‘Markets Slowly Turning, Pockets Of Growth Evident’

Happiest Minds Technologies witnessed a constant currency revenue growth of 0.8 per cent quarter-on-quarter (QoQ) and 9.4 per cent year-on-year (YoY) in Q3 FY24. Total income for the quarter amounted to Rs 434.17 crore, marking a 1.2 per cent QoQ growth and a 15.9 per cent YoY increase. The company achieved an EBITDA of Rs 105.19 crore, constituting 24.2 per cent of the total income, with a 0.4 per cent QoQ growth and an 8.2 per cent  YoY increase. The Profit After Tax (PAT) reached Rs 59.62 crore, showing a growth of 2 per cent QoQ and 3.6 per cent YoY.

BW Businessworld's Rohit Chintapali spoke with Joseph Anantharaju (Executive Vice Chairman at Happiest Minds Technologies) and Venkatraman N (MD & CFO at Happiest Minds Technologies) to delve into the demand environment and Happiest Minds' trajectory for the forthcoming quarters. Excerpts:

Growth was flat at 0.8 per cent for Happiest Minds in Q3 FY24. What is your reading of this quarter’s performance?

Venkatraman N: In Q3 FY24, despite facing challenges such as a short quarter, reduced working days, and holiday disruptions (which resulted in revenue reduction of USD 1.7-2 million), we achieved decent 0.8 per cent growth and EBITDA aligning with our targeted 22 per cent to 24 per cent. While we aimed for better top-line performance to approach the 12 per cent guidance for the year, our constant currency growth over the last nine months stands at 11.5 per cent. Bottom-line EBITDA, at 24.2 per cent, includes the impact of a second round of pay hikes (for 30 per cent of employees), lower billing days and tepid revenue growth. Noteworthy is our 15th consecutive quarter of maintaining margins ahead of the 22 per cent to 24 per cent guidance. 

What are your projections given the tough environment for the industry at large?

Venkatraman N: Our focus is on the present, specifically Q4, with the goal of achieving 12 per cent revenue growth while maintaining margins within the 22-24 per cent range, as previously communicated. Regarding M&A, though we experienced a delay, we have a robust pipeline and are in discussions with promising companies. Closure in M&A is inherently binary, but we remain cautiously optimistic. The current market perspective suggests a gradual turnaround with identifiable pockets of growth.

Where did you see the growth coming from across geographies and business verticals? 

Joseph Anantharaju: In terms of market outlook, India emerged as our best-performing geography in Q3, fueled by economic positivity and early-stage digitisation across industries. Europe holds potential for improvement, driven by necessary global competitiveness investments. ANZ, while a smaller market, maintains consistent spending. North America presents challenges due to conflicting macroeconomic signals and an upcoming election, leading to cautious customer budgeting.

Internally, our generative AI business unit, launched in October, has shown promising traction with 30 customer conversations, multiple POCs and consulting exercises. This momentum is expected to translate into larger implementations next year, with ongoing conversations. We have established a robust leadership structure and team, and we are investing in training our people extensively in the generative AI space. Additionally, we are verticalising our structure into industry groups with dedicated heads, aligning sales, delivery, and domain expertise for strategic growth.

Attrition and utilisation numbers have improved further this quarter. Are you happy or are you looking to get to a better place in both these categories? 

Joseph Anantharaju: In terms of attrition and utilisation, while there's improvement with utilisation reaching 75 per cent, we see potential for a further 2-3 per cent increase, barring excessive demand for skills not currently within our internal pool. Attrition, currently reported at 14.1 per cent, is deemed at a satisfactory level. We aim to bring it down to a range of 12 per cent to 15 per cent in the near to medium term.

Also Read: Happiest Minds Q3 FY24: PAT Rises 2% QoQ