Cigniti Technologies Ltd Management Discussions

Overview

Cigniti Technologies Limited is the worlds leading AI & IP-led Digital Assurance and Digital Engineering Services Company. Our 4200+ employees across 24 countries help Fortune 500 & Global 2000 enterprises accelerate their digital transformation journey, providing transformation services leveraging IP & Platform-led innovation. We provide expertise across multiple verticals and domains and assure automation, acceleration, and engineering excellence.

Our unique approach of being a Quality-First digital engineering services company helps us offer our customers a unique and highly differentiated digital services stack, helping them win the Digital landscape. We call it Digital Done Right.

Our flagship services have helped organizations achieve measurable outcomes, significant ROI, and frictionless experiences for our global customers. Our digital assurance services include Artificial Intelligence Testing, Big Data & Analytics Testing, Blockchain Testing, Security Assurance, IoT Testing, Robotic Process Automation (RPA), and full cycle software quality engineering and assurance services, including DevOps, Test Automation, Omnichannel Functional, Performance, and Security testing, and business assurance. Our AI-led digital engineering services cover data engineering, software platforms, cloud, and digital product engineering, AI/ML engineering, intelligent automation, big data analytics, and blockchain development services.

Our IP, next-gen quality engineering platform, BlueSwan™, accelerates the quality engineering initiatives of global companies. In contrast, Zastra™, an active learning-enabled Computer Vision-based annotation platform, enables AI-led digital outcomes of credible, measurable impact for clients. iNSta^TM, a low Code/No Code test automation with a self-healing, AI-powered Scriptless test automation platform, helps clients achieve results faster and reduces the time-to- market.

Cignitis deeper investments into labs across Mobile, IoT, Performance, Energy & Utilities, and Computer Vision and AI have delivered significant breakthrough innovation and disruptive outcomes to our clients.

We consider industry verticals as our go-to-market business segments. The key vertical clusters we cater to are Banking, Financial Services & Insurance (BFSI), Retail and E-commerce, Travel, Transportation, and Hospitality (tt&h), Life Sciences, Healthcare, and others.

We are headquartered in Hyderabad, India, with our global offices spread across the USA, the UK, UAE, Australia, South Africa, the Czech Republic, and Singapore.

Quick Facts:

• 4200+ experienced professionals

• 60+ Fortune 500 companies trust Cigniti, as well as 80+ Global 2000 enterprises

• In the FY23, Cigniti won large multi-million-dollar deals across BFSI, Retail & E-commerce, HCLS, and ISVs

• Industry-leading revenue growth of 32.7% in FY23.

Global Economic Outlook: Low Growth and Peaking Inflation

IMF projects that the world economic outlook is uncertain due to several factors, including the ongoing effects of COVID-19, financial sector turmoil, high inflation, and the invasion of Ukraine. Advanced economies are expected to experience a more significant growth slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023, compared to emerging markets. While inflation may decline from 8.7 percent in 2022 to 7.0 percent in 2023, underlying inflation will likely decline more slowly. The return of inflation to the target is unlikely before 2025.

GDP Global Output: IMF World Economic Outlook, April

The IMFs projections indicate that the global economy may experience low growth and peak inflation soon, with several potential factors that could impact this outlook.

The baseline forecast assumes that recent financial sector stresses are contained for growth to fall from 3.4 percent in 2022 to 2.8 percent in 2023 before rising slowly and settling at 3.0 percent in five years.

The Indian Economy Outlook:

The Indian economy has shown strong resilience in the face of the COVID-19 pandemic, with GDP growth projected to be the second-fastest among major economies in the current fiscal year (FY 2022-23). However, the growth momentum has slowed in recent months due to multiple factors as erratic rainfall, falling purchasing power, and rising food and energy prices. Despite improving labor market conditions, stay remains a concern, with the CPI expected to remain above the central banks target of 6 percent until early 2023.

