm trying to understand is, assuming, you know, there is no update and it is awarded to somebody else, how will, you know, the cost shape up? How will margin shape up? Is there a cross-utilization which we can do of employees and whatever cost we've built in?
Prakash, PAN 2.0 is like a regular RFP. When we are bidding for RFPs, naturally, we do the groundwork over there. It is just like any other RFP. The rest of the numbers, as we've been discussing, we will be sharing during the results, and we'll provide more details. With regard to RFP businesses, naturally, we do not build up the full stack of new sources prior to the RFP mandates coming through.
Sure, sure. I'll join back in the queue if I have more questions. Thank you.
Thank you. The next question is from the line of Rohan Mandora from Equirix Securities. Please go ahead.
Yeah, good afternoon, sir. Just want to see one. Once PAN 2.0 goes live, you indicated that three-fourths of the PAN applications come via the distribution network. The remaining one-fourth of the PAN applications will move to the new vendor. Is that understanding correct?
Hello, that is a difficult one to predict. You know, the PAN 2.0 RFP, as in when it is mandated, there's a clear period of development and deployment of the tech stack. It will take two years. At that stage, we'll naturally have to see how many citizens are seeking assistance services, which means, you know, depending on the assistant agent to put the application across, and how many would be going on to direct channels. Even as we speak today, we have direct channels. You can actually go to a Protean website and directly apply for a PAN card. The direct channels are already available even as we speak. I think this is about citizen behavior and what sort of, you know, digital capability the citizens have and the comfort they have at that stage.
Difficult for me to predict what sort of distribution will there be between assisted applications and direct applications two years down the line.
Right. Direct would be with the new vendor. On the assisted thing, if we were to look at the revenues, if Protean is participating in the assisted distribution of the PAN card and the PAN 2.0, out of the current profit pool that Protean is getting, what would get shared with the new partners in the assisted distribution thing? If the INR 91 stays as it is, currently, as we understand, there is a certain payout that goes to the franchisees, and the remaining difference is what Protean retains as profit. With the new implementation partner in PAN 2.0 and with assisted distribution where Protean is helping, what kind of a synergy would exist? What kind of profitability would get eroded?
Hello, difficult to predict two years down the line where things will stand. But I'll give a similar example. Today, when you look at UIDAI and issuance of Aadhaar cards, today Aadhaar cards are issued by multiple entities who have distribution networks. There is a revenue model on which they work when they issue the Aadhaar card. Similar indication is there even in this RFP that if somebody is seeking a physical PAN card, which today is, you know, almost 100% of the cases seek a physical PAN card as we speak, there is a cost of INR 50 of issuance, which even the RFP mentions. But difficult to talk about revenue split down the line. I won't be, I would, you know, sort of refrain from making a forward-looking statement or a judgment where it stands.
You're talking some part of revenues would get split.
Yeah, my only point, my only fundamental point I'm raising where, you know, there is probably clarity we would like to provide that PAN 2.0 is primarily a tech stack revamp. That is why it's in the form of an RFP. The business we run is for processing and issuance, which is a separate business. As and when the new tech stack gets deployed, there will actually be interfaces which are there also today for direct applications, which will come into play. The current things as they stand, there is, you know, a majority of people seeking assisted support to apply for PAN cards. Two years down the line, we'll have to see which way it plays, but there is no immediate impact on the business we run.
Got it. On the PAN verification business that we do right now, after the PAN 2.0 goes live, what happens to that line of business, the PAN verification?
There is indication in the RFP that the entire verification business will then run with the direct ITD department. Currently, we provide these services at a very low margin to the market, and it's a very minuscule part of our revenues under the online PAN verification. This is a business we actually club with that identity business because this is towards opening a bank account or authenticating a transaction or so on. We club it with our eSign, eKYC, and eAuthentication services. It fits under that revenue line, and it's a small component of that.
Got it. Any reasons that you got to know why we were not considered for the next round?
We are seeking clarifications, as I mentioned. This came only over the weekend. As of now, we've requested clarification on where it stands.
