Happiest Minds Technologies Limited (HAPPSTMNDS) Q1 2027 Earnings Call Transcript

Ladies and Chairman, good day, and welcome to the Happiest Minds Q1 F527 Earnings Conference Call, hosted by ICSI Securities Limited. As a reminder, all participant lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal the operator by pressing star, then zero on your touchstone telephone. Please note that this conference is being recorded. I will now hand the conference over to Ms. Aditi Patil from ICSI Securities Limited for opening remarks. Thank you, and over to you.

Thank you, Ryan. Good morning, ladies and gentlemen. Thank you for joining us today on the Q1 FY27 earnings call of Happiest Minds Technologies Limited. On behalf of ICSA Securities, I would like to thank the management of Happiest Minds for giving us the opportunity to host this call. Today, we have with us Mr. Joseph Anantaraju, Co-Chairman and CEO, Mr. Venkatraman Narayanan, Managing Director, Mr. Ram Mohan, CEO, Infrastructure Management and Security Services, Mr. Sridhar Mantha, CEO, Generative AI Business Services, Mr. Praveen Darshankar, Company Secretary and Compliance Officer, Mr. Anand Balakrishnan, TFO, Mrs. Priyanka Sharma, Head Investor Relations. I will now hand it over to Priyanka Sharma for the safe harbor statement and to take proceedings forward. Thank you, and over to you, Priyanka.

Thank you so much, Aditi. Good morning to all participants on the call, and welcome to the conference call to discuss the financial results for the first quarter ended June 2026. I'm Priyanka Sharma, Head of Investor Relations. We hope you have had an opportunity to review the earnings release issued yesterday. Now, let me quickly walk you through the agenda for today's call. Joseph will begin by sharing his perspectives on the business environment, our strategic priorities, and overall business performance. Shridhar will touch upon AI-led transformation initiatives and progress around AI-led engagement and ability. Thereafter, Venkat will take you through the financial and operational performance for the quarter. Followed by our outlook for FY27. Following the management commentary, we will open the floor for Q&A. Before we begin, let me read the safe harbor statement. During this call, we may make forward-looking statements. These statements reflect the environment we see as of today and involve risk and uncertainties that could cause actual results to differ materially. We do not undertake any obligation to update these statements periodically. With that, let me hand it over to Joseph.

Thank you, Priyanka. Good morning, everyone, and thank you for joining us today to discuss Happiest Minds Technologies' financial desires for the first quarter of FI27. We have started FI27 on a strong note, reflecting the continued trust of our customers, the resilience of our operating models, and the growing relevance of our capabilities as enterprises accelerate investment in A&M transformation, digital engineering, cybersecurity, and automation. As more of our peers have reported their quarterly performance, we are encouraged by the relative strength of our own results. We believe this reflects the strength of our AI first strategy, the breadth of our digital capabilities, and our disciplined execution in an evolving market environment. Our operating revenue for the quarter stood at 629 crores, representing 14.3% year-on-year growth in rupee terms. In constant currency, revenue grew 2.6% sequentially and 6.7% year-on-year. We also maintain the healthy EBITDA margin of 21.7% while continuing to invest meaningfully in AI capabilities, enterprise platforms, talent, and go-to-market initiatives that will support our long-term growth. Venkat will talk more about our results. This starting to start to the year reinforces our confidence in the resilience of our business and provides a solid foundation for the year ahead. Let me now turn to the market conditions. The demand environment remains mixed with discretionary spending continuing to be selective. At the same time, enterprise technology investments are increasingly shifting towards AI-led transformation, data modernization, cloud, cybersecurity, and productivity initiatives. We believe AI is fundamentally reshaping the future of enterprises. As organizations move from experimentation to scale deployment, the conversation has shifted from whether AI should be adopted to how quickly it can be deployed securely and at scale to create measurable business value. This is reflected in the continued strength of our demand environment, with our pipelining remaining strong, providing us with confidence in our growth outlooks. Our AI portfolio continues to expand with over 100 AI agents, around 60 repeatable use cases, and a big suite of AI-powered solutions and accelerators, enabling faster deployment, greater use, and stronger customer outcomes. Shrida will provide more details on our AI strategy. Beyond our services business, we continue to strengthen our portfolio of proprietary platforms and repeatable solutions. Our enterprise AI platform, together with Artha, Insurance in a Box, Multi-Iromics, and Adobe platforms, help customers accelerate AI adoption while allowing us to combine proprietary intellectual property with our engineering capabilities. These platforms create differentiated entry points into customer relationships, lead to non-linear growth, and support larger, long-term transformation engagements. Some notable wins during the quarter included a selection as a strategic data and AI partner for a leading North American energy infrastructure company, an AI power test automation engagement for a leading Australian insurance provider. A digital commerce modernization program for a leading Indian multinational CPG company, a sales force-based product and engagement for a global consulting company, and a multi-year managed security services engagement with a major Middle Eastern retailer. From an industry perspective, both led by healthcare and life sciences, which grew 22% year-on-year and 4% sequentially, VFSI remained our largest. WorkSkill at 27% of revenues, while EdTech contributed 16% and delivered modest growth. iTech2 recorded a strong sequential recovery. Geographically, the Americas continued to be the largest market, contributing 57% of revenues. Growth was increasingly diversified across our other markets, with India and APAC growing approximately 9% and 10% sequentially, respectively. This broader geographic participation provides us with greater balance and supports our long-term growth ambitions. Looking ahead, while the macroeconomic environment remains mixed, we believe the structural drivers of technology spending remain firmly intact. Enterprises continue to prioritize AI, cloud, cybersecurity, and data engineering, areas where happiest minds have deep capabilities and strong customer relevance. Supported by healthy by client, disciplined execution, and increasing AI adoption across our customer base, we remain confident in our strategy. With that, I will hand over to Sridhar, who will take you through the process behind our AI strategy. Sridhar, over to you.