The Indian economy has shown resilience despite external headwinds, with strong domestic demand. However, the International Monetary Funds World Economic Outlook projects a slight decline in growth from 6.8 percent in FY2022 to 5.9 percent.

Global IT Industry Outlook:

According to the latest forecast by Gartner, worldwide IT spending is projected to increase by 5.5% to reach $4.6 trillion in 2023, despite ongoing global economic turbulence. This growth is expected to be driven by the software and IT services segments with a 9.1% growth rate.

The demand for digital technologies is anticipated to continue growing in 2023, and the industry is expected to focus on cloud-based initiatives for cost rationalization and business agility. AI initiatives will also likely gain prominence especially in pricing optimization, new customer targeting, and promotional effectiveness. In addition, automation themes are anticipated to streamline operations across various industries.

However, the tight labor market is expected to challenge IT services spending as high competition for skilled IT staff drives up wage requirements. While skilled IT workers continue to migrate away from enterprise CIOs, businesses are expected to invest more in digital business initiatives to meet specific business drivers.

	2022 Spending	2022 Growth (%)	2023 Spending	2023 Growth (%)	2024 Spending	2024 Growth (%)
Data Center Systems	216,095	13.7	224,123	3.7	237,790	6.1
Devices	717,048	-10.7	684,342	-4.6	759,331	11.0
Software	7933,839	8.8	891,386	12.3	1,007,769	13.1
IT Services	1,250,224	3.5	1,364,106	9.1	1,502,759	10.2
Communica- tions Services	1,424,603	-1.8	1,479,671	3.9	1,536,156	3.8
Overall IT	4,401,809	0.5	4,643,628	5.5	5,043,805	8.6

As macroeconomic headwinds persist, prioritization is expected to be critical in optimizing IT spending while using digital technology to transform a companys value proposition, revenue, and client interactions. CIOs face a balancing act as they maintain existing on-premises data centers while shifting new spending to cloud options. While the IT services segment is projected to continue its growth trajectory, cloud services are expected to be a key driver for increased spending, largely due to the infrastructure-as-a- service market.

IDC predicts that global revenue for IT and business services will see a steady growth rate of 5.7% in 2022 and 5.2% in 2023, with digital technology spending by companies increasing at 8 times the economy in 2023. This rise in digital technology adoption lays the foundation for operational excellence, competitive differentiation, and long-term growth. While service

provider spending has decreased from the previous year due to slower post-COVID growth, investments by cloud and hyperscale providers have remained steady. Cloud services continue to experience strong demand and drive growth despite inflationary pressures, while non-cloud spending is expected to decline.

Indian IT Industry Outlook:

According to NASSCOM, In FY2023, Indias technology industry revenue is estimated to reach $245 Bn, representing a YoY growth of 8.4%. The increasing demand for technology adoption and digital acceleration is driving this growth, which has become a critical component of business innovation and transformation. The growth areas of technology segments are expected to focus on digital CX, digitization, cloudification, building SaaS-enabled products, cybersecurity, and phantomization. The industry is also expected to witness a continued focus on building quality talent in niche and pure tech areas like cloud, AI/ML/NLP through reskilling/upskilling. India to position as the "Digital Talent Nation" for the world.

Indian companies are shifting from a wholly owned IT model to project-based outsourced models, leading to a growth in tech outsourcing and hardware maintenance. Software spending growth is expected to dip slightly in 2023, while spending growth in tech consulting and systems integration will remain high but decrease due to SaaS adoption and outsourcing.

Anticipate an economic deceleration in the upcoming 18 months, coupled with short-term disruptions like labor imbalances, supply chain challenges, and record- breaking inflation. It is projected that discretionary spending will decrease by approximately 15%.