Sure, sir. Thanks. Thanks a lot.
Thank you. The next question is from the line of Love Jen from Artha India Ventures. Please go ahead.
Hi, good afternoon. Thank you for the call. My question is on PAN 2.0 project. I see that this is a one-stop solution or a platform where I can make the updates, correction, PAN-Aadhaar linkage, reissuance, PAN validation, all kinds of solution on the 2.0 project. If we haven't got the bid or haven't been selected, can the market share of this business go down in Protean? Is there any clarification on that?
Now, again, as I mentioned, that ITD does that today also. All allotment, updation, and correction in the PAN database is done by the ITD. We do not do that today. As I mentioned, we do the processing and issuance of the PAN card, which means that we collate the data. When you are making an application, you naturally have to fill up the application and provide multiple details, including your ID details. That is what we do today. That is the mandate given to us in 2002, 2003. Today, as I mentioned, we collate this data. There are people who go to the agent and provide this information to the agent. Similarly, people have the ability to also take a non-paper journey, which means at the agent point, they can do eSign and, you know, do everything without submitting any paperwork.
All that work is done in a supported mode by the agent, or you are able to do it directly on the website. That is what we do. PAN 2.0 talks about the central system or the core which the ITD runs today on which they do the allotment. That should be any deduping, right? If I already have a PAN card and apply a second time, you have to dedupe the data. That is what the ITD does. This tech revamp is for that stack which they are currently running, which we do not run today. There are two separate, you know, parts of the process, if you may, which are there. PAN 2.0 talks about the tech revamp of that core stack which the ITD runs.
Okay, okay. What if in future, if they include issuance and distribution in their one-stop solution, then it can be impacted, or they will ask for new bid in future if they come up with something or alteration in the PAN 2.0 project?
Difficult to predict, you know, what they will do. But as I was saying, let me give another example. Today, there are, you know, the other national ID is Aadhaar, right? UIDAI to this day does not have their own distribution points around the country. They leverage banks. They leverage the postal ecosystem. We, as an organization, were also earlier involved in issuance of Aadhaar cards. We were one of the enrollment agencies. So all the central government agencies actually, you know, leverage large-scale distribution networks to do this. As I mentioned, we today have 400,000 points of service at which we do the PAN card, you know, processing and collation of data. Very clearly, I do not expect the ITD to set up their own distribution network.
This will always be supported by distribution because ultimately, it's a citizen-centric service, and you have to provide it, you know, for equitable access and reach to everybody.
Okay. Thank you.
Thank you. The next question is from the line of Pranav Gupta from Aionios Alpha Investment Management. Please go ahead.
Hi, good afternoon, sir. Just a clarification on one thing you mentioned earlier. You said that in case that hello?
Yeah, Pranav?
Yeah. Just a clarification on one thing you said earlier. You mentioned that in case the IT department eventually decides to sort of do the online bit of distribution themselves, that's a revenue pool that gets hit. Is that understanding correct? That's obviously eventually when the PAN 2.0 network.
Can you repeat yourself? I lost you. Just repeat it again, please.
The question I was asking is that you mentioned in an earlier comment that once the PAN 2.0 framework is implemented, the online distribution or the mode of getting a PAN card that we currently have then gets eventually moved to the Income Tax Department. Is that understanding correct, or did I sort of misinterpret what you said?
No, let me reclarify it. Pranav, first of all, even as we speak today, Income Tax Department does have an online site on which you can apply for a PAN card. So today, ITD , Protean, and UTI Infrastructure Technology And Services Limited are three entities which have direct channels open also and have assisted channels. With PAN 2.0, ITD will be offering this service online, but that they offer even today. That is the only correction I would make. There is the online channels are even there today as we speak.
Okay, perfect. The second clarification, sir, was that as I understood it earlier, and you can correct me if I'm wrong, under the PAN 2.0 framework, there were certain changes that were going to be made in the PAN cards themselves in terms of the data that is sort of that can be defined PAN card. Is the understanding incorrect? Because you mentioned that that was clearly the revamping of the stack of ITD. That's what I understood from your comment.
