Happiest Minds reports 12.5% q-o-q revenue rise and PAT decline in Q2

Happiest Minds reported a profit after tax (PAT) of ₹49.51 crore, a decline of 3 per cent, in the second quarter of the current fiscal. Joseph Anantharaju, Executive Vice-Chairman and CEO-PDES, said the company’s recent acquisitions have allowed it to enter new markets, and double its growth in the APAC region.

The company’s revenue stood at ₹521.64 crore this quarter, a growth of 12.5per cent from Q1’s ₹463.82 croreand a YoY growth of 28.3 per cent from Q2FY24’s ₹406.62 crore. However, its PAT dipped to ₹49.51 crore, down from last quarter’s ₹51.03 crore and a 15.3 per cent YoY decline from Q2FY24’s ₹58.46 crore.

Venkatraman Narayanan, Managing Director and CFO, said, “In percentage to revenue terms, there has been a drop due to investments in GenAI and a new sales engine we have put in place. We have also given a single-digit pay hike to a large part of our employees effective July 1.”

He added that the GenAI investment for the first half of the fiscal was between $1 million and $2 million a quarter. The pay increase was about ₹13 crore.

Growth affected by acquisitions

“Revenue growth has been impacted by two acquisitions because they are now Happiest Minds companies. Growth shows that the integrated companies are not margin-dilutive or loss-making companies, and instead, similar to us in their margin profiles,” the CFO said.

Among the verticals, BFSI picked up, accounting for 22.5 per cent of the company’s revenues, an increase from last quarter’s 16.8 per cent and Q2FY24’s 10.3per cent. This was followed by Edutech, whose revenue share was 19.3 per cent, down from Q1’s 21.5per cent.

“A vertical where we are seeing higher proclivity for the new initiatives and where customers are doing more work is the BFSI space. Part of the uptick, apart from the PureSoftware and Aureus revenue consolidation is a reflection of new opportunities. With the interest rate cuts from the Feds and the overall business environment improving, we’re seeing more traction and that’s reflected in the growth in the BFSI segment,” said Joseph Anantharaju, Executive Vice Chairman and CEO.

While the US continues to be the largest market for the company, with 65.3 per cent of revenues coming from there, this quarter, the APAC region has grown to 5.6per centfrom Q1’s 2.4 per cent by revenue share, he added.

Anantharaju said, “In APAC, initially our presence was only in Australia and New Zealand, whilePureSoftware gets some business from Singapore. As we consolidated the company’s numbers in APAC revenues, there has been a significant jump. Both acquisitions have diversified our revenues to an extent. Both companies have a presence in Africa, where we didn’t have a presence earlier. We can now target a continent where the economic growth is higher than in Europe and North America. At the same time, they need to digitie quickly, so it’s a good opportunity.”

The company had earlier said it would see revenue growth of 30-35 per cent this fiscal. “As the numbers stack up today, it is going to be a difficult journey since Q3 is going to be a difficult quarter because of furloughs and holidays. However, we are seeing activity in Q4 and possible upsides on the Arttha banking software platform revenues because those revenues tend to be lumpy. We have seen most closures happen in Q4,” Narayanan said . He added that 30per cent would be the growth target .

In Q4, revenue will pick up on the services side and the new sales engine will start bringing in business , added the CFO. The company will start seeing traction in the Gen AI space, from POCs to multi-year repeatable work.