Digital Assurance and Digital Engineering - An integrated Quality-First approach

Digital Engineering is a full cycle play that encompasses Digital assurance and hence paves the path for Cigniti to a meaningful journey towards becoming a quality- first digital engineering service company. Our solid background and foundation in Digital Assurance,

Digital Test Ops, and Quality Engineering, coupled with the AI, ML, and Data led Digital engineering portfolio leads us to a unique Quality-First approach to Digital Engineering. This helps us be a Quality-First Digital Engineering services company and a preferred partner of choice for global enterprises and software product companies, and businesses across verticals. In line with our aspirations to be a Quality-First Digital Engineering services company, we have significantly increased our total addressable and total serviceable market, thus paving the path for sustainable growth in the years to come.

As a leader in digital assurance, Cigniti is well- positioned to capture a significant share of wallet from our existing enterprise customers by offering a comprehensive range of digital transformation services through technology-led solutions. We are expanding our services by introducing Digital Engineering offerings aimed at helping our customers become Digital-First while continuing to focus on providing top-quality Digital Assurance services.

Technology Trends on Rise, 2023:

AI/ML:

Artificial Intelligence (ai) has made significant strides in recent years, with breakthroughs in natural language processing and computer vision. In 2023, AI will continue its explosive growth, and businesses that fail to adopt it risk falling behind. AI is best used to augment human abilities, automate repetitive tasks, provide personalized recommendations, and make data-driven decisions with speed and accuracy. AI-led testing increases the scope and market opportunity for Digital Assurance Players, leveraging AI-powered test automation, intelligent test case generation, predictive analytics for defect detection, AI-powered exploratory testing, and AI-powered test environment management. By 2024, 70% of enterprises are expected to use cloud and cloud-based AI infrastructure to operationalize AI, according to Gartner. Apart from the fact that AI and ML form the core of every digital enterprise of the future, and AI-led digital engineering is here to stay.

DevOps:

DevOps has become a crucial methodology for businesses to streamline their software development and delivery process. With machine learning algorithms, DevOps can optimize resource consumption in the cloud for cloud cost management or detect and avoid issues in the software development process. Low-code platforms can also extend the advantages of agile and DevOps to create and deliver apps quickly. By 2023, 70% of organizations are expected to use value stream management to improve flow in the DevOps pipeline, leading to faster delivery of customer value, according to Gartner.

Cloud:

Cloud computing has become a crucial platform for digital transformation and driving business innovation. With the widespread adoption of the cloud, there has been a democratization of other emerging technologies like artificial intelligence, augmented reality, blockchain, and more. Gartner says, by 2024, cloud adoption is expected to raise the CFOs influence over the CDOs decisions due to the explicit linkage of workloads to cost, disrupting the CDO role. According to industry experts, the cloud is a "one to watch" technology for its high potential for accessibility, usability, and efficiency.

Data and Analytics:

Data has emerged as a key enabler for current business challenges and future opportunities. Organizations benefit from automation to create efficiencies and reliable, repeatable processes. Data- driven organizations understand that data requires governance, collaboration, and sharing, which the right scalable architecture can enable. By leveraging AI and machine learning, businesses can analyze vast amounts of data to extract insights and drive decision- making. By 2024, 75% of organizations are expected to establish a centralized data and analytics data center of excellence to support federated Data &Analytics initiatives and prevent enterprise failure, according to Gartner.

Low-code, no-code

According to Gartner, by 2025, 70% of new applications enterprises develop will use low-code or no-code technologies. The rise of business technologists and a growing number of hyper-automation and composable business initiatives are expected to drive the adoption of low-code technologies through 2026.

The availability of low-code tools for IT developers and non-IT personnel enables organizations to achieve the level of digital competency and speed required for modern agile environments. Gartner predicts that by 2026, at least 80% of the user base for low-code development tools will be developers outside of formal IT departments.

We at Cigniti recognize the importance of emerging trends like AI while maintaining our core value of being a Quality-First company as we focus on Digital Assurance and increasing our Digital Engineering services revenue share.

