Cigniti Technologies – Aspiring to be Number one player in SW testing space

Summary:-
– 3rd largest “Independent Software Testing” company
– Target is to be the largest IST
– Targeting 300M USD revenue in FY18 (Geographic Expansion + Inorganic Acquisition)
– Target EBIDTA margin ~ 20%, PAT margin ~ 15%
– 1800 people
– Serving 34 Global 2000 companies
– IDFC Equity Opportunity Fund and Religare both hold 1%+ stake in it
– More Info @ http://www.cigniti.com/corporate-presentation
– Diversified client base

Growth:-

Moat:-

Industry Overview:-

• Testing consumes ~ 20-30% of SW development
• Growing at 11% CAGR (FY18 ~ USD 25B)
• 2 types
  • Traditional ~ Not done by career tester
  • STS : Specialist Testing Service ~ Done by career tester
• STS
  • 15.7 B USD, growing at 10%
  • Increasing tendency toward multi-year contact (Now ~42%)
  • North America ~ 46% share : growing at 14% cagr
  • New testing (ERP, BI, SOA, Agile, Mobile etc) ~ growing at 29% cagr

Risk:-

• Demise of key guy who was the torch bearer of growth ( https://www.youtube.com/results?search_query=Sriram+Rajaram )
• Execution risk, not 100% sure if the rest of management can drive Cigniti to new high
• Highly fragmented market
• Technology risk – Newer technologies requires newer way of testing, need to keep oneself abreast with newer technology to stay in the game.

Disc : Invested