The Rs 2,000 crore invisible rail: 2 smallcap stocks securing India’s paperless future

Still, a paperless system needs more than digital documents. It needs identity verification. It needs e-signatures. It needs authentication. It also needs secure workflows. Without these layers, digital records cannot fully replace paper.

That is where the investment case gets interesting. This is not just a general digitisation story. It is about the businesses that help users verify, sign and process documents online. As more institutions move these tasks online, the trust layer becomes more important.

That is why we have focused on eMudhra and Protean eGov Technologies. Both these companies have a combined order book of Rs 2,000 cr. eMudhra is a direct play on digital trust. Protean has a wider presence in digital identity and authentication, and related public digital infrastructure, even though it missed the PAN 2.0 shortlist. LTIMindtree won the PAN 2.0 project, but its exposure to this theme sits within a much broader IT services business. That makes eMudhra and Protean more focused fits for an article on the trust and identity layer behind India’s paperless economy.

#1 eMudhra: Scaling India’s Digital Trust Moat Globally

eMudhra is a licensed certifying authority involved in issuing digital signature certificates in India under its eMudhra brand. The company is licensed by the Controller of Certifying Authorities (CCA), Ministry of Information Technology, and operates under the guidelines set by the Information Technology Act.

eMudhra reported a strong December quarter. Growth was led by product revenues and better traction in overseas markets. Total income for Q3 FY26 rose 35.6% year-on-year (YoY) to Rs 191.1 crore. Net profit increased 29.5% to Rs 29 crore. Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 38.2% to Rs 44.1 crore. EBITDA margin stood at 23.1%.

The quarter also strengthened its link to the paperless economy theme. Management said demand was supported by wider digital onboarding and documentation program, especially in India. It also saw higher transaction volumes across retail, banking and capital market use cases.

In this space, eMudhra is not merely selling digital signatures. It is also building around identity, authentication, certificate lifecycle management and paperless workflows. That makes it more relevant to the digital trust layer. It is not just another IT services play.

Growth in the quarter was driven largely by products. This helped offset slower growth and margin pressure in the U.S. services business. Management said 65% of revenue is recurring. The remaining 35% comes from one-time licence-led business. It also said product revenue is likely to grow faster than services over the next 12 months. That could support margins going ahead.

International Expansion: The CRYPTAS Factor

Geographically, Europe made a stronger contribution after the CRYPTAS acquisition. The acquired business contributed about Rs 34 crore in Q3 revenue. This was up from about Rs 24 crore in Q2. It also turned profitable at the PAT level. Management said it is aligning the CRYPTAS portfolio with its wider trust stack. It is now working on cross-sell opportunities in European and non-European markets.

The company is also expanding its global infrastructure.

The Global Data Center Push

Its U.S. data centres are now live. These centres are enabling local TLS certificate issuance and lifecycle management for North American clients. In the UAE, eMudhra is setting up a local data centre and disaster recovery site. This follows a regulatory change that requires trust services to run from within the country. Management said most of the spending is already done. Audits are now underway. Commissioning could take another two to three months.

On the ground, the company highlighted a broad set of project wins during the quarter. These included certificate lifecycle management wins in the U.S. It also reported renewals and upsells in Europe. The company rolled out its first eSignature workflow for a large bank in Oman. It also executed large deployments across defence agencies in India.

Beyond that, it pointed to CLM implementations across central banks and leading banks in the Philippines and Indonesia. In India, it continues to see higher eSign and eStamping adoption. This is coming mainly from banking and financial services-led digitisation programmes.

Moat Check: Why 65% Recurring Revenue Matters for eMudhra

There are also fresh product investments underway. Management said the current year’s capex plan, excluding the UAE data centre, is aimed at areas such as post-quantum cryptography, privacy-led data discovery, classification, consent management and remote signing. These are still early-stage bets. But they show where the company wants to deepen its role in secure paperless transactions.

For now, the company appears to be entering FY27 with a healthy pipeline and a better product mix. Management said the pipeline is above Rs 400 crore. It also remained optimistic on the Middle East, Africa and Europe.

Still, it did not raise its full-year guidance. It stayed with the Rs 700 crore revenue target. That cautious stance is worth noting. It suggests that demand remains strong. But it also shows the company is waiting for deal closures and execution to fully reflect in reported numbers.

In the past year, the share price of eMudhra tumbled 40.8%.

eMudhra 1 Year Share Price Chart

#2 Protean eGov Technologies: The Backbone of India’s PAN & eKYC Rails

Incorporated in December 1995, Protean eGov Technologies was previously known as NSDL e-Governance Infrastructure Ltd and is engaged in the business of developing citizen-centric and population-scale e-governance solutions.

Protean eGov Technologies reported a steady December quarter. The company remains closely linked to India’s paperless economy. Its role sits in the back-end rails. These include PAN issuance, eKYC, Aadhaar authentication and online PAN verification. As more services move online, these rails become more relevant.

Revenue from operations in Q3 FY26 rose 13% year-on-year to Rs 229 crore. Adjusted profit after tax stood at Rs 26 crore. EBITDA grew 34% to Rs 46 crore. Margin expanded to 19%. The company said growth was led by its tax services business and a rising contribution from newer businesses.

Even so, the story is now more nuanced after the company missed the PAN 2.0 shortlist last year, making execution in newer businesses more important.