Test Automation:

Continuous testing has become increasingly important in software development as businesses need the benefits of faster releases and improved quality. To address this need, many companies are turning to test automation tools. For instance, Cigniti launched iNSta^TM, a low-code/no-code test automation platform that leverages AI to provide self-healing capabilities. This platform helps clients achieve faster results and reduces the time and effort required for test script development. With the rising demand for scriptless test automation, more companies need to adopt this approach in the future. By leveraging these advanced tools, businesses can quickly respond to customer expectations, improve quality, and achieve faster time-to-market. The latest trend in test automation is codeless automation, which provides a powerful interface for developing automation suites. By leveraging this revolutionary approach, companies can improve their testing capabilities, increase speed, and reduce costs.

Security and Digital immunity:

In the age of digital transformation, applications and data have become essential assets for businesses. However, the focus on securing these assets falls short of their perceived value, leaving organizations vulnerable to security risks. As Gartner predicts, 60% of organizations will embrace Zero Trust as a starting point for security by 2025. Implementing DevSecOps practices proves extremely beneficial in improving both security and organizational efficiency. However, the most challenging part of DevSecOps adoption is to make security complement existing business processes, culture, and people, in addition to the complexities in the cloud. Cignitis holistic enterprise Security Assurance program helps address security risks for critical applications and data by implementing practices such as Security Requirements Engineering & Risk-Driven Design, Secure Code Implementation, Risk- Driven Testing, Secure Deployments, and Operations that support security assurance and compliance requirements. Digital Immunity and Digital acceleration lead to Digital resilience.

Generative AI

We at Cigniti Technologies have started using Generative AI and ChatGPT as unit test case generation tools. We have created a combination of prompts that lets our developers & testers leverage GPT to generate automated test case scenarios, test cases to test the code and also system testing and security testing. On the Digital engineering services side, we are working to leverage ChatGPT / equivalents that are available through GitHub Copilot, OpenAI Codex, AWS CodeWhisperer etc. We are evaluating GitHub Copilot and others to see what benefits can come. Overall, this will help us significantly deliver productivity benefits to our customers both from our digital assurance and digital engineering services perspective.

Navigating the Vertical Landscape:

According to the latest Nasscom Future of Tech Services report, the growth of G-2000 is stagnating, and only a few verticals may remain attractive. However, there will be a high resilience in tech spending in verticals such as manufacturing (2-3%), life sciences (4-5%), healthcare (5-6%), travel and transportation (6-7%), and energy utilities (11-12%). On the other hand, the report predicts a medium to low resilience in tech spending in verticals such as insurance (1-2%) and banking and financial services (2-3%).

Verticals on the Rise:

MedTech:

The medical technology industry is experiencing a rise in demand due to advancements in digital healthcare solutions, which include artificial intelligence, the Internet of Things (IoT), and other connected devices. Additionally, the COVID-19 pandemic has accelerated the adoption of digital health technologies to improve patient outcomes. Supported by Nasscoms latest report, the Life Sciences vertical is expected to grow by 4-5% in tech spending, indicating a positive outlook for the industry.

Cignitis Medical Devices Testing CoE experts help verify and validate software for medical devices in Diagnostics, Surgical, and Cardiology, thus providing a competitive advantage in this space Cigniti has also been selected as a winner in the 2023 MedTech Breakthrough Awards program, taking home the "Best IoT Healthcare Platform" award, adding significant value to our MedTech expertise.

Power and Utilities:

With the growth in renewable energy sources and smart-grid systems, the Power and Utilities industry is experiencing a rise in demand for software testing and validation services. Cignitis Energy & Utilities Center of Excellence (CoE) and SmartMeter Labs provide deep testing for smart-grid systems, meter data management, and other related areas. As per Nasscoms latest report, the industry will show resilience in tech spending by 11-12%, indicating a positive outlook.

