The Company has informed that it is not being considered favorably by the Income Tax Department (ITD) for the next round of RFP selection process for PAN 2.0 project.
This obviously came as a major shock to the investors given Protean’s significant reliance on the PAN related revenues; 55% contribution to the revenues in FY 24 with Company having a market share of >60% of new PAN issuances.
The announcement seemed like a immediate hit to this significant business.
Company organized a call to provide key clarifications.
- Pan 2.0 RFP is for tech revamp whereas Company’s current business is focused towards distribution and verification. Both are complementing businesses and not directly substitutable.
- Company already uses the current technology stack controlled by the Income Tax Department (ITD) and if nothing changes, will use the new stack as and when that gets developed.
- Yes, there is a possibility that once the new tech is implemented, there can be changes in the distribution and verification mechanism impacting Company’s business. However, that’s difficult to predict as of now.
- Citizens even today can go directly to ITD’s portal and get PAN issued. Protean provides services to people who don’t want to or are not aware or are not capable to do the processing directly. This is not unique to PAN issuance and offline distribution is a key to so many other services (e.g., Aadhaar).
- Therefore, whether PAN 2.0 will impact Protean’s business will be a function of Citizen’s behavior that can not be predicted at this stage.
- There is no immediate impact on Company’s operations (if any) as Pan 2.0 implementation is still atleast 2 years away.
- Company is also engaging with the ITD to understand the reasons for it’s disqualification.
- Along with PAN, Company has other focus segments and will continue to expand and work on more depending upon the opportunities.
I personally believe that the reason for rejection could be the potential conflict of interest – a verifier ideally should not be a developer.
As regards the potential impact, I believe that given the significant share of PAN’s business into the Company’s operations, investors will be wary for the foreseeable future.