Yeah. So naturally, you know, as technology is evolving, I'm sure more data will be emphasized, and that was part of the tech revamp also, that if you can add more features to the PAN card itself. Even today, if you see, the PAN card does have a QR code on it. Naturally, as technology evolves and as this is getting deployed, there's definitely, you know, other areas in which you can further enhance the ID protocols over there. Yeah, definitely, you know, there would be other features which would come down the line.
Right. Just a last question in connection to that. If there were new features that, or if there are new features that are, you know, going to be added to the PAN card under the PAN 2.0 scheme, eventually the current vendors, I mean, how would, I mean, including you and UTIITSL , how would you sort of navigate through the, you know, the changed output that is required, or will it then eventually move to the new vendor? That is what we are trying to understand.
See, the point is the RFP is for a vendor who will develop the entire tech stack, do the design, the development, the maintenance of it. Distribution is still something which is out there. There are two parts to your question. One is the entire work of first a citizen coming and applying for a PAN card, right? A citizen applying and putting their application in is something which will be a widely distributed activity. Now, when the PAN card is being issued, if there are new features in it, then we will be issuing the new PAN card because when we started in 2002, 2003, there was no QR code, for example. Over a period of time, further features were put onto the PAN card, which is what we are issuing today.
Whoever is then doing the distribution, they'll also get the ability to issue the new revised PAN card. Today, as you know, that Aadhaar, where we do whatever updates come into Aadhaar, ultimately it's the same distribution network which does it. UIDAI does not go out and do it themselves, right? Because last mile distribution and managing that again is left to the entities which are collating the data and then issuing. I'm saying the processing and issuance is separate from the tech stack revamp. I, again, you know, reiterate that point.
Perfect. That's very clear. Thank you so much. Yeah.
Thank you so much. Thank you. The next question is from the line of Mayank Bapla from Enam AMC. Please go ahead.
Hi. Thank you for taking my question. Am I audible?
Yes.
Yeah, Mayank.
Yeah. Thank you for all the clarification points. Just to get it more in black and white, what you're saying is that as it stands now, there is no threat or impact to your existing services that you're providing under the PAN tech services?
The answer is yes because the part of business we do is processing and issuance.
Right. Is different, yeah.
Right? As we see today, nothing changes. Even the PAN RFP itself, the design, development, and deployment as indicated in the RFP will be a two-year process. So even when the new stack comes into play, it will be still two years down the line.
Got it. All right. That's all. That was my only question. Thank you so much.
Thank you. The next question is from the line of Dhruv Shah from Dalal & Broacha. Please go ahead.
Yeah. Hi, sir. Thank you so much for this opportunity. Sir, I just wanted to understand currently in the last, if we take an average of the last three years, what percentage of this issuance and processing was with Protean? So basically, I wanted to understand in the last, I understand a report of the people have been issuing these hard cards. How have things been changing in the last three years? Taking that into account, when the PAN 2.0 gets implemented, do you believe that the same process and issuance business will be at a similar scale, or that could trickle down a bit? Also, in the PAN 2.0, if there is any modification, some modification work also comes to companies like Protean, or it will go with the tech stack company?
Dhruv, you have multiple questions, so let me take them one by one. First of all, today, as we've already shared, we have a dominant share in the issuance of PAN. We have a 60%+ share in the cumulative PAN issuance till date. And we've been sharing our numbers, which you would see anywhere in our quarterly results. Now, as far as issuance is concerned, there is a part which is about processing of data, or rather it starts from the citizen, right, as a process. So citizen applying for the PAN card will always be an activity which will be required because just the way you apply for Aadhaar, you apply for PAN. So that data collation and then putting the data and sharing with ITD for issuance will continue to be.