Healthcare and Life Sciences:

The healthcare and life sciences industry is experiencing a rise in demand due to advancements in digital healthcare solutions, including electronic health records, telemedicine, and other connected devices. As a result, there is a growing need for software testing and validation services in the healthcare industry. Cignitis Healthcare & Life Sciences Software Testing CoE, Hospital Clinical System Testing Expertise, EHR Experience, Cerner Testing Experience, and Epic Application Experience provide a competitive advantage. As per Nasscoms latest report, the industry is expected to grow by 5-6% in tech spending, indicating a positive outlook.

Travel and Hospitality:

The travel and hospitality industry is under tremendous pressure to improve customer experience, operational efficiency, and personalized digital experiences. Digital touchpoints are meeting traveler expectations, with contactless check-in and check-out becoming an industry must-have. IDC analysts say that by 2025, 75% of hospitality and travel organizations will offer multiple payment options, including contactless, QR code, or alternative payment, improving customer satisfaction by 15%. Furthermore, by 2024, 50% of interactions with hospitality/travel brands will be AI-enabled for recognition and automation, lifting profits by 15% and improving customer satisfaction by 30%.

As per Nasscoms latest report, the industry is expected to show resilience in tech spending by 6-7%, indicating a positive outlook. Traditionally, Cigniti is very strong in the Travel & Hospitality segment. It has worked with leading global airlines, airports, and four large hotel chains. Growth in this segment is an added advantage.

The Plight of Verticals: Navigating the Downturn

Retail & E-commerce:

The retail and e-commerce industry has been struggling due to the post-pandemic inflation effect. The shift in consumer behavior towards online shopping has accelerated during the pandemic, and companies that failed to adapt quickly have suffered. The rise in inflation has further impacted the industry as retailers struggle with higher costs and lower sales volumes. Real-world retailers are turning to automation to reduce labor costs, but this comes at an increased initial investment. Despite the growth in online sales,

the industry faces tough competition, and growth rates are slowing down. The Nasscom report predicts a medium to low resilience in tech spending for this vertical, which means that IT spending in this industry will likely remain stagnant or decline.

High tech:

The pandemic has impacted the high-tech industry. The global shortage of semiconductor chips has disrupted the supply chains of many high-tech companies, leading to production delays and higher costs. Additionally, the industry faces increased competition and regulatory pressures, which may impact growth in the coming years. The Nasscom report predicts a medium resilience in tech spending for this vertical, meaning IT spending in this industry may not grow significantly soon.

Telecom:

The telecom industry faces challenges due to increased competition and changing consumer preferences. The rise of over-the-top (OTT) services like Netflix and Amazon Prime Video has led to a decline in traditional telecom services like cable TV. Additionally, the pandemic has led to a shift towards remote work and online communication, which has impacted the demand for traditional telecom services. The industry is also facing regulatory pressures and the need to invest in infrastructure to keep up with technological advancements like 5G. The Nasscom report predicts a low resilience in tech spending for this vertical, meaning that IT spending in this industry will likely remain flat or decline.

Adapting to Change: Responding to Market

Downturns in Verticals:

In light of these challenges, Cigniti is leveraging the possibilities in industries that are expected to grow, such as manufacturing, life sciences, healthcare, travel and transportation, and energy utilities. We are investing in the capabilities and expertise needed to serve these industries and meet their evolving IT needs. While we recognize the challenges facing industries like retail, high tech, and telecom, we remain committed to serving our clients in these industries and helping them navigate the changing landscape. Our exposure to Hi- tech and telecom is limited, and we might not see a major impact here.

Steady State: A Look at the Balanced Verticals BFSI:

According to Nasscoms Future of Tech Services report, the banking, financial services, and insurance (BFSI) industry is expected to see a medium to low resilience in tech spend. The industry faces challenges due to increased competition, low-interest rates, and regulatory pressures. However, the industry has been able to adapt to the changing business environment by adopting new technologies like blockchain, artificial intelligence, and machine learning. These technologies have improved efficiency, better customer experience, and enhanced security measures. Therefore, while the BFSI industry may not see a significant increase in tech spending, it is likely to continue to leverage technology to stay competitive in the market.

