Cigniti Technologies
Building Quality Software while Improving Time-to-Market

ETMarkets Management Talk | Margins may improve from Q3: Cigniti Tech CEO Srikanth Chakkilam

Monday, August 21, 2023

NEW DELHI: After reporting a decline in margins in the June quarter due to performance-based appraisals for FY24, Cigniti Technologies is hoping to be back on the growth path from Q3. “As we move forward, our strategic initiatives, like a better offshore-onshore mix and focus on long-term value creation, would pave the way for improved margins, potentially from Q3 onwards,” said Cigniti Technologies CEO Srikanth Chakkilam. Edited excerpts:

During the quarter, your revenue improved sequentially but margins declined. Do you see margins improving from Q3 onwards?

We have reported a sequential growth of about 3.4% on a quarter-on-quarter basis, which we believe to be a fair performance given the recent macroeconomic conditions. We have, however, observed a decline in margins during this current quarter due to the performance-based appraisals for FY24.

Nevertheless, during these challenging times, we are cautiously optimistic. Our capacity to adapt to the changes and maintain agility has been symbolic in our journey, and we intend to continue delivering the same. It is noteworthy that we refrain from offering fixed guidance, given the continuously evolving nature of the situation. Our primary focus shall remain to respond to the market dynamics with a defined approach while ensuring optimal outcomes for our stakeholders.

As we move forward, our strategic initiatives, like a better offshore-onshore mix and focus on long-term value creation, would pave the way for improved margins, potentially from Q3 onwards. Our team is meticulous & dedicated to capitalizing on opportunities, navigating obstacles, and charting the company's course toward sustainable growth.

Do you see signs of stress in the BFSI basket?

The BFSI sector contributes approximately 21% to our revenues. The sector experienced certain headwinds due to the economic conditions, and we hope it will stabilize from Q3. While we have witnessed some signs of stress in the BFSI basket, we believe it is vital to approach this assessment with a balanced perspective.

In Q1FY24, it's worth highlighting that we've won two significant logos – one of the top 4 USA banks and the other a leading Insurance company in the US.

Our strategy has been to remain proactive and responsive to the evolving landscape. We ensure to engage with our BFSI clients regularly to understand their specific challenges and requirements, aiming to provide tailored solutions, considering that the situation can vary across different sub-segments within BFSI.

Our long-standing relationships with clients in the BFSI sector and our continuous efforts to enhance our service offerings position us well to address their current needs. The expansion of our Digital Engineering Services (DES) offerings has bolstered our revenue stream, resulting in significant growth within our existing customer base.

As of now, retail and e-commerce are the biggest contributors to your revenue. How do see this mix changing in the next 3-4 years?

Retail and e-commerce constitute over 23% of our revenue, followed by BFSI at 21%. We anticipate potential shifts in this composition over the next 3-4 years. Our strategy revolves around diversifying our portfolio and expanding into emerging sectors such as technology services and digital solutions.

This strategic pivot aims to create a more balanced revenue mix and reduces dependence on any single segment. The impact of new digital technological advancements is transforming the retail customer experience, leading to substantial investments in this area. Consequently, retail remains one of our top revenue-generating verticals. While retail and e-commerce will continue to play a significant role, we envision a more equitable revenue distribution across various sectors in the coming years.

The recent positioning of Cigniti by leading analysts for Intelligent Automation services in Retail further solidifies our presence in the industry while expanding into other areas.

You signed six new deals during the quarter. How are things looking like for the rest of the financial year?

We have successfully secured six new deals during the quarter, which is a positive indicator of our competitive positioning and the value we provide to our clients. We remain cautiously optimistic as we look ahead to the rest of the financial year. The market conditions continue to evolve, and the deal landscape might be subject to fluctuations. However, our proactive approach to market dynamics, strong client relationships, and innovative solutions position us well to navigate potential challenges and seize opportunities. While we can't predict the future with absolute certainty, our strategic efforts and commitment to delivering excellence make us hopeful about the prospects for the remainder of the financial year. However, the total order book and the pipeline look healthy and promising.