Happiest Minds sees strong topline, weak bottomline in Q4; eyes double-digit growth in FY26

What were some key highlights during the quarter?

Venkatraman: We had decent growth but took a small knock on the profitability for the quarter. The primary reason is that we had to take a knock of almost ₹12.5 crores for a bad debt that came and hit us this quarter. This was a customer for whom we had ramped up to $1.5 million in revenues in Q3. But because of certain problems with their end customers, US government-supported institutions, they stopped funding. We understand this happened under the new dispensation. Since they couldn’t make payments, we stopped work in January, but what we had built in Q3, we wrote, so it had an impact. But if you adjust for that in terms of profitability, we are close to last year; similar at the EBITDA level. Year over year, our EBITDA has grown, which shows that the revenue growth has come with profitability growth. This increase is after the investment of about ₹40 crore we made in GBS services early this year, and the new sales team we have been putting in place. There is also noise from acquisition costs, non-cash charges, goodwill impairment, and earn-out payments. In PAT, we would have been higher than last year, but those are investments we are making for the longer term and business health. Effectively, the top line has grown both q-o-q and y-o-y. We integrated the companies we acquired early last year, and they are beginning to pull their weight, helping us with growth. We continue to build and invest in our platform, which is showing decent growth and profitability. Last fiscal year was a difficult year. Next year, we are looking at double-digit growth and are holding on to the 20-22 per cent EBITDA guidance from last year. We’ll try to improve in FY26.

What are some positive factors supporting your growth?

Joseph: The first one is in the GenAI space. We recognised the potential of this area and formed a separate business unit. This year, we are seeing signs of good growth. We also see green shoots in the BFS segment, along with a few of our other brethren. Our quarter-on-quarter growth is impressive. We have several new opportunities in both the banking and insurance spaces, some of which we are implementing or executing. The Arttha Banking Platform gives us a good direct source of revenue and a wedge into some of the accounts, allowing us to differentiate and show a deeper capability. The third area is healthcare, where some focus is on data-driven patient care, data-driven drug discovery, how to use data and customise the commercialisation process, and bioinformatics. From a geography perspective, our revenues in the Middle East have gone up, and we acquired a few customers during the quarter in the banking space. We have critical mass there, and it should continue growing. In India, despite a drop in this quarter, we exhibited growth and expect it to continue. This year, India’s growth will be higher than Europe or the USA because a lot is happening with GCCs coming in.

With the Middle East gaining traction, are you shifting toward a more balanced revenue mix instead of having the US dominate your earnings?

Joseph: At the end of the day, when half the IT spend either originates or happens in the US, you will have to focus on it and get as much growth as possible. Having said that, in our geowise revenue split, between FY23 and FY25, and between quarters, even though we are growing as a company, the share of the US has been dropping. For instance, in FY24, we were at 70.7 per cent, and down to 64.6 per cent in FY25. In Q4, it’s even lower at 62 per cent. The acquisitions had a larger share of revenues outside of the US, like in Africa, in the case of Pure Software. As a result, there’s a diversification of revenue. We expect that in FY26, the US would be between 61 per cent to 63 per cent, which is a good number. May be we will push the other geos to grow faster, with which the acquisitions and some implemented strategies are helping.

BFSI appears to be leading the way for the IT industry. What sets their approach apart?

Joseph: It’s different for banking and insurance, but a common element is the data and analytics space. There is continued investment and more automation, whether it’s GenAI or more of digital process automation, driven by tools from companies like APN and ServiceNow. Another trend is that many have legacy platforms, whether a Temenos or a Ducré for insurance. The expectation from the customers of these companies is a more digital interface. Therefore, some are having to spend on putting this veneer over the existing product, driving their core processes. In the insurance space, customers are looking at customising their CRM because the available CRM does not allow flexibility in some of the processes and how they interact with customers. So they’re building their own CRM. There is an increasing push to develop more of their workflows in a customised manner.

What are some major shifts or changes you aim to bring in your new role as CEO?

Joseph: Verticalisation, creating a GenAI Business Unit, and a separate NN sales team, which was implemented only in the middle of FY25. Many opportunities and closures will be generated by this team. A priority is to ensure momentum in the right direction by providing the required support and investment. We invested ₹40 crore in these two areas in FY25 and expect them to start yielding results and provide the revenue uplift during the year. The other transformation is my elevation and the integration and creation of the new organisational structure, which is a process underway. The priority for this year will be to integrate the two companies we have acquired. The other three would be around GCCs, pursuing private equity companies and hyper accounts. In the IT services space, it is becoming imperative to have your own platform or solution and to add to the services portfolio. We are enhancing our Arrtha platform. The task force is working on how to take it to the Indian market, which needs a different set of customisation as opposed to the European and North American markets. We are also looking at healthcare as a service platform in the early stages of conceptualisation and are working through the business case and POCs.