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Happiest Minds Technologies – Born Digital. Born Agile

Company Name – Happiest Minds Technologies Ltd (Happiest Minds)

Current Share Price – INR 884 (Jan 18, 2024)

Market Cap – INR 13,460 cr


1. What is interesting about the stock?

Digital transformation is the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation. It transcends traditional roles like sales, marketing, and customer service. As they embark on digital transformation, many companies are taking a step back to ask whether they are doing the right things. [Source: Salesforce]

Digital transformation is key for businesses to survive in today's world.

Company builds on the mission of the happiest people and the happiest customers to yield outstanding customer and people satisfaction results. Happiest Minds is an early adopter of new technologies and builds state-of-the-art solutions for customers.

Happiest Minds Technologies is a technology service provider to clients focused on digital transformation. The company provides an end-to-end solution in the digital space. The company offers solutions across the spectrum of advanced digital technologies such as Robotic Process Automation (RPA), Software-Defined Networking/Network Function Virtualization (SDN/NFV), Big Data and advanced analytics, Internet of Things (IoT), Cloud, Business Process Management (BPM) and security.

Happiest Minds delivers services across industry sectors such as Retail, Edutech, Industrial, BFSI, Hi-Tech, Engineering R&D, Manufacturing, Travel, and Media & Entertainment.

Company focuses on - Born digital (~96% of its revenue). Born agile (~94% of its revenue).

Happiest Minds had 5,246 employees as of December 31, 2023, across 7 countries with 245 active clients (92% of repeat business). The offshore/onshore mix of employees is 96:4 and revenue is 86:14 in Q3FY24. The utilization rate was ~75% in Q3FY24. Company has seen the attrition level fall from ~23% in FY22 to 14% in Q3FY24 due to a slowdown in the industry and funding in venture capital backed companies.

The revenue mix of the Company is as follows:

Company is divided into business units:

  • Product Engineering Services (PES) - Product engineering services (PES) include the engineering of next-generation products and platforms across software and hardware that powers digital evolution and provide end-to-end engineering services for developing high-quality, scalable, and secure products. Expected to grow at a CAGR of 11.3% from 2018-2025

  • Digital Business Services (DBS) - Digital business services are those that can create business value through the adoption of powerful digital and disruptive enablers such as mobile, analytics, social media, big data, and cloud to fuel topline growth, improve customer experiences, and foster a culture of innovation. Enterprise digital spending is expected to grow at a CAGR of 20.2% from 2018-2025

  • Infrastructure Management & Security Services (IMSS) - Provide end-to-end monitoring and management capabilities and continuous support and managed security services for mid-sized enterprises and technology companies. Its security offerings include cyber and infrastructure security, governance, risk & compliance, data privacy and security, identity and access management, and threat and vulnerability management. The Company’s infrastructure offerings include DC and hybrid Cloud services, workspace services, service automation (RPA, ITSM & ITOM), database and middleware services, and software-defined infrastructure services

Revenue split by Business Unit in Q3FY24 was:

  • PES - 50%

  • DBS - 28%

  • IMSS - 17%

  • Others - 5%

Future Prospects

Management is working towards becoming a billion-dollar revenue company in 10 years with industry-leading profitability and capital return ratios. This would imply a CAGR growth of ~22% which could be achievable given their focus on digital services.

During the investor conference call, management guided toward a sustainable EBITDA margin between 22-24%.

Why invest in Happiest Minds?

  • Strong management background - Ashok Soota as Executive Chairman leads the company. He was a founder of Mindtree and former Vice Chairman at Wipro. While he is involved in making the overall strategic direction, day-to-day operations are managed by Venkatraman N. (Managing Director and CFO) and three business unit heads

  • Capabilities in the Digital Space

  • Partnerships with leading solution providers – Happiest Minds has developed unique IPs powered by platforms like Microsoft, AWS, SAP Hybris, Magento, and Google Cloud for various industries including retail, manufacturing, and banking.

2. Key Historical Financials

  • Revenue has grown at a CAGR of ~27% in the last three years with EBITDA margin expanding from 9% in FY19 to 25% in FY23. However, the revenue growth has significantly slowed in FY24 with a fall in EBITDA margins

  • Net profit grew by 28% in FY22 on a YoY basis which was lower than revenue growth (31%)

  • Cash flow conversion (CFO/EBITDA) is poor in FY22 and FY23

  • ROCE/ROE is quite healthy at 30%/31% in FY23 – similar to other IT or ER&D companies

  • IT services company raising debt in FY23 and fresh equity through QIP in Q2FY24 after having strong cash on the balance sheet seems odd

3. What is my view on company valuation?

Happiest Minds came out with its IPO in September 2020 at an issue price of INR 166. The share price has jumped ~10x in a year after the IPO and subsequently corrected ~40% from its peak in September 2021.

The Company currently trades at a P/E (TTM) multiple of 58x vs KPIT at 86x, LTTS at 44x, and Persistent Systems at 60x. With relatively less room for an increase in profitability margins, Happiest Minds could deliver earnings growth of ~20% in the future. Most IT companies trade at a PEG ratio of 1.5x in the long term, implying a P/E ratio of 30x for Happiest Minds leaving aside a margin of safety.

So, the Company is overvalued at the current levels. However, it could be an excellent investment opportunity with a strong business and management team at the right entry price for long-term investors.

4. What are the risks to the investment analysis?

Risks to the analysis are:

  • A high attrition rate could disrupt the business

  • The Company doesn’t have experience in managing acquisition and related transitions

  • Stock prices could remain elevated in the short-medium term due to digital being the new buzzword in the technology space

Case Study of their work in EdTech (example to understand the business)

Challenge: The client is in the business of offering exam preparation courses for the insurance industry. However, a change in the evaluation procedure that placed a higher emphasis on critical and analytical thinking in candidates led to a steep decline in the performance of students. The client was looking to arrest the resulting dropouts by putting in place a learner support system to automatically identify at-risk students and initiate remedial action.


  • Happiest Minds built a solution that analyzed the current student database and corroborated our findings with students who had dropped out of the course.

  • Modeled the data using various classification models while factoring in model complexity and model accuracy.

  • Basis the chosen model, the team built a prediction engine that accurately classified at-risk students.

  • Built a visualization layer that could easily showcase trends in student performance and help instructors and administrators take corrective action.


About the Author

Insignificant Investor


I have no stock, option, or similar derivative position in any of the companies mentioned in the last 30 days, and shall not initiate any such positions within the next 5 days. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from SocInvest). I have no business relationship with any company whose stock is mentioned in this article.

I am not a SEBI registered advisor. This article is purely for educational purposes and is not to be construed as investment advice. Please consult your financial advisor before acting on it.

I have used publicly available information while writing this article.



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