Happiest Minds Technologies’ acquisitions of Pure Software and Macmillan Learning India will reduce the company’s operating margins to a range of 20-22% in FY25 from 24.6% reported in FY24.
The management said during a post-earnings press conference that both the acquisitions are cash accretive, profitable and synergistic. “It will take a while to catch up from an operating margin perspective but we are not seeing any dilution in the fundamental gross margin of the business,” the management said.
The IT services company acquired Pure Software for Rs 779 crore in April which will bolster the firm’s capabilities in the BFSI vertical as well as in healthcare and life sciences. Further, it is expected to enhance Happiest Minds’ footprint in the US, the UK, and India, along with establishing a near-shore presence in Mexico and offices in Singapore, Malaysia, and Africa.
The company also acquired Macmillan Learning India for Rs 4.5 crore in April to strengthen its educational technology and learning solutions.
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The management said the decline in margins in FY24 was primarily due to wage increases, including variable pay commitments, and the onboarding of campus joiners. “We on-boarded campus joiners as per our commitment and while there were slight upheavals, we did onboard everybody that we had made offers to,” it said.
The company posted an EBITDA margin of 19.9% for Q4FY24, a slight increase from 19.7% in Q3FY24. Revenue for the January-March period was Rs 417 crore, marking a sequential increase of 1.8%, while the net profit surged by 25% to nearly Rs 72 crore.
The attrition rate fell to 13% on a trailing 12-month basis in the Jan-March quarter, down from 14.1% in Q3FY24. This improvement aligns with broader industry trends, indicating a stabilising workforce environment.
Despite the anticipated margin pressures, the company has projected a robust revenue growth of 35-40% for FY25 which, according to executive chairman Ashok Soota, is poised to be “our best-ever year since the IPO,”. He noted that the company is on track to achieve its long-term vision of $1 billion in revenues by FY31, now requiring only a 22% compound annual growth rate, down from the previously estimated 25.3%.
Further, the company is strategically positioning itself to leverage the emerging opportunities in generative artificial intelligence (GenAI). Soota said “We have 14 active customers across various industries engaged in 20 GenAI projects.” The projects span a diverse range of applications, including contextual chatbots, learning simulators, contract management, sentiment analysis, and content generation.
