SQS India BFSI Limited


About the Company

SQS India BFSI Limited (“SQS BFSI” or “the Company”), incorporated on June 8, 1998 as a private limited Company was converted into a public limited Company with effect from August 19, 2008. The Company made its Initial Public Offering (IPO) of its Equity Shares on September 24, 2009 (issue open date) and shares under IPO were allotted on October 14, 2009. The Company’s shares are listed in National Stock Exchange and Bombay Stock Exchange with effect from October 26, 2009.  SQS India BFSI Limited is a subsidiary of SQS Software Quality Systems AG since April 2014.  The Company is an India based software service provider primarily delivering software validation and verification services to the banking and financial services industry worldwide. The Company has invested in five wholly owned subsidiaries in Singapore, USA, Germany, UK and UAE for market development and service delivery in the respective regions. The German Subsidiary is in the process of being wound up.

The company is providing software testing services. All its clients operate in the banking, financial services and insurance sector, yet each of them have individual needs. To cater to the very distinct needs of its customers, the company has configured its comprehensive range of service capabilities in the area of testing and business requirements assurance. These include functional testing, performance testing, test automation and Requirements Documentation services.

  • User Acceptance Testing
  • Integrated System Testing
  • Test Automation
  • Business as usual testing
  • Testing Centre of Excellence
  • Business Requirements Audit
  • Business User Support

Shareholding Pattern

Shareholding 600X.jpg
Shareholding Table 600X.jpg

Key Milestones of the Company

Below figure enlists the key milestones achieved by SQS India BFSI are as follows:

Key Milsstones - 600X.jpg

Promoters and Directors Overview

Promoter Table - 600X.jpg

Industry Overview

  • The share of STS (Software Testing Services) is projected to improve from 30% in 2012 to 48% by the end of 2018. The outsourced testing services to India are expected to grow at a CAGR of 24% over the same period.
  • Growth of STS is expected to come from Financial services, retail & logistics, Energy & utilities and healthcare segments
  • According to Nelson Hall, delivery of STS services from India is estimated to reach 67% of total STS spending by 2018
  • As per the world quality report, the average spending on software testing as a percentage of the total IT spending is around 20-24%
Industry - 600X.jpg

Business Overview

  • SQS India is a specialized software testing company with 100% focus on financial services and is more than 14 years in the business. In financial services, it has presence in banking, cards & payments, insurance, treasury & capital markets.
  • The company provides independent advice and testing solutions to clients and gradually moving towards more managed services and specialist consulting which have higher margins.
  • SQS AG acquired 75% stake in VeriSoft in 2008. At that time, the employee base and revenues of Verisoft were ~100 and EUR 1.2 MN respectively while its PBT was reported at Euro 0.1 MN. Now the employee size of Verisoft has increased to ~900 while in 2014, it reported earnings of Euro1.98 MN.
  • VeriSoft, which is now SQS India Infosystems, is focused on other fields outside financial services. Verisoft operates in the field of software testing in the manufacturing, telecommunication, retail and logistics sector, while Thinksoft will continue to be a sole partner of SQS AG when it comes to delivering financial services and insurance out of India. So there is a clear distinction between the operations of both companies.
  • Banking continues to be the strongest practice and showed consistent growth, up 27% to $18.4m compared to the previous year’s $14.6 MN. The insurance segment grew by 75% to $1.54 MN.
  • Contribution of Top 5 and top 10 clients in overall revenues of the company in FY15 was 50.2% and 67.2% respectively.
  • As per Nelson Hall report, Financial Services, Retail, telecom and media are major contributors to STS business. The total spending of these segments is ~66% of overall spending of STS.
Business OVerview - 600X.jpg

Growth across Key Geography

APAC [Cont. 38.5% of Rev] went‐up by ~5.5% Q/Q. and USA [Cont. 10.2% of Rev] witnessed strong growth of 5.1% Q/Q which was partially offset by Europe [Cont.51.3% of Rev] went‐down by 4.6% Q/Q. During the quarter, the company’s domestic business grew by ~13.4% Q/Q; partially offset by 1.4% Q/Q decline in the international business (Contribution| 89%). Active clients during the quarter were 60 [v/s 56 active clients in Q3FY17]. Company has added 7 clients during this quarter which was 6 clients sequentially. During this quarter, company has 12 clients, up by 2 clients (US$1 to 6mn: Clients category).  

