Happiest Minds sees need for strategy alignment as customers turn cautious

Mid-cap IT services firm Happiest Minds Technologies, which reported revenue growth of 18.7 per cent at Rs 464 crore, said the macro environment continues to be uncertain and clients are more focused on short-term rather than long-term impact.

Joseph Anantharaju, executive vice-chairman, said, “Overall, customers will be careful about how they spend money. They are prioritising initiatives that will give them either a cost or revenue advantage in the near-to-medium term. I think we need to find out what those initiatives or priorities are and align accordingly with the customer. That's going to be key.”

For Happiest Minds, Q1 FY25 was one of the best in terms of growth since the company got listed in September 2020.

On the macro front, Anantharaju foresees an uptick in discretionary spend, going forward, in the year. But it said that a lot will depend on the geo-political scenario.

“Discretionary spending may increase. The extent of this spending, however, will vary, influenced by recent uncertainties in the Middle East and the upcoming elections in the US. How these events unfold will dictate the overall impact,” he added.

Happiest Minds released its quarterly results on Monday.

During Q1 FY25, net profit fell 12.5 per cent year-on-year (Y-o-Y) to Rs 51.03 crore compared to Rs 58.33 crore reported during the same period of the previous year. Sequentially, profit after tax (PAT) was down 29.1 per cent.

“Variation in profit before tax and PAT are primarily on account of non-recurring expenses in the current quarter versus a large exceptional write-back in the previous quarter, and increased amortisation and financing costs arising from acquisitions,” said Venkatraman Narayanan, managing director (MD) & chief financial officer (CFO), while explaining the decline in profits.

In May this year, Happiest Minds acquired 100 per cent stake in US-based digital product engineering firm Aureus Tech Systems for $8.5 million (around Rs 71 crore). A month before, it bought PureSoftware Technologies for $94.5 million (Rs 784 crore).

The company added 41 clients in the quarter, and its attrition rate stood at 13.5 per cent, up 0.5 per cent sequentially.

It is also investing hugely into its new GenAI unit, developing GenAI solutions. And, there is some impact of that in the numbers as well, said Narayanan.

Its GenAI business services unit contributed Rs 7.13 crore to the revenue during the quarter. The company is currently working on more than 15 proof of concepts (PoCs) and expects them to translate into large projects in the coming year.

“There's genuine interest that customers have in GenAI, where they correlate the technology use cases to productivity or cost-cutting opportunities. We hope that some of the PoCs that we are doing for customers will start converting into larger projects in the second half of the year or perhaps next year,” said Anantharaju.