Thank you very much, Joseph, and good morning, everyone. Joseph has shared how our AI for strategy is creating momentum in the marketplace. Let me now take you through the engineering capabilities, enterprise platforms, and delivery innovations that are enabling those outcomes for us. Our efforts are centered around three priorities. The first one is, as we shared in the previous quarter, building a secure and reusable enterprise AI platform that can be customized for various domains and create vertical solutions on the top of it. The second one is, of course, embedding AI across the entire software development lifecycle and in all the services that we provide to our customers. The third and the last one is Delivering measurable productivity and quality improvements for our customers because various AI technologies that are being adopted are so young and new in the marketplace. Our enterprise AI platform provides a modular, secure, and model agnostic foundation for enterprise AI adoption. A key design principle is reuse, enabling customers to leverage reusable agents, flows, and accelerators rather than building every AI application. This significantly reduces implementation time, improves consistency across deployments, and allows domain-specific AI solutions to scale with appropriate governance, security, along with human oversight for enterprise environments. We are equally focused on transforming the way software is engineered. At this point, we have more than 2,000 happiest minds that are using advanced agentic and AI development tools, and our engineering teams today generate more than 2.5 million lines of code with the help of agents every month. This reflects the increasing adoption of AI across our software engineering lifecycle. More importantly, AI is helping shorten development cycles, improve code quality, strengthen documentation, and also increase the test coverage and accelerate application development and modernization. While all outputs continue to undergo our established engineering security and quality review rigor. Our reliable platform is enabling customers to adopt agentic software engineering within secure governed enterprise environments, allowing human engineers and AI agents to work and collaborate together throughout the entire development lifecycle. Beyond software engineering, within Happiest Mind, AI is also driving measurable improvements across all our delivery operations. Few examples are, within our infrastructure services, approximately 60% of the identified provisioning scope has been already automated with the help of AI tools, resulting nearly two-fold improvement in provisioning speed. Another example is within application integration, now AI automation is covering the identified process scope and contributing to estimated 80% reduction in our efforts and, of course, We are also embedding AI across quality engineering, infrastructure operations, cybersecurity, and data engineering, as demonstrated by the AI-powered test automation engagement that Joseph highlighted earlier. As AI adoption scales, responsible governance also becomes increasingly important. Security, privacy, model governance, and human oversight are therefore built into Both our enterprise AI platform as well as in the delivery process and methodology that we have within Happiest Minds which is enabling customers to innovate with confidence while maintaining the enterprise-grade controls. Overall, we are very encouraged by the progress and we continue to... Believe, the milestones and metrics we have shared today demonstrate that our AI strategy is translating into tangible execution. Our focus remains on converting AI from a promising technology into measurable business outcomes through enterprise platforms, reusable IPs, engineering excellence, and disciplined execution. With that, let me hand over to Venkat, who will walk you through our financial and operational performance for the quarter. Venkat, over to you.

I was on mute. Thank you, Sridhar, and good morning, everyone. Over the next few minutes, I will take you through our financial and operational performance for the first quarter of FI 27 and conclude with our outlook for the year. We have started the year on a very solid note, delivering another quarter of profitable growth, despite a demand environment that remains selective. Operating revenues for the quarter stood at 629 crores, representing a growth of 4% sequentially and 14.3% year-over-year. In Conscient Currency, our revenues grew 2.6% sequentially and 6.7% over the previous year. Total income for the quarter came in at about 652 crores, representing a growth of 4.9 percent sequentially and 12.5 percent year-over-year. The quarter was one that continued to see improvement in demand across the spectrum of services, together with good execution from our side across our business. Turning to profitability. Our operating margin at 100.5 crores has shown up to 2.3 percent while continuing to be at about 70.5 percent of revenues. This is incidentally almost the same as it was last quarter and the quarter last year. This margin performance was despite the currency lost on our forward contracts of about 11 crores and a spike in provision to account for delayed collection or receivables of about 5 crores and both of them compared to the previous quarter. Only for a pure comparison purposes, if I adjust these two losses, our operating margin stands at about 19.75% and higher than our... Not guided range, but what I was saying as an expectation for us to be 17.5 to 18.5 percent. Coming straight to our adjusted profit after tax for the quarter, it stands at about 80.5 crores, which is 12.3 percent of our total income, showing a growth sequentially of 12.9 percent and the year-over-year growth of 14.2 percent. To clarify, Path adjustments do not account for the forex losses or provisions for receivables that I talked about just a while back. These adjustments only relate to acquisitions costs, which I believe is counting noise, and I have been adjusting for them over all the previous quarters. Our healthy, adjusted path aptly reflects. Our growth of adjusted EPS as well, which for the quarter stands at Rs 534, 5 rupees 34 paisa, up to 15% over a year. Our profitability continues to reflect disciplined management while continuing to invest in AI and platforms, sales capacity, future ready talent. From a capital efficiency standpoint, ROC improved to 23.9 percent, while ROE is at 15.5 percent, both up from 21.8 percent and 12.8 percent. So, a significant improvement, and this has been a focus for us. We closed the quarter with cash and cash equivalents of about 1743 crores compared to the 1679 crores last quarter . Talking about some operational metrics, we ended the quarter with about 306 active customers, which is same as last quarter, while the number of billion dollar corporations we serve has increased by 1 to 92. These billion-dollar customers of ours contribute to about approximately 60% of our revenue. Repeat continues to remain at about 94.4%, reflecting our customer relationships and the confidence reposed by them on us. Working capital discipline is an area of continued... While they proved to 92 days from 94 in the previous quarter, we did have to account for some one time provisions which I talked about earlier, and let me assure you that that was us being conservative on account, and we are leaving no stone unturned to collect most of those ah provisions. We ended the quarter with about 6530 tapis mines. Utilization moderated marginally to 81 percent, about 0.4 percent reduction ah, not a cause for concern and our hiring has been up by about 32, 30, 32 people on, on net terms. Our utilization of 3 percent is healthy, but it also continues to be an area of focus in in these fast changing times. Our point of attrition has improved from 15, from 17 percent in the previous quarter to 15.4 this quarter. Looking ahead, our priorities remain clear and unchanged. Continue investing in AI, talent, go-to-market capabilities, and operational scale to support sustainable long-term growth. While the macro... And remains mixed. We are encouraged by the strength of our pipeline, accelerating AI adoption and the resilience of our business model. On the strong start to FI27, ability we have today, we continue to focus on our achieve, on achieving our FI27 revenue guidance of 12.5%. I would like I would like to thank our customers, partners, shareholders and our customers. And every happiest mind for their continued trust, commitment, and support. Thank you for joining us. And now, I'll turn this over to your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and Chairman, we will wait for a moment while the question queue assembles. We take the first question from the line of Aditya Patil from ICSA Securities Limited. Please go ahead.

Thank you for the opportunity and congratulations on good set of numbers in Q1. My first question is on our revenue outlook. We had shared a revenue guidance of at least 12% YY growth in FY27. So this implies a strong CQGR for the rest of the three quarters. Around 5%. So, what kind of visibility do we have for this kind of growth? Is it based on already one deal, or it also depends on converting a pipeline in coming quarters? And if you can share how your deal TCV has grown on a viable basis, maybe qualitative commentary on it. And does the guidance include any contribution from potential acquisitions? Thank you.

While I will answer your questions, our growth numbers do not include any acquisitions, but it includes what we have acquired as now in the rounds that we have got on board. The second thing is on TCV, we have not been disclosing that number. Well, thank you. And it's something that we are beginning to internally track because our philosophy or our growth philosophy has been anchored on the land and expand. So, TCV is not something that makes sense or at least we have not seen it, we are not able to relate that to the numbers, which is why we have always been talking about repeat business customer additions and our customer cohort, you know, revenue from our customer cohorts, which is 50% with customers who have been with us for more than 5 years and less than 5 years. So, all of these put together show the health of the revenue and repeatability. Joseph, with the rest of on the …

Sure, Venkat, you know, I think the line of talk that Venkat started off with, you know … Commentary. Our pipeline is strong, and it's... Three quarters. Cut out, we need to continue. