HAPPSTMNDS - Happiest Minds Technologies Limited Share Price

Happiest Minds Technologies management has outlined a positive outlook, highlighting a constant currency growth of 25.6% for FY '25 and indicating an expectation of sustained double-digit organic growth through FY '26 and FY '27, driven by strategic initiatives. The Chairman, Mr. Ashok Soota, noted transformational changes, including leadership restructuring and the establishment of new industry groups, emphasizing improvements in margins and operational efficiency.

Key forward-looking points include:

1. Growth Projections: The company anticipates "healthy organic growth" over the next three years and commits to maintaining industry-leading margins.

2. Segment Performance: Product Digital Engineering Services (PDES) marked a growth rate of 27.9%, with contributions from sectors such as BFSI and Healthcare. Notably, four new customers joined the US $5 million to US $10 million cohort.

3. Generative AI Focus: An independent business unit for Generative AI has been established, anticipated to drive transformation and revenue. Sridhar Mantha, heading this unit, confirmed 35 projects in progress, bolstering the company's innovation profile.

4. Client Acquisition Strategy: The company aims to expand key accounts under the "Hipo Strategy," targeting to increase large accounts to $20 million and securing more $5-$10 million clients through dedicated client partners.

5. Investment in Technology: A total investment of approximately Rs.40 crores in Generative AI and new sales initiatives is relevant, with the aim of enhancing market capabilities and maintaining growth momentum.

6. Healthcare Product Launch: The anticipated healthcare product, leveraging bioinformatics, is set to launch by Q1 FY '27, projected to be cash positive in its first year.

7. Financial Health: Achieving a revenue threshold of Rs.244 million and maintaining strong EBITDA margins around 21"“22%, with projections for continued profitability.

Overall, management expresses confidence in the resilience and growth potential of Happiest Minds, backed by strategic acquisitions and a focus on high-growth sectors and emerging technologies.

1. Question: "When you look at the performance, it is on the lower side as compared to our peers in mid-cap and small-cap category. Can you throw some light on why we think there would be headwinds in terms of growth?"

Answer: While we recorded a Q-o-Q growth of 1.1% and a Y-o-Y growth of 26%, we did face the impact of a customer reneging on payment obligations, which affected our overall performance. Despite this, our quarterly performance still reflects strong underlying growth trends.

2. Question: "The EduTech segment is going through challenges. What is your strategy in this area moving forward?"

Answer: Our strategy focuses on expanding in the higher education sector while also pivoting towards workforce development. We're aware of the challenges higher education faces but are engaged in discussions with potential clients to enhance our offerings in workforce development, which is gaining traction.

3. Question: "The BFSI vertical saw significant growth. How did the Arttha Banking platform contribute to this?"

Answer: Arttha contributed notably due to seasonal revenue spikes observed quarterly, benefiting from our recent acquisitions. It plays a vital role in our BFSI segment, assisting in securing new clients in the Middle East and driving overall revenue growth.

4. Question: "What are the growth strategies for Healthcare and BFSI?"

Answer: We intend to focus on integrating data-driven insights and AI technologies, especially in biopharma and medical devices within healthcare. For BFSI, we aim to leverage the Arttha platform and enhance customer experiences through modernized solutions, especially for legacy systems.

5. Question: "What would be the amount of capex you would be investing for the bioinformatics product in FY '26?"

Answer: We are currently in the exploratory phase regarding our capex needs for the bioinformatics product. The business plan, once finalized, will detail our capex requirements, but I expect to keep it cash positive in the first year post-launch.

6. Question: "The IMSS vertical saw a decline in margins. What contributed to this decline?"

Answer: The decline is primarily attributed to our recent acquisition of a Middle East business, which operates at lower margins due to its onsite-centric structure. This implementation phase led to a noticeable impact on the overall segment margins.

7. Question: "How many projects are you managing in the Generative AI space?"

Answer: Currently, we are engaged in 35 distinct generative AI projects, showcasing significant traction. We're developing solutions that harness AI capabilities to optimize data interaction and enhance client operations significantly.

8. Question: "Given the slower growth in Generative AI compared to larger peers, how do you plan to pivot toward this fast-growing segment?"

Answer: We recognize the need to enhance our generative AI capabilities. The revenue from generative AI will grow, driven by our strategy of building dedicated teams and focusing on extensive Proof-of-Concepts, complemented by strong market demand for our innovative solutions.

9. Question: "What are the key operational metrics and how do you model amortization for acquisitions?"

Answer: We typically model amortization for intangible assets over 5-7 years. Moving forward, we anticipate amortization expenses to be around Rs.49-50 crores next year. These figures correspond to our acquisitions and are necessary for reflecting the true business value.

10. Question: "What kind of pricing structure do you generally use for projects?"

Answer: Most projects are fixed-price, allowing us premium pricing due to our differentiated offerings. Our engagements often begin with fixed pricing but are gradually transitioning to more flexible models as we refine deliverables and collaborate closely with customers.