The banking industry has undergone significant transformation over the years due to the introduction of digital technologies. With the rise of digital banking, customers can now access banking services anywhere and anytime, making the industry more efficient and convenient. Digital banking is on track to become the industry standard, and banks that are slow to adopt mobile banking risk losing customers as mobile banking services become more popular.

Advantage Cigniti:

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 favor as it indicates a growing demand for our services. The essential side of the budget is projected to grow from 3.5% in 2022 to 9.1% in 2023. According to Gartner, 59% of CFOs prioritize digital initiatives with short payback periods (12-24) months which presents a promising opportunity for us to grow our business.

In addition, according to Gartner, 78% of CFOs are planning to increase or maintain their enterprise digital investments through 2023, despite the persistence of inflation.

While maintaining the core value of being a Quality- First company, which will always be upheld in all areas of our operations. As we continue focusing on Digital Assurance, we also strive to increase our revenue share in Digital Engineering services. With our strategic and complimentary capability-led acquisition of Roundsqr, we were able to deepen our digital engineering capabilities. This new identity reflects our ambitions to tap into the fast-growing $600+ billion market segment of digital assurance and the digital engineering services market. This strategic move has enabled us to upsell and cross-sell within our top 60 accounts, and our target is to generate 25% of total revenue from Digital Engineering Services in FY24. 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. We are currently witnessing noteworthy traction for cross-selling these services and moving up the value chain for more customer engagement and rate improvement.

Many reports suggest mega deals ($100 Mn and above) are hitting historic lows and the IT sector is driven by smaller deal wins. This works in our favor because the number of deal sizes between $5 million to $20 million in ACV will be increasingly more in the market. As an AI & IP-led Digital Assurance and Digital Engineering services company, we are best positioned to leverage the same with our offerings, size, agility, and the level of customer intimacy that we can provide.

Companies across the globe are certainly cautious about the economic outlook, but Digital has become the core of any business. Hence, we might see a reduction in discretionary spending. However, the work of mid-size companies like Cigniti is derived from the essential budgets of the clients.

The evolving business landscape for Cigniti is centered around its Digital Assurance and Digital Engineering services. The adoption of new-age technologies such as AI, ML, RPA, IoT, Blockchain, etc., has been instrumental in redefining digital experiences. We are helping our global customers become digital-first and enhancing their capabilities in DevOps, Cloud Migration Assurance, RPA, etc. to create better customer experiences while automating processes in the system.

According to IDC, by 2026, enterprises that successfully generate digital innovation will derive over 25% of revenue from digital products, services, and/or experiences. This is a clear validation that digital is the way ahead. Cigniti is well-aligned with this trend as it has developed an ecosystem of skill development, digital reskilling, and matching to the latest technologies. The companys L&D team is investing in upskilling individuals with the latest technology skills and providing them with career paths that match their aspirations by acquiring the best talent available in each industry it operates.

Cignitis focus areas for FY23-24 include product engineering, agile transformation, data engineering & insights, business intelligence/visualization, AI/ML, blockchain, DevOps transformation, and intelligent automation - RPA. The company has been investing in innovation and has added new capabilities to its services and product portfolio.

Cigniti has launched iNSta^TM, a low Code/No Code test automation with a self-healing, AI-powered Scriptless test automation platform. Scriptless Test Automation enables testers and business users to automate test cases without worrying about coding. It helps achieve faster results and reduces the time to understand and develop the code, leading to faster TTM, higher ROI, and increased coverage with low maintenance.

Cignitis Zastra™, an active learning-enabled Computer Vision-based annotation platform, enables AI-led digital outcomes of credible, measurable impact for clients.

