In Conversation with, Venkatraman Narayanan, Managing Director and CFO, Happiest Minds Technologies Ltd.

In Conversation with, Venkatraman Narayanan, Managing Director and CFO, Happiest Minds Technologies Ltd.

The company has achieved EBITDA margins of more than 25 per cent for the tenth successive quarter. Which is the key strength that the company possesses in achieving such strong margin numbers?

One of the key pillars of the company’s vision is ‘growth with profitability’. If you consider the metric of ‘growth + profitability’ as a measure, I am happy to state that we lead on this one in comparison to almost all competitors. While talking about margins it’s important to first start with our guidance which has been EBIDTA between 22-24 per cent on a sustainable basis. The actual margins have been higher, and we have continued to pleasantly surprise on this front. Margins in the IT business is function of multiple variables and the inter-relationship between this has only become a lot complex over the years.

Some of the key variables being billing rates, utilisation of resources, revenue split by onsite and offshore, geography, vertical, foreign currency, contract structures, people cost, overheads, interest and the like. Work from home during the pandemic tested the outcome on some of these costs or variables, as for example, the need for travel, onsite presence, etc. Benefits on this count did help improve margins for a couple of quarters and did help our EBIDTA to go over 27 per cent in a couple of quarters. However, now with work slowly returning to normal and happening from office we are seeing some of these benefits retract.

As such, we are now moving towards the above-mentioned sustainable margin levels. Coming to our margin levels themselves, yes, we have been able to post a good profile thanks primarily to the nature of work we do – 100 per cent digital and the rates customers are willing to pay for outcomes. Repeat business, growth within existing customers and scale help manage overheads and pursuit costs. It is all this and a favourable exchange rate scenario which has helped us post better-than-expected margins over the past quarters.


Can you brief us regarding the strategies you are planning to adopt for keeping a check on the attrition numbers and ensuring that they trend downwards?

I believe that employee retention levels have been affected by the sequence of virtual recruitment, virtual on-boarding followed by virtual work. People create bonds at work. Working with and amongst people only help strengthen these. An analysis of our attrition over the last year showed that attrition was highest amongst those who went through this ‘virtual’ cycle. We have over the years built and continue to build Happiest Minds as a ‘great place to work’

People must experience this to bond and associate with the company, work, culture and related aspects. We are currently engaged in a process of bringing people back to work and this I believe is a step in the right direction to engage and retain people. Attrition is also a function of the market demand for qualified, experienced IT professionals by tapping into their growth aspirations. While we hire very good and qualified professionals, we are addressing their growth aspirations through training, re-skilling, allocation of challenging projects, job rotation, etc


Can you elaborate regarding the use of ₹ 1,400 crore capital the company has proposed to raise for funding its inorganic growth aspirations?


We have taken an enabling resolution from the shareholders of the company to raise additional capital of ‘up to’ ₹ 1,400 crore. The final amount, timing of raise and the mode of raise will be decided by the Board of Directors with appropriate approvals. As you may be aware, we have articulated a ten-year vision for the company i.e. to reach a billion dollars in revenues by 2031. While we have displayed strong organic growth over the years and have that as a key differentiator, we do realise that in reaching the above-mentioned goal we will need to add to our capabilities through inorganic means, essentially buy versus build.

The corporate development team is consistently looking at possibilities around this and while we do have cash on the books, we will need additional capital to fund such overtures. We have set out our aspirations for inorganic growth quite clearly and we are looking for assets which will add newer technology capabilities and become profitable. Good customers, vertical focus and focus on the US and Europe as customer geographies are add-ons that would definitely work in favour.


Since FY20, the company has been seeing an attractive rise in free cash flow (FCF) conversion at a CAGR of 60.6 per cent. Which is the main factor contributing towards the same?

The company has been following an asset-light model in pursuit of its business growth. Essentially, a substantial part of our EBIDTA falls into our balance-sheet as free cash. We have also been very effectively using working capital facilities offered by banks to address our growing needs around the same. We have also not hesitated to fund any long-term asset acquisition, like the facility that we recently purchased, using longer maturity or term borrowings. In essence, we have been focused on capital and cash allocation with metrics like return on capital employed on a continuous basis.

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1 comments on article "In Conversation with, Venkatraman Narayanan, Managing Director and CFO, Happiest Minds Technologies Ltd."

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N.Krishna Anand

Excellent article. Mr Venkatraman Narayanan has really articulated the company stand and one gets a feeling that the company will achieve its 10 year goal in a swift manner. Moreover with a visionary like Ashok Sooraj at the helm of affairs with Mr Venkatraman and Me Anantaraju with him, Happiest Minds is sure to keep everyone Happy… Good going. Keep it up

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