For GenAI, Utilisation Rate Will Rise To 60-70%, To Take The Co To A Breakeven Point: Happiest Mind

Summary

In this interview on CNBC TV18, the management of Happiest Minds, including CFO Anand Balak Krishnan, discusses the company’s strong growth trajectory, focusing on its key verticals: BFSI, Healthcare, and EdTech. The company aims for a $1 billion revenue target by 2031 while addressing challenges and opportunities in sectors like Gen AI. Despite some setbacks in the EdTech sector, the company is emphasizing its inorganic growth strategy and expansion in emerging technologies. Happiest Minds anticipates continued growth, with a focus on double-digit revenue growth, strategic acquisitions, and operational excellence moving forward.

Takeaways

• 😀 Anand Balak Krishnan is the newly appointed CFO of Happiest Minds, and his focus for the next 12 to 18 months includes sustaining growth and achieving the billion-dollar target by 2031.
• 😀 Happiest Minds has achieved a 26% growth in FI25, combining organic and inorganic growth, with a compound annual growth rate of 22% over the past three years.
• 😀 The company's goal is to continue its double-digit growth trajectory, driven by both organic and inorganic strategies.
• 😀 Inorganic acquisitions, particularly in the BFSI, healthcare, and high-tech sectors, have strengthened Happiest Minds' position and diversified its product mix.
• 😀 Although edtech was a strong vertical for the company, there has been slight weakness in the sector, and the company is shifting focus towards growing BFSI, healthcare, and other sectors.
• 😀 The company is seeing a good deal flow with new business coming in from existing customers and expects similar growth in the upcoming quarter.
• 😀 Happiest Minds is working to meet its growth target, even in the face of challenges like a previous customer mishap that affected Q4 results.
• 😀 Happiest Minds expects the GenAI business to break even by FI26 and become profitable by FI27, with the goal of achieving 5% of total business revenue (around $25 million) from GenAI in the next couple of years.
• 😀 The GenAI segment had a challenging startup phase in its first year but is expected to see improved utilization rates and growth moving forward.
• 😀 There are plans to integrate GenAI into the company's larger business model, similar to how the IoT business was absorbed into the verticals, allowing it to be seamlessly part of the company's offerings.

Q & A

What are the key focus areas for Anand Balak as the newly appointed CFO of Happiest Minds?

Anand Balak is focusing on driving growth for the company, both organically and inorganically, with an emphasis on achieving the aspirational growth target of $1 billion by 2031. His main objective is to maintain a double-digit growth rate, similar to the past three years.

How has Happiest Minds performed in terms of growth over the past few years?

Happiest Minds has achieved a compounded annual growth rate (CAGR) of over 22% in revenue over the past three years, maintaining a double-digit growth rate post-listing, with a 26% growth in the most recent fiscal year.

What is the company's strategy regarding verticals and acquisitions?

The company verticalized its businesses last year, focusing on sectors like BFSI, healthcare, manufacturing, and retail, while continuing to strengthen its position in the edtech sector. Recent acquisitions have bolstered growth in high-tech, healthcare, and BFSI, with a commitment to growing these sectors further.

Why is Happiest Minds focusing more on healthcare and BFSI, and how does this relate to their challenges in the edtech sector?

Happiest Minds is doubling down on healthcare and BFSI due to a slight weakness in the edtech sector, which has historically been strong for the company. While edtech continues to be important, the company is focusing on strengthening other verticals to ensure continued growth and maintain a double-digit growth rate.

What is the company's current deal pipeline like?

The company has a strong deal pipeline, with existing business growing and new business coming in from current customers. While specific quarter details cannot be disclosed, they are seeing good growth and deal flow despite industry challenges.

What are the company's expectations for the Gen AI business in the near future?

Happiest Minds expects the Gen AI business to break even in FY26 and become profitable in FY27. They are focusing on increasing utilization rates from 35-40% to 60-70% in FY26, which will help drive growth and profitability.

What are the revenue expectations for Gen AI in the coming years?

The company expects the Gen AI business to generate approximately $25 million in revenue within the next couple of years, aiming for about 5% of the total business revenue.

How is the company integrating its Gen AI business within its broader organizational structure?

Gen AI is being treated as a startup within the larger organization. While it has initially been a standalone unit, the company is focused on integrating Gen AI into its verticals and horizontal offerings as it matures, similar to how IoT was absorbed into other business units.

What is the company's stance on its performance in Q4 of the last fiscal year?

Despite challenges with a specific customer, Happiest Minds grew by 1.1% in Q4. Adjusting for the customer mishap, the growth rate was around 2-2.5%. The company is optimistic about similar growth in the current quarter, driven by both new and existing business.

How does Happiest Minds plan to maintain its growth trajectory in the coming fiscal year?

The company aims to continue growing both organically and inorganically, focusing on its core verticals, expanding its acquisitions, and maintaining strong deal flow. The leadership is committed to achieving or surpassing its growth targets while diversifying into new markets like healthcare and BFSI.