In an interaction with Krishnan Venkatachary, Chief Financial Officer of Cigniti Technologies Limited
Our outstanding Q4 results were a testament to our strategic insight, unwavering execution, cutting-edge expertise and ability to adapt to market dynamics, says Krishnan Venkatachary, Chief Financial Officer, Cigniti Technologies Limited
In Q4FY23, the consolidated revenue from operations increased more than 23 per cent from last year's same quarter, while net profit of the company zoomed more than 117 per cent. What were the contributing factors behind the impressive results?
Our niche positioning and unwavering execution were pivotal in our outstanding performance. We steadfastly focused on our existing Fortune 500 and Global 2000 clients, skilfully up-selling and cross-selling our services. This approach strengthened our long-term relationships and opened doors to exciting new ventures in the digital engineering services realm.
The offshore shift has happened to about close to a percentage point, contributing to the margins, which is in line with our endeavours to push for managed services. Our vertical-focused approach proved highly fruitful. We continued to invest in building capabilities in Healthcare and Med-tech while Travel and Hospitality (our forte before pre-covid) bounced back. BFSI continued to be our major contributor. We tailored our solutions to meet the unique needs of these sectors.
In conclusion, our outstanding Q4FY23 results were a testament to our strategic insight, unwavering execution, deep client relationships, cutting-edge expertise, and ability to adapt to market dynamics. We remain committed to delivering excellence and driving growth as we forge ahead.
Can you share an overview of the company's overall order book and execution?
The company's current order book position, considering uncertainties and approximately 85 per cent renewals, is estimated to be around USD 202 million. We are confident about the upcoming year but have chosen not to provide specific guidance.
As a company, we aim to continuously improve our EBITDA margin and achieve similar growth as in the past. We have witnessed increased profitability and stability, with a price increase in over 50% of our revenue accounts. Additionally, we have secured newer wins from strategic accounts at higher margins. We regularly review our human resources to optimize our manpower and have achieved a utilization level of approximately 82 per cent. Our top 20 accounts continue contributing around 50% of the revenue, while newer revenues during the year account for approximately 7 per cent.
Although we face some backlog due to customers reducing their IT technology requirements, we have carefully priced in such scenarios and developed strategies to maintain double-digit growth. Our dollar rates have slightly increased, and overall receivables and collections show fantastic cash generation. Overall, our order book appears healthy, and we are focused on improving profitability, expanding digital initiatives, and maintaining growth in the face of challenges in specific sectors.
What is your segment-wise revenue mix and how do you expect it to evolve over the next 2-3 years?
Broadly we have divided our service offerings into Digital Assurance and Digital Engineering segments. Digital Assurance comprising quality assurance, quality engineering and test automation is our forte for the years where we are serving nearly 230 clients. The revenue from this segment is around 91% now.
With our strategic and capability-led acquisition of Apaara Digital (RoundSqr), we have expanded our offerings into digital engineering. We would leverage our quality-first approach to digital engineering and extend to the top 50 existing clients. We currently have around 9 per cent of revenue from this segment and hope to grow to 25 per cent in FY24. This would also fetch us margins.
As we chart our path forward, we remain dedicated to enhancing our digital capabilities and optimizing our asset stance. By leveraging our expertise and expanding our digital engineering services portfolio, we anticipate continued growth in our revenue mix over the next 2-3 years. This strategic focus aligns with our commitment to staying at the forefront of industry trends and meeting the evolving needs of our clients.
What are your top 3 strategic priorities?
Digital Engineering Services Expansion: Digital Engineering services market spend is expected to reach USD 687 billion by 2023. Upholding our core value of being a Quality-First company, we are committed to reinforcing our position as a leading provider of digital assurance and digital Engineering services. To achieve this, we are focused on expanding our portfolio, including product engineering, data engineering & insights, AI/ML, and more. These strategic advancements are expected to gradually contribute to a distribution of 60% of our services in Digital Assurance and 40 per cent in Digital Engineering. Furthermore, we continue to invest in AI & IP-led innovation like Zastra and iNSta, aligning with the increasing demand for digital engineering and assurance services.
Up-selling and Cross-selling Opportunities: Our objective is to focus on existing accounts and capitalize on up-selling and cross-selling opportunities through our Digital Engineering services. We have identified the top 60 accounts where we can upsell and cross-sell our Digital Engineering services. We aim to generate 25 per cent of total revenue from Digital Engineering Services in FY24. We believe nurturing strategic partnerships will be crucial in achieving our growth objectives. Co-innovation with our partners will help us leverage untapped potential and drive revenue growth.
Investment in Talent and Technological Advancements: To maintain our competitive edge, we will invest in training and development programs for our employees, ensuring they have the skills and expertise to deliver exceptional value to our clients. Additionally, we will continue to implement cutting-edge technologies in our service offerings. By doing so, we aim to stay at the forefront of the industry and provide innovative solutions to our clients.
These strategic priorities will guide our actions as we expand our market presence, drive revenue growth, and solidify our position as a leader in digital assurance and engineering services.
What is your outlook on the Indian IT industry? What are the opportunities you are currently focusing on?
According to the latest forecast by Gartner, worldwide IT spending is projected to increase by 5.5 per cent to reach USD 4.6 trillion in 2023, despite ongoing global economic turbulence. This growth will be driven by the software and IT services segments, with a 9.1 per cent growth rate. Cigniti Technologies is well-positioned to take advantage of the current IT spending trends. Despite a downtrend in IT spending overall, non-essential spending is declining while essential spending is increasing rapidly. This shift in spending priorities is in our favour, indicating a growing demand for our services.
According to NASSCOM, In FY2023, India's technology industry revenue is estimated to reach USD 245 billion, representing a YoY growth of 8.4 per cent. This growth is driven by the increasing demand for technology adoption and digital acceleration, which has become a critical component of business innovation and transformation.
We at Cigniti Technologies are continuously evaluating opportunities to expand into new domains. In the coming year, we plan to strengthen our capabilities in emerging technologies such as AI, Machine Learning, and Blockchain and continue to build long-term partnerships with our clients. The company has been investing highly in innovation and added new capabilities to its services and product portfolio.
This shift in our focus towards digital engineering services has opened new opportunities for potentially multi-year client engagements. We are currently witnessing noteworthy traction for cross-selling these services and moving up the value chain for more customer engagement and rate improvement, which should yield positive results in the next year.