That is where we were indicating that today also there are direct channels and there are assisted channels of doing it. That is an activity which will continue because ultimately you are providing a citizen service. As far as trickle down is concerned, we earlier also mentioned that today, I see PAN is not a saturation ID like Aadhaar. Aadhaar, we naturally say, is something you would speak to have at the moment a child is born. PAN is usually done when people enter the workforce. You know, your minors are becoming adults. You are opening your first bank account. That is when you are speaking of PAN card. If we look at overall, you know, demographics, the penetration of PAN is around 35%-40% in the country. Every year new workforce comes in.
The requirement of PAN as an identity is also getting more widely applied. We've seen in the recent couple of years, the government for their welfare and benefit schemes, a lot of schemes are now asking for a PAN. We therefore see the propensity even in rural India where people are now applying for PAN cards so that they can qualify for a welfare scheme. Similarly, the government has announced initiatives to say we want to make PAN a single identifier for all non-individual cases, which is for entities because entities don't have an equivalent of Aadhaar. There are various initiatives in place which will mean that more and more entities will seek PAN card. We don't see this trickling down.
With a population like ours, today there are hardly, you know, 50-55 crore people who have a PAN card, and we have already a population of 1.4 billion. Therefore, we see this continuing. Every year we've generally seen as a trend, 6-7 crore new PAN card issuances every year.
Sir, so similarly, like currently we agree that we have 4,000 touch points. But the way things changed in case of issuance of a passport, do you envisage that kind of a threat that could come in in case of PAN 2.0?
See, today, Dhruv, as you are aware, at Protean we are working across multiple DPIs, right? We've been earlier focused largely on BFSI, which is centers where you can, you know, process data for PAN issuance. Similarly, out of these 400,000 touch points, there are points serving our pension business. Similarly, as we are moving into agriculture, health, ONDC, which is digital commerce, open finance, we are leveraging the same ecosystem for providing citizen-centric services. For us, our distribution is a multi-product or multi, you know, DPI distribution. PAN is one service we provide over there. Most importantly, it ultimately depends on the citizen, right? If a citizen chooses to or feels that getting assisted at a touch point, which is proximate to them, is where they want to consume the service, this distribution will continue to be relevant.
It will not be dependent on the core tech stack and what happens to it. It is where I want to apply for a PAN card, which will be relevant to me as a citizen of India.
Thank you. Ladies and gentlemen, due to time constraint, this will be the last question for today, which is from the line of Ashish from Emkay Investment Managers Limited. Please go ahead.
Yeah, thank you, sir. Sir, as you mentioned in your comment that mandate was issued by Income Tax Department for the existing PAN business. I just wanted to understand, is it renewed yearly or, like, when was it last renewed? Is there a possibility that the existing PAN business in future comes through an RFP route and not the mandate which is currently there? Thank you.
It was last renewed. I'll have to share the date with you here. It was recently only. I will share the date. I don't have it. If somebody in the room has the date, then please share it. Sandeep, if you guys are on the call. We'll just share that. This contract for us has been reviewed every three to four years. It has been happening right from 2003 onwards. I would naturally not make a forward-looking statement to say whether, you know, it will go down an RFP route down the line, but this is what has been happening in the past, which we can share with you with clarity.
Okay. Thank you, sir.
Thank you. Ladies and gentlemen, as that was the last question for today, I will now hand the conference over to MD Sir for closing comments. Thank you and over to you, sir.
No, thank you very much. Thank you everyone for, you know, patiently listening and asking all the questions. We just wanted to clarify the status. Just reiterating that PAN 2.0 is an RFP which is associated with the design, development, and deployment of the new tech stack for the Income Tax Department from where they do the allotment, updation, and correction of the PAN in their database. On an immediate basis, we see very limited impact on our distribution business. Currently, it is going to be, and going forward also, it is going to be driven by all citizens applying for the PAN cards. That is where we today have a service network of almost 400,000 points. Largely, that business will be driven by the citizen-seeking services over there. I would not like to add anything further.
We've already got a lot of questions further requesting more details on this. Thank you very much.
Thank you, sir. Thank you, members of the management. On behalf of Protean eGov Technologies Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.