Scaling the Aadhaar and UIDAI Footprint

The tax business remained the biggest support in the quarter. Protean issued more than 1.1 crore PAN cards. It held 59% market share in PAN issuance. Management said the increase was helped by higher overall PAN issuance after the Aadhaar-PAN linkage deadline extension. It also gained market share sequentially. In a paperless economy, this matters because PAN, verification and linked compliance workflows remain core to digital onboarding and formalisation.

Its identity business also saw strong volume growth. This came from online PAN verification, eKYC and Aadhaar authentication. These are key pipes in the broader digital document and identity stack. Revenue here was affected by slab-based pricing and competitive pressure. Even so, management said its focus remains on scaling volumes, gaining share and building value-added offerings.

Protean’s Pivot: Expanding Beyond PAN Issuance

The company’s newer businesses are becoming more visible. In the first nine months of FY26, they contributed 11% of operating revenue. This compares with 4% in FY25. Protean said it continues to expand across open digital ecosystems such as insurance, health, agriculture, education and identity. This is important because the paperless economy is no longer just about tax filing or KYC. It is spreading into wider public digital infrastructure and sector-specific platforms.

Scaling Aadhaar Seva Kendras

One of the biggest projects under execution is the UIDAI mandate for Aadhaar Seva Kendras. Protean has completed the first phase. It has operationalised 34 centres across 19 states and Union Territories. Revenue has started coming in. Management said early performance is in line with expectations. The full mandate is for 190 centres. The company expects the rollout to be completed by September. A more meaningful revenue uptick is likely after that.

The Rs ₹1,600 Crore Order Pipeline

The company also highlighted a strong order pipeline. Its unexecuted order book stood at more than Rs 1,600 crore. This is nearly twice its annual revenue. These opportunities are largely linked to digital identity and open digital ecosystems. Protean said large domestic projects such as CERSAI KYC, Bima Sugam and Aadhaar Seva Kendras are still in relatively early stages. This means revenue can stay uneven in the near term, especially in turnkey projects where recognition depends on milestone delivery.

Protean is also pushing its global presence. During the quarter, it won a national-level mandate worth Rs 25 crore in Ethiopia. The project involves building digital public infrastructure for the agricultural ecosystem. The work will cover design, development, deployment and support. With this, the company now has four international mandates across three markets. This gives Protean a wider role beyond India’s domestic digital stack.

The company also made a strategic investment during the quarter. It acquired a 4.95% stake in NSDL Payments Bank. Management said the logic is not banking margins. It is about working with the bank to build replicable digital banking technologies and create cross-sell opportunities across the BFSI space. That fits the larger theme of digital infrastructure, though this part is still at an early stage.

For now, the quarter suggests Protean is moving from a legacy transaction utility to a broader digital infrastructure platform. The core businesses remain stable. Newer projects are starting to contribute. But execution remains the key variable. Much of the growth case now depends on how quickly large mandates move from rollout to steady monetisation. In that sense, the story is promising, but still tied closely to project execution and scale-up over the next few quarters.

In the past year, the share price of Protean eGov Technologies slumped 61.3%.

Protean eGov Technologies 1 Year Share Price Chart

eMudhra vs Protean: Decoding the Valuation Multiples Gap

Let’s now turn to the valuations of the companies in focus, using the Enterprise Value to EBITDA multiple as a yardstick.

Valuations of Companies in focus

Sr No	Company	EV/EBITDA Ratio	Industry Median	ROCE	ROE
1	eMudhra	23.8	13.0	15.3%	12.1%
2	Protean eGov Technologies	12.2		11.7%	9.4%

eMudhra looks stronger on the basic return ratios. Its return on capital employed (ROCE) is 15.3%. Its return on equity (ROE) is 12.1%. Protean eGov Technologies is lower. Its ROCE is 11.7% and ROE is 9.4%.

The valuation picture is very different as well. eMudhra is trading at 23.8 times EV/EBITDA. The industry median is 13 times. So it is clearly trading at a premium. Protean is at 12.2 times EV/EBITDA, which is far lower.

Both companies are linked to the paperless economy theme. But they are not playing the same role. eMudhra is more directly tied to digital signatures, certificate management and paperless document flow. Protean is coming from the digital identity side, through PAN, eKYC, Aadhaar authentication and related systems.

So there is a simple trade-off here. eMudhra has better return ratios, but the stock is already expensive. Protean is cheaper, but the return profile is not as strong. These are still the two names worth keeping on the watchlist for this theme. The next few quarters should show whether the numbers improve enough to justify the gap.

Execution: The Final Variable

The move towards a paperless economy is becoming easier to see now. More work is being done online. More institutions are using digital records, digital approvals and identity-based systems in everyday operations.

But that does not mean every company linked to this space will benefit in the same way. Some are much closer to the heart of this shift. Others are only loosely connected. Over time, that difference should show up in revenue growth, margins and return ratios.

That is why this space is worth watching. The opportunity is there. But the theme by itself is not enough. What will matter now is execution. The next few quarters should show which companies are actually turning this shift into stronger business growth.

You can track how these are progressing by adding stocks to your watchlist.

Disclaimer:

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. 

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. 

Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to deep dive into the world of companies, studying their performance, and uncovering insights that bring value to her readers.

Disclosure: The writer and her dependents do not hold the stocks discussed in this article. 

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