Human Resources

Human resources play a critical role in our organization, ensuring our employees are empowered to achieve our business objectives. Our policies, processes, and practices attract, engage, empower, and retain the most talented individuals in the industry. Over the past year, our HR department has been focused on continuous process improvement, automation, and implementing innovative employee engagement strategies. We have also placed an increased emphasis on diversity, equity, and inclusion initiatives, recognizing the importance of creating a workplace culture that values and celebrates differences. We remain committed to investing in our employees professional development, providing training opportunities and career advancement programs to support their growth within the organization. Detailed insights into our HR activities can be found on pages 30-35 (update the page numbers) of this years report.

Our HR policies, processes, and practices continue to evolve to attract and retain the best and brightest talent. In addition to focusing on process reengineering, automation, and innovative employee engagement strategies, we have also made significant strides in promoting diversity, equity, and inclusion (DEI) across the organization.

We are proud to have recently added DEI policies to our HR framework, which celebrate and promote diversity in all forms. Our commitment to womens empowerment continues to be a core focus, with ongoing efforts to support and advance women in the workplace. For a detailed overview of our HR activities over the past year, please refer to pages 30-35. (Update the page numbers)

Corporate Social Responsibility:

Project Cignificance, Cignitis Corporate Social Responsibility program, is deeply ingrained in our business strategy, and we work towards creating a positive impact in the communities in which we live and work. In addition to Education and Healthcare, we have included the new charter - Sustainability.

Some of the significant achievements in the year 2022 include:

• 80% increase in the pass percentage from last year, with approximately 85% of students passing the exams in the Standard X board exam

• 51% increase in girls participation and back-to- school rate due to various curricular activities and counseling sessions with parents

• A considerable 12% decline in the dropout rate, indicating a better retention rate among the students

• 60% of students were able to develop the basics of computer fundamentals and usage of technology to continue their studies

• Around 1000 critical infants were treated from marginalized communities through NICU healthcare support

• Over 1000 women cancer patients from marginalized communities will be treated annually through gynecology facility support

• Over 200 saplings were planted as part of the sustainability "Cignitree" green initiative

Outlook

Cigniti Technologies is committed to achieving its ambitions of scaling up and achieving multi-fold growth. In pursuit of this vision, we have recently made a strategic appointment to our leadership team. Dr. Srinivas Kandula, the ex-Chairman, and CEO of Capgemini India, has joined Cigniti as its Executive Director on the Board. Dr. Kandulas appointment brings a wealth of experience and expertise that will help us navigate our ongoing transformational journey into the digital orbit, which is at the core of any business today. We are confident that Dr. Kandulas experience will help further accelerate our growth and strengthen our already formidable trajectory.

Last year, with a strategic and complimentary capability-led acquisition of Roundsqr, we were able to deepen our digital engineering capabilities. This shift in our focus towards digital engineering services has opened new opportunities for potentially multi-year engagement with our clients.

In the upcoming year, we are placing a significant emphasis on proactive Quality Engineering (QE), Data Engineering, Data & Insights, and Digital Engineering Services (DES). Our objective is to focus on existing accounts and promote up-selling and cross-selling opportunities. We firmly believe that strengthening our strategic partnerships will play a pivotal role in achieving our growth objectives. With our partners, we plan to co-innovate to leverage untapped potential and drive revenue growth.

While the global outlook for BFSI and Retail sectors is somewhat uncertain, we continue to focus on other sectors and anticipate growth in the travel and hospitality industry. Our revenue is growing at a steady pace, and we are targeting a 25% increase in revenue from Digital Engineering Services in the coming year. We aim to maintain our competitive edge by investing in training and development programs for our employees and implementing cutting-edge technologies in our service offerings. By doing so, we are confident that we will continue to deliver exceptional value to our clients and maintain our position as a leader in digital assurance and engineering services.

Additionally, we are investing in upskilling our workforce to stay ahead of the rapidly evolving technology landscape and be better equipped to deliver cutting- edge solutions to our clients. We have also introduced new training programs to foster a culture of innovation and collaboration within the organization.

