Focus on client mining, building depth in verticals: Happiest Minds heads

Q&A with Joseph Anantharaju, Executive Chairman, & Venkataraman Narayanan, MD & CFO, Happiest Minds Technologies

IT services firm Happiest Minds Technologies announced its financials for the first time after its IPO in September, posting a significant improvement in profits and profitability. While consolidated net profit expanded 27.8 per cent through on a smaller base, to Rs 34.08 crore, revenues grew 4.4 per cent on YoY basis at Rs 182.84 crore. Operating margin at 26.3 per cent, an improvement of 70 basis points was almost at par with the best in the sector. In an interview with Bibhu Ranjan Mishra, the company’s Executive Vice Chairman Joseph Anantharaju, and Managing Director and CFO, Venkatraman Narayanan talk about how the firm is focusing on niche categories and preparing a large base for future growth. Edited excerpts:

Now that Q2 is over and we are in the middle of Q3, what does the business environment look like?

Overall, business sentiment is at a very high level. We started seeing an uptick in June which continued to Q2 as customers started looking at the new normal and began taking new initiatives which resulted in increased spend. In terms of the verticals in which we are seeing more traction, these are primarily the ones where the Covid-19 situation and the fallout has led to increased demand. The first one is edutech which is getting a boost with customers continuing to spend on enhancing and supporting online learning. The high-tech space is also looking up. In retail, more spends and focus are going to e-commerce.

How do you look at enhancing client mining as the contribution from top clients is insignificant now?

We have a long tail (of customers) for sure, but the customers outside of the top-20 are the ones who can grow bigger in the future. Many of these, who are smaller, are the ones where we have worked in newer areas like blockchain or drone. The initial deals may be small in size, but can grow much faster.

How easy is it for a company like yours to compete with the biggies and win new clients?

As far as clients are concerned, some of them are smaller companies that could be early-stage or venture-funded ones. We also work with quite a few mid-size companies for whom we are the only partner or the second partner, and there are many for whom we do end-to-end work. But large customers tend to work with multiple customers for different types of specific works. We work with them for anything to do with digital needs, cloud and security.

How does working with start-up and early phase companies help you?

We have customers who are in the startup phase with just core team trying to build the technology product the success of which will determine their future. There are quite a few of them with whom we have become the only engineering team. They may just have a CTO or VP of Engineering at that time. But once they scale up, then they start building their own team out and you also grow with them depending on the size.

Q3 is traditionally How does the December quarter look for you?

We are in the early part of November, but we have not seen any flag off (by the clients) so far. Some of them may take a little bit of pause in December, but nobody has come back and communicated that so far. In terms of opportunities and pipeline, October was a good month. So far, we have been able to sustain the business activity that we had in Q2.

How do you acquire scale, hence on? Would you reply on organic or inorganic means to do so?

Organically, we have laid a strong foundation with a deeper focus on technology. In order to get to the next level, we have to build depth in some of these verticals where we can really position ourselves as trusted advisors to the customers. We have also put in place account mining and account management plans to grow our existing accounts. We are also looking at areas in organic opportunities and as stated in our messaging during the time of IPO, we have set aside a fund for that. We are looking for digital companies which are profitable.