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Mu Sigma, India’s First Profitable Unicorn: IPO Soon?

Posted on Wednesday, Jun 21st 2017

According to Nasscom, India’s analytics industry is estimated to be around $2 billion and is expected to grow ten-fold to $20 billion by 2025. Billion Dollar Unicorn Mu Sigma is the first among the Indian Unicorns to deliver consistent profits over the years.

Mu Sigma’s Offerings

Mu Sigma was founded in 2005 by Dhiraj Rajaram with the vision of helping organizations institutionalize decision-making using data analytics by providing analytical capabilities on a real-time basis. Prior to this, Dhiraj worked as a consultant with Booz Allen Hamilton and Pricewaterhouse Coopers in the US. While working as a consultant, he noticed that well-paying analytics positions in organizations remained open for more than six months. This gave him the idea to start Mu Sigma that could use the abundant analytical skills available in India. He started Mu Sigma by selling his Illinois home and putting in $200,000 from his savings.

Mu Sigma then developed an in-house training program called MuSigma University to train freshers in Bangalore in specialist skills across financial services, retail and consumer products, pharmaceuticals, technology, and telecom industries.

Mu Sigma signed on Microsoft as its first customer in 2005, and today the company offers its products to more than 150 Fortune 500 organizations in the areas of marketing, risk, and supply chain across 10 industry verticals. Its client list includes Wal-Mart, Dell, and Pfizer Inc. The majority of its 4,000 employees are based out of its headquarters in Bangalore, India, and its has a main delivery center for the US in Chicago. It also has offices in UK and Australia.

Mu Sigma was among the pioneers to offer outsourced high-end data analytics. But, unlike other India-based outsourcers, Mu Sigma does not rely on the low-hanging fruits of labor arbitrage. Instead, it is extremely process-driven and has developed a platform that provides solutions that encompass the process of Data Engineering, Data Sciences, and Decision Sciences. Mu Sigma defines Data Engineering as the stage of data acquisition, storage, processing, and workflow management; Data Sciences as the stage of applying advanced algorithms; and Decision Sciences as the stage where it provides complex, real-time decision support analytics.

Mu Sigma competes with outsourcing giants such as Cognizant, Tata Consultancy Services, Infosys, and Wipro as well as startups such as New Jersey-based Opera Solutions, LatentView Analytics, and Fractal Analytics.

Mu Sigma’s Financials

Mu Sigma has reported a 22% growth in net profits at Rs 462.9 crore ($70 million) on a revenue of Rs 809.5 crore ($125 million) for 2015-16. Mu Sigma had reported a profit of Rs 380 crore ($59 million) and revenue of Rs 684.2 crore ($106 million) in 2014-15. In April 2015, the company disclosed that it had annual sales of $250 million. It hit the $100 million revenue mark in 2012.

2016 was a tough year for Mu Sigma. Dhiraj split from his wife and then CEO Ambiga Subramanian in May 2016. She held multiple roles in Mu Sigma, including director of innovation, head of talent management and chief operating officer, before becoming the CEO in February 2016.

In October 2016, Dhiraj bought shares of his ex-wife to take a controlling stake of 51.6% and took over from her as the CEO. Both Dhiraj and Ambiga have signed a non-compete agreement. Ambiga will be a part of the Mu Sigma Board, but in a non-executive capacity.

In March 2016, a complaint was made in a Chicago court by Aon Corporation founder Patrick G Ryan who claimed that he was cheated out of hundreds of millions of dollars when Mu Sigma downplayed its own growth prospects in a ruse to buy back his 17.5% stake in the company in 2010 for $9.3 million. Ryan’s Walworth Investments had invested $1.5 million in 2006.

Mu Sigma was originally bootstrapped using services. It is venture funded so far with $213 million from investors including Accel Partners, Sequoia Capital, MasterCard, and General Atlantic. The firm was valued at $1.5 billion when it raised $45 million in February 2013 in a round led by MasterCard. The company has not raised money since 2013, but with estimated revenues in the range of $300-$400 million and solid profitability, Mu Sigma would currently be valued between $3-$4 billion. I imagine, an IPO filing is coming soon, once the internal turmoils are under control.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

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