Moreover, we have expanded our global footprint and established new delivery centers in strategic locations, enabling us to provide our clients with cost-effective solutions while maintaining our high quality.

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. We remain committed to delivering exceptional value to our stakeholders and strive to be the partner of choice for digital transformation initiatives.

Risks and Concerns

The ongoing economic recession has led to uncertainties across markets, while the U.S. continues to contribute a major share of Cignitis revenue. Cigniti is focusing on steadily expanding across geographies such as Europe & Asia Pacific and implementing strategies to enhance revenues from existing geographies. In addition to the U.S., Cigniti has offices in the UK, UAE, the Czech Republic, Singapore, South Africa, and Australia, which can help us diversify our revenue sources and weather potential market downturns. However, given the current economic climate, we need to remain vigilant and adaptive in our approach to continue adding new logos and deepening our client relationships across all geographies.

Internal Controls

The Company has framed satisfactory internal controls and governance within the company as detailed elsewhere in this annual report.

Opportunities & Threats

As mentioned in the Chairmans message, CEOs Review, and in further discussions made in the Management Discussion and Analysis section (md&a), there is a huge growth potential and opportunity for the company in the Digital Assurance and Digital Engineering business market. The company looks forward to technologically advanced innovations for mitigating its business threats. The company consistently invests in future technologies along with getting accredited by the leading industry technology analysts.

Review of Financial Performance Revenue

Revenue for the current year was at Rs. 69,664 lakhs as against Rs. 45,552 lakhs in the previous year, increased by 53%.

EBITDA

The EBITDA for the year stood at Rs. 14,527 lakhs as against Rs. 5,650 lakhs in the previous year, increased by 157%.

Earnings Per Share

The EPS (Basic ) of the Company stood at Rs. 37.06 for the current year as against Rs. 14 in the previous year, increased by 165%.

Profit After Tax

The Company has reported Profit After Tax (PAT ) of RS. 10,172 lakhs for the current year as against Rs. 3,926 lakhs in the previous year, increased by 159%.

Ratio analysis and its elements

Ratio	Numerator	Denominator	March 31, 2023	March 31, 2022	% change	Reason for variance
Current ratio	Current assets	Current liabilities	3.72	4.35	-14%
Debt- Equity Ratio	Total debt*	Shareholders equity	0.11	0.14	-17%
Debt service coverage ratio	Earnings for debt service = Net profit after taxes + Non-cash operating expenses + Finance cost	Debt service = Interest & Lease Payments + Principal repayments	11.76	6.79	73%	Note (a)
Return on equity ratio	Net profits after taxes	Average shareholders equity	25%	11%	132%	Note (a)
Trade receivable turnover ratio	Net credit sales = Gross credit sales - sales return	Average trade receivable	7.46	5.24	42%	Note (b)
Trade payable turnover ratio	Other expenses + Employee benefit expense + Hired contract cost	Average trade payables	34.12	34.61	-1%
Net capital turnover ratio	Net sales = Total sales - sales return	Working capital = Current assets - Current liabilities	2.30	1.64	40%	Note (c)
Net profit ratio	Net profit after taxes	Net sales = Total sales - sales return	15%	9%	69%	Note (a)
Return on capital employed	Earnings before interest and taxes	Capital Employed = Tangible Net Worth + Total debt	29%	13%	119%	Note (a)
Return on investment#	Finance income	Time weighted average investment	4%	7%	-42%	Note (d)

*Debt includes lease liabilities.

# Mutual funds, ETFs, bonds and debentures are considered for the purpose of computing return on investments. Explanations given where the change in the ratio is more than 25% as compared to the preceding year.

Notes:

a) Change in ratio is due to increase in net profit on account of increase in revenue compared to previous year.

b) Change in ratio is due to revenue growth and improvement in collections from customers.

c) Change in ratio is due to revenue growth along with higher efficiency on working capital improvements.

d) Change in ratio is due to decrease in return on investments.