Venkatraman Narayanan, Managing Director & CFO, and Rajiv Shah, President & CEO – Digital Business Services (DBS), Happiest Minds Technologies talk about the September quarter numbers, future outlook, partnership with AutonomIQ, among other things during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: The set of numbers of Q2FY21 is fairly good in terms of dollar revenue which has grown by 5.4% and margins are also good. What were the main reasons for this kind of growth given the world is already going thin on IT spending given the COVID?
Venkatraman Narayanan: The dollar revenue you are talking about, we expect that the momentum will continue. But there is a bit risk on it and it relates to the possibility in which the COVID can relapse, which is being talked about. And, the lockdown has just begun in Europe for the second time and similar talks related to lockdown are going on in the US. So, that is the risk otherwise, the pent-up demand that we saw among the customers is being released and it resulted in this growth of 5.4%. It is necessary to understand that our year-on-year growth has been flat due to the pandemic and now, we are getting out of it. If it doesn’t relapse then we would be able to post the same performance in Q3 and Q4.
Q: Recently, the company partnered AutonomIQ, a cloud platform, to accelerate enterprise digital transformation journey using autonomous testing capabilities. What is the revenue potential of the deal and how much client addition is expected in the next three quarters?
Rajiv Shah: Our total focus is on digital. If you have a look at our business model then we are into product engineering, digital services and infrastructure services. So, we have an impact on the entire ecosystem of the customer, we impact their digital journey. As a result, this partnership will help us to look at the entire ecosystem of the customer environment. Our existing customers need more, so our growth strategy is what we can do with the entire ecosystem by taking partnership in existing accounts and large accounts, as well as what can be done for new client acquisition. So, this partnership over the next two-three years will play a very critical role and will be a critical growth engine for us, as far as doing a digital transformation in the customer environment is concerned. We are proud of that partnership.
Q: Overall, margins have been fantastic with a growth of 3% over the previous quarter as well. What factors majorly led to this kind of an increase and do you think that it will continue in the future, as well?
Venkatraman Narayanan: I would like to highlight three factors for it
Revenue growth: We have talked about it concerning 5.4% growth.
Utilization: Utilization is very important in our industry and it has increased from 74% to 78% in this quarter. So, this has also helped in increasing the profit.
Attrition Rate: We are a people company and attrition have an impact. If there is attrition, it costs us to feel back in it. So, attrition has been lower than the last quarter on the trailing 12 months. This also helped us in increasing profit.
I would like to point out that you should also focus on EBITDA %, which has been at 26%+ this time, which is like a large size company. But we have always been saying that we have been looking at 21-23% kind of trajectory, however, this work from home and COVID has helped in saving the cost has provided cost-benefit to us, which has had a very positive impact on the profit.
Q: Profit has fallen despite the revenue and margins have increased. What was the rationale behind this?
Venkatraman Narayanan: Our EBITDA has grown quarter-on-quarter and accordingly, out profit before tax (PBT) has increased quarter-on-quarter. You are talking about the profit after tax (PAT), which has decreased. So, there is a line of tax between the profit before tax and profit after tax and in that we got a one-time credit in the last quarter. Normally, PAT is derived by reducing the tax from PAT but in the last quarter, we got a one-time credit of Rs 9 crore due to which the PAT went up.
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In this quarter, we have taken a charge of RTs 8.50 crore at the normal tax rate and the PAT stood at 18%. So, you will have to broadcast accordingly, which is done. Normally, the tax is a charge.