#021 CGES Index: Under the Hood

Unveiling the Top 30 emerging Enterprise SaaS companies of the CGES Index

Let’s take a deep dive into how the CGES Index is built, how were the constituents selected and what is our thought process behind the Index

How is the CGES Index built ?

The CGES Index is built to track the real-time performance and investor sentiments for pure-play emerging Enterprise SaaS companies.

Unlike most public indices, whose constituents are selected mostly on market capitalization, the constituents of CGES Index are selected for an equitable representation across multiple business models, sectors and size of operations.

We categorize Enterprise SaaS models as Self-serve SaaS and Serviced SaaS, primarily depending upon the nature and complexity of the delivery of the SaaS solution (we will discuss more about these models in our forthcoming blogs! ). The Index aims to maintain a healthy ratio representing both the business models.

Infact, our SaaS Metrics are also reported explicitly for both the business models to truly capture the nuances of these models.

The Index covers all major sectors and segments of Enterprise SaaS companies - Core Operations Platform (Vertical SaaS), Process Automation, BI & Data Analytics, IT Infra Management & Cybersecurity, Sales & CRM and Support Function Platforms.

The Index has an inclusive market-cap representation across three categories: (1) Market cap < $10 bn, (2) Market cap < $ 100 bn and (3) Market cap > $100 bn.

Selection Criteria

In addition to ensuring the above representation criteria are met, our selection criteria is simple - Enterprise SaaS business ! Only companies that satisfy the below conditions are considered for the Index :

  1. At least 80% of the annual revenue is generated from sale of software product(s),

  2. At least 80% of the annual revenue is generated from Enterprise Users and

  3. At least 80% of the annual revenue is recurring in nature

Basis above, we excluded some of the most popular tech giants like Apple, Microsoft, Google, Facebook, Amazon, Netflix, etc. that could not satisfy one or more of the above condition to qualify as pure-play Enterprise SaaS company.

Check out more details in our video here.

The Index constituents are reviewed every quarter to ensure optimal representation at all times. The review considers the changing revenue mix of companies – that may qualify or disqualify them as “Enterprise SaaS” and account for corporate actions like mergers, new listing, and delisting that can affect the Index constitution.

The Index Constituents

Here is the list of the Top 30 Enterprise SaaS companies that are part of the CGES Index. These companies represent the universe of Enterprise SaaS across business model - Self-serve & Serviced SaaS, across sectors and scale of operations.

How exactly is the CGES Index calculated ?

The CGES Index is calculated using a modified market capitalization-weighted method as opposed to a price-weighted method used by DJIA or a free-float weighted method used by NIFTY.

We have built a proprietary formula that assigns a “multiplier” for every stock based on various business parameters (that’s our secret sauce !) which when multiplied with its market-cap & divided by the total market cap of the Index, gives the weightage of every stock in the Index.

As the stock prices move during market hours the Index’s real-time value is calculated and reported live on our website here.

The Index calculation formula ensures that no individual stock weighs more than 20% and Top 5 stocks together do not weigh more than 50%. Over time, we will endeavor to reduce the weightage of Top 5 companies to under 40% without losing the essence of the Index.

Learn more about: CSVP Fund | CGES Index | Enterprise SaaS

~ Vatsal Bavishi