Key Segments Delivered Growth

Revenue from Banking (Cont. 52.3% of Rev) segment witnessed a material uptick of 10.1% Q/Q along with a sharp uptick in insurance business up~16.2% Q/Q (Cont. 14.3% of Rev). This was partially offset by de‐growth in Capital Market & Treasury (Cont. 5.3% of Rev | down 25% Q/Q), and Cards & Payments (Cont. 28% of Rev | down 15.4% Q/Q).  Employee count during the quarter was 874 which was 925 in Q2FY17. DSO for the quarter was 56 days (v/s 63 days in Q2FY17)

Geographic Distribution

By geography, the company focus continues to be on the US and Europe. In FY15, geographically, 46% of revenues came from Europe, 32% from IMEA and Australia Regions and 22% from North America. SQS AG has ~75% client from non-English speaking countries and ~25% clients from English speaking countries. The company has recently trained more than 50 employees for German speaking and over 20 already have level A1 language certification in anticipation of starting offshoring requirements from Germany, Austria and Switzerland.

According to Nelson Hall 2014 report, US is the largest market of $7,375 MN over for software testing over the total market of

$15,675MN. SQS AG was having very less presence in US and mainly into BFSI, so post acquisition of Thinksoft in Nov 2013; they have entered US software testing market in a big way. Management is very keen to focus its presence in US for which they have recently acquired two US based consulting companies with strong clientele across various verticals. Acquired Galmont for US$ 22 MN which is a leading software testing consultancy in the Mid-west region of the US, with a presence in Chicago, Dallas, New York and Kentucky with revenue of US$ 17 MN in 2014 and PBT of US$ 1.1 MN. SQS also acquired Trissential for US$ 30.7 MN which is a leading IT project, programmer and portfolio management consultancy in the Mid-West region of the US with a presence in Minneapolis, Milwaukee and Chicago. Going ahead, SQS India BFSI may garner maximum portion of parent’s US BFSI revenue for its offshore delivery model and due to its deep domain expertise.

Geographic- 600X.jpg

Key Risks and Opportunities

Key Risks

  • Foreign exchange rate fluctuations: Exchange rate of the Rupee vis-à-vis the US Dollar and the other currencies could affect its ability to compete, also results in fluctuation in operating margins.
  • Increasing competition: SQS India BFSI is an exclusive software testing company. However, there is a strong competition from other big players in the market.
  • Uncertainties in economic, business and geo-political conditions: Since the company operates in geographies like US and Europe mainly, so any economic downturn in these geographies might impact the company’s growth.
  • Financial Services domain Risk: SQS India BFSI revenue represents completely from BFSI segment, which can affect the business when financial market declines.


  • Trends in the market can be noticed under which digitalization of business model, security and compliance of IT systems are a main focus of the companies. Due to complexity of such requirements there is considerable potential that orders for quality assurance will be placed at multinational companies like SQS Groups especially in comparison with smaller competitors and may initiate an extra increase in sales
  • Due to publicity of IT break-down resulting from software errors reported in media, potential customer could invest more in quality assurance to avoid further damages and costs. This could help to increase sales in this business segment especially for the market leader like SQS
  • More and more customer require reduced prices for standardized services which can be answered by SQS by providing blended onshore and offshore solutions as well as increasingly test automation while still providing them with industry leading engineers to manage the testing requirements on-site

Competitive Advantages

  • Expertise in Digitalization of Business Model: Due to its international exposure and legacy in the current industry of providing best solutions, it will be first choice of companies to setup their IT infrastructure and hence SQS will be able to leverage its expertise in Digitalization of Business Model
  • Size of operation of organization: Compared to its competitors that are small in size and local in terms of exposure SQS has benefit of Economies of Scale and international exposure leading to better standardized service
  • Ability to provide standard service at cheaper price: Due to international exposure and economies of scale SQS is able to provide standard service at cheaper rate leading to a win-win situation for all
  • Tailor made solution for customers: It provides onshore as well as off shore solutions and is able to cater to large variety of problems thus making it one stop solution leading to better positioning

Financial Summary

Financial Pl- 800X.jpg
Financial BS- 800X.jpg
Financial CF- 800X.jpg
Financial Ratios- 800X.jpg
Financial Charts- 600X.jpg