Cigniti Technologies Ltd - Research Report


Private Client Research




IT - Software


Cigniti Technologies Ltd

Reco Price
Rs. 284
Price Target (12 Months)
Rs. 570


03 March 2014
CNX Nifty




World’s third largest independent software testing services player, with revenue of $40 million.

Premium Services:
Cigniti offers superior value to its clients through premium services like IP led testing, test advisory / process consulting, enterprise mobile, cloud, big data, performance, security, automation, ERP testing services and Test Centers of Excellence by leveraging their cloud enabled test labs. Over the years, they have proven their delivery capabilities and established advanced test labs to create compelling value for their clients. Also to assess the services provided company introduced client satisfaction index (CSI) which helped in getting feedback from clients. Cigniti’s CSI over the last one year has improved from 3.4 out of 4.0 to 3.8 out of 4.0 with more than 80% of clients giving them a perfect score of 4 out of 4.These shows the clear intent of the company to stay focused on clients and upgrade the services on regular basis.

Gallop Solution acquisition:
Cigniti Technologies Ltd. acquired US-based specialized software testing services firm Gallop Solutions Inc. in a deal that can produce the world’s third largest independent software testing services player, with revenue of $40 million. Privately-held Gallop, which employs 200 people worldwide and had $9.5 million in revenues in 2012, specializes in building and implementing niche solutions in the application lifecycle management space with a special focus on quality, test automation and test asset modernization. This will help company’s mission of becoming the world’s largest independent testing services company in the next few years.

Cloud based testing:
Given the cost benefits, flexibility and increasing feasibility, Cloud based testing will be the next logical move that will benefit enterprises. Testing as a Service (TaaS) is already a part of the service offerings by Independent Software testing enterprises and major corporations. Since Testing over the Cloud is a critical decision, there will be a demand for impeccable pre-engagement assessments and agreements in the form of a global service delivery model that meets standards compliance, data privacy, and global business protocols.

Major sectors:
The major chunk of innovation will happen in the areas of IP-led testing. IP-led testing is undoubtedly the future. It is a value driven offering to clients using patented tools. This helps Clients jumpstart their QA 104 Company also believes that Independent Software Testing will play a crucial role in sectors with large application portfolios like BFSI, Life sciences and Utilities. Leading industry report predicts Financial Services and Energy, Utilities will lead the pack.

Strong Industry growth:
This year there will be paradigm shift in testing industry. Independent software testing majors will gain momentum as against the conventional IT services majors. Software Testing has emerged into becoming a mainstream activity in Software Development Life Cycle and plays a vital role in production release. Year 2014 and ahead will be a very important year for testing services. A report by the leading industry analyst firm Nelson Hall, suggests that Independent Software testing services is expected to grow by 9.5% year on year till 2018.

Smart Model:
Cigniti has built set of tools to speed up events in software test life cycle. Its smart tools provide point solutions for gaps that are not fulfilled by the market tools and allow seamless integration with all the leading market tools. Most of the Cigniti IP is cloud enabled with a Pay as you Go and Use as you need model. This helps the client to pay as per their business requirement and keep check on their expenditure.

Strong Relationship:
Company has built strong analyst relationship with Nelson Hall, Gartner and Forrester leading software testing industry analyst. This helps the company to keep in check for its products and services and upgradation takes place as and when required. This helps the company to maintain its international standards in delivering its premium services.

Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
284.90 - 129.50
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Cigniti Technologies Ltd.Sensex
Cigniti Technologies Ltd
Performance (%)


(in %)

+91 22 6639 3000


Software Testing Industry

Over the last 5-6 years, India has become one of the leading destinations for outsourcing of software testing services accounting for 32% of the total global outsourcing share. Export revenues and the number of employees have doubled over the last 4 years growing at CAGR of 20%.Key growth drivers include faster time to market, compelling cost advantage, evolution of technologies, availability of skilled talent pool, and increased maturity of Indian vendors offering end to end, innovative services and solutions. Mature usage of these services is ultimately steering towards defined levels of business assurance, taking quality assurance to the next level.

By 2020 India’s testing segment is expected to be USD 13-15 billion, and exploiting this opportunity will require all stakeholders – industry, academia, government and associations to collaborate and promote India as the preferred destination for testing services.


Cigniti Technologies Limited is one of the world's premier Independent Software Testing Services company. Over the last 15 years, Cigniti has improved quality of software for global Enterprises and Technology companies using proprietary SMART Tools and Cloud enabled Test Labs. Cigniti offers Test Consulting, Test Advisory services, Functional, Regression, Automation, Security, Performance, Enterprise Mobility, Cloud, Big Data and ERP testing services. Cigniti has strategic alliances with all the leading product, tool and technology vendors. Cigniti is the world's first independent software testing services .Recently they acquired Gallop Solutions Inc, a US based specialized software testing services company. The combined entity is poised to become the world's third largest independent software testing Services Company with revenues of $40 Million and more than 800 people worldwide. Cigniti Technologies is one of the fast growing IT services companies in this space and aims to become the world leader in software testing in the next few years through a combination of organic and inorganic growth.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
FY 2012
FY 2013
FY 2014E
FY 2015E
  • Sales
  • Total Expenditure
  • Other Income
  • Operating Profit
  • Interest
  • Profit Before Depreciation & Tax
  • Depreciation
  • Profit Before Tax
  • Tax
  • PAT
  • Adjusted (EPS)
  • 33.76
  • 30.74
  • 3.01
  • 0.08
  • 3.10
  • 0.33
  • 2.77
  • 0.98
  • 1.78
  • 0.60
  • 1.18
  • 0.70
  • 150.88
  • 142.11
  • 8.77
  • 0.03
  • 8.80
  • 0.31
  • 8.49
  • 1.57
  • 6.92
  • 1.91
  • 5.01
  • 2.66
  • 257.65
  • 219.68
  • 37.97
  • 0.72
  • 38.69
  • 0.81
  • 37.88
  • 2.10
  • 35.78
  • 11.65
  • 24.13
  • 12.82
  • 395.06
  • 325.06
  • 70.00
  • 0.65
  • 70.65
  • 1.03
  • 69.62
  • 3.25
  • 66.37
  • 18.05
  • 48.32
  • 25.67
Source: Stockaxis Research, Company Data


Considering the niche industry where cigniti technologies are operating and growth prospects which it possesses company is well poised for stellar growth in next three years both in top line and bottom line figures. we assign the P/E of 22.20x on one year forward basis on FY 2016E.Company deserves premium valuation as they are growing at brisk pace and considering the unique business model company is operating in,S it is poised to grow in double digit growth.We arrive at a target price of Rs 570 on basis of our valuation.



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