Happiest Minds eyes 3-4 digital-led acquisitions in next few quarters

Technology firm targeting companies earning revenue in the range of $10-50 million for acquisition

Happiest Minds Technologies is setting sights on three-four digital acquisitions in the next few quarters with an eye to scale its business to the $1 billion revenue target by 2031.

The Ashok Soota-led company hopes to close two acquisitions by the end of this financial year.

“We have set a goal of achieving $1 billion by 2031, and our guidance of 25 per cent is based on that target. In our guidance of 25 per cent, we have not made a distinction between organic and inorganic growth. During the current financial year, we have been expecting to carry out significant acquisitions, which we have not closed so far. We will update our guidance target in October based on the mergers and acquisitions (M&As) progress,” said executive chairman Soota.

The Bengaluru-based company is focusing on specific criteria for its acquisitions.

“Firstly, we want to acquire a company in the digital space as it has to align with our philosophy of ‘born digital, born agile’.

Then, it has to be profitable with a strong growth trajectory. We are also looking at particular sub-segments or technologies like artificial intelligence (AI) and low-code no-code where we could have more critical mass or economies of scale. But that becomes a secondary aspect,” Joseph Anantharaju, executive vice-chairman of Happiest Minds, told Business Standard.

In terms of size, Happiest Minds is targeting companies with revenues ranging from $10 million to $50 million.

“Most importantly, the target should have a match in terms of people’s mindset and culture, as many acquisitions fail because of a mismatch here,” added Anantharaju.

The most recent acquisition by Happiest Minds was that of Madurai-based IT services firm Sri Mookambika Infosolutions (SMI) for Rs. 111 crore in January this year.

SMI is anticipated to bring deep domain capabilities that will add to Happiest Minds’ health care vertical strength and align with its product engineering services business unit.

The company reported a net profit of Rs. 58.33 crore for the first quarter ended June 2023. This is up 3.5 per cent year-on-year (YoY) and 1.2 per cent sequentially.

For the June quarter, the Bengaluru-based company’s revenues increased by 18.8 per cent YoY to Rs. 390.87 crore. On a sequential basis, revenue grew by 3.4 per cent.

The company added 18 new clients during the quarter, bringing the total to 243 as of June 30.

The attrition rate, on a trailing 12 month basis, reduced to 16.6 per cent from 19.8 per cent in the preceding three months. This is a trend observed across the industry.

Happiest Minds made a net addition of 131 employees during the June quarter, taking the total headcount to 5,048.

Last month, it raised capital to the tune of Rs. 500 crore through a qualified institutional placement (QIP) of equity shares.

After its successful initial public offering (IPO) in 2020, the fundraising in July marked the first ever equity capital raised by the company.