Happiest Minds Technologies Ltd Q4 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Vimal Gohil - Alchemy Capital Management Pvt. Ltd. - Analyst : Yes. Thank you for the opportunity, sir. And congratulations on an excellent quarter and very heartening to see the guidance. The first question is on guidance itself. If you could just highlight how much of this 25%, how much of that will come from inorganic initiatives, if at all. Because if I were to look at the ask rate, that comes very close to 8% every quarter. So I just wanted to get a sense on any inorganic acquisitions that have been built in. I have one more question after that. Thank you.

Question: Vimal Gohil - Alchemy Capital Management Pvt. Ltd. - Analyst : Right, understood, sir. Thank you so much for that. Sir, one question on this whole debate around -- and one of your closest peers in PAM on Friday highlighted the discretionary spends almost drying up with some of their clients and the industry. How do you look at that environment? Because your guidance clearly indicates that there is no dearth of work. So there are two very, very opposing views, and the market for cost takeout projects seems to be heating up. How are we positioned over there? Thank you.

Question: Vimal Gohil - Alchemy Capital Management Pvt. Ltd. - Analyst : Understood, sir. Thank you so much. All the very best. I'll come in the queue. Thanks.

Question: Mukul Garg - Motilal Oswal Financial Services Limited - Analyst : Thank you. Just a follow up to Vimal's question. When we are talking about the demand environment, you mentioned that there was a bit of a right shifting which happened this quarter. Any sense whether that is something which is more industry specific? And then also, in terms of the patent which you are seeing, are you seeing different kind of client behavior across industries? So it was a bit surprising to see your growth in hi-tech this quarter because that's one area where a lot of companies are piloting concerns. So if you just give some sense on how we should think about different industries moving forward. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2023 / 11:30AM, HAPP.NS - Q4 2023 Happiest Minds Technologies Ltd Earnings Call

Question: Mukul Garg - Motilal Oswal Financial Services Limited - Analyst : Good. And just a follow up to this, is it fair to imply, given your excellent guidance, that the visibility on the demand side continues to remain as strong as what you guys have been seeing for last two years? Again, the associate addition and the plan seems to indicate that the visibility is quite good, but I would love to hear some thoughts on how the demand visibility is out there.

Question: Mukul Garg - Motilal Oswal Financial Services Limited - Analyst : And my second question was on the sales investment side. There was a slight moderation this quarter. How should we think about the investment into SG&A for FY24, especially given the aim to deliver a 25% growth in a tough year? Are you still kind of penciling in a 22% to 24% operating margin, easing more from this year more because of the growth aspirations? Or is it something which will stay around current levels?

Question: Mukul Garg - Motilal Oswal Financial Services Limited - Analyst : Sure. Thank you so much. I will get back into the queue.

Question: Dipesh Mehta - Emkay Global Financial Services Ltd. - Analyst : Thanks for the opportunity. I just had two questions, data related. How much SMI acquisition has contributed in Q4? And, relatively, about how many employees get added because of the transaction?

Question: Dipesh Mehta - Emkay Global Financial Services Ltd. - Analyst : So when we adjust some equities in this quarter, organic number appears to be weak. Even on YoY basis, your revenue growth's likely to be slipping closer to double digit, around 10-odd percentage. So I just want to understand now if one look -- organic performance seems to be slowing down. Now, you are guiding for acceleration in organic revenue growth. So can you provide what is changing compared to, let's say, last couple of quarters?

Question: Dipesh Mehta - Emkay Global Financial Services Ltd. - Analyst : I understand. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2023 / 11:30AM, HAPP.NS - Q4 2023 Happiest Minds Technologies Ltd Earnings Call

Question: Dinesh Kudache - Technowell Web Solutions - Analyst : Congratulations, Happiest Minds team on a truly [aggressive fiscal result]. Your hardwork and dedication has led you to that (multiple speakers)

Question: Dinesh Kudache - Technowell Web Solutions - Analyst : Yeah, one second.

Question: Dinesh Kudache - Technowell Web Solutions - Analyst : Hello. Am I audible now?

Question: Dipesh Mehta - Emkay Global Financial Services Ltd. - Analyst : Hello.

Question: Dipesh Mehta - Emkay Global Financial Services Ltd. - Analyst : Hello. Am I audible now?

Question: Dinesh Kudache - Technowell Web Solutions - Analyst : (inaudible) Happiest Minds team on achieving greater Q4 results. This success is well deserved. Keep the excellent work (inaudible) going on. I have one little question about Happiest Minds' utilization percentage. In Q3 '23, it was 80.1%. Whereas in Q4 '23, it is now 74.6%. Can you please put some light on it? Thank you so much, sir.

Question: Dinesh Kudache - Technowell Web Solutions - Analyst : Okay. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 08, 2023 / 11:30AM, HAPP.NS - Q4 2023 Happiest Minds Technologies Ltd Earnings Call

Question: V.P. Rajesh - Banyan Capital Advisors LLP - Analyst : Thanks for the opportunity. My first question is more of a clarification. So when you are guiding for 25% revenue growth in fiscal year '24, should we just assume that that's going to be organic? And anything that comes on top from an acquisition or more of those, that will be on top of that?

Question: V.P. Rajesh - Banyan Capital Advisors LLP - Analyst : Okay. And then given the confidence you have around this guidance, are there any lumpy deals in your pipeline that is driving this guidance?

Question: V.P. Rajesh - Banyan Capital Advisors LLP - Analyst : That's helpful, but my question was slightly different. What I was trying to understand is that if there are a few large deals which are driving this growth guidance or this is like business as usual, lot of small and medium-sized deals in the pipeline, which is giving you the confidence? That is what I was trying to understand.

Question: V.P. Rajesh - Banyan Capital Advisors LLP - Analyst : Got it. And last question is on the margin. Now that the cost pressures seem to be coming down in the industry, so your guidance of 22% to 24%, are you doing any investment, that's how you have been concentrating on the guidance? Because if you are going to grow at 25%, one would expect that your margins will also expand.

Question: V.P. Rajesh - Banyan Capital Advisors LLP - Analyst : Understood. Thank you. That was helpful. That's all.

Question: Sumeet Jain - ICICI Securities Limited - Analyst : Yeah, hi. Thanks for taking my questions. I hope I'm audible.

Question: Sumeet Jain - ICICI Securities Limited - Analyst : Okay, great. So actually, first question is on your guidance. Can you quantify the size and the nature of the deal, what you have won which is giving you the confidence of a strong growth in 1Q? Because typically, whichever companies I've reported till now, all of them have been guiding for a significantly weak Q1 because of the banking crisis and the various other reasons we are seeing at a macro level. So can you quantify the nature of the deal, what you have won, in which area it is, and how it will impact which industry -- or which service line basically?

Question: Sumeet Jain - ICICI Securities Limited - Analyst : Right. Right, sir. So what --

Question: Sumeet Jain - ICICI Securities Limited - Analyst : Got it. And what risk do you see to this guidance if the macro situation deteriorates in US or Europe particularly? Do you think there will be any risk to this guidance going forward or probably in the second half? And also, how are you factoring in the growth during the quarter? Are you seeing a ramp up in the second half of the year? Because at least all your competitors who are more banking focused or maybe hi-tech focused are clearly guiding for a ramp up in the second half after a slowdown in the first half. So are you also factoring in any pickup in the second half? Or is it going to be a steady growth every quarter?

Question: Sumeet Jain - ICICI Securities Limited - Analyst : Got it. Thanks for addressing my question. My second question is around your M&A strategy. So can you elaborate on your M&A strategy? Will it be driven by scale or around capabilities or entering into a new geography? So can you please elaborate on that?

Question: Sumeet Jain - ICICI Securities Limited - Analyst : Got it. Thanks a lot for addressing my questions and all the best for future quarters.

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : Yeah. So, sir, you are giving a guidance of 25% in rupee terms. But last two to three years, we are almost doing 35% to 40% revenue growth. So are we being a little more conservative than necessary? That's one. Thanks.

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : Okay. Got it. So you're giving it in dollars. Okay. Sorry.

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : Yeah. But even rupee, we are growing almost like 38%, 39% last year.

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : So you feel that with the rupee-dollar equation being in our favor, we could actually continue with that kind of a situation?

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : Sir, and our capacity utilization of people is falling. So any trend that could be read into it or it has fallen?

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : Okay. So it's something which is a little out of --

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : And sir, how do we see the opportunity of EduTech playing out? Because a lot of these players may not be now having the funds from VC or PE funds to really fund their further projects. So will that still continue? Because that is a fairly big segment of our revenues. That is one. And secondly sir, we are getting projects from across the board. I mean, it's so many verticals. Where do you see the big traction coming from?

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : So since we are one of the fastest adapters to new technologies, how fast do you feel that we can adapt to ChatGPT to actually automize most of our software solution then, really, let go of a large part of our workforce or retain them?

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : So are we already looking at retraining people to use ChatGPT as an enhancer and really cut down on the hours that we take to complete any kind of a project?

Question: Faisal Hawa - H. G. Hawa & Co. - Analyst : Thank you very much, all, for showing answers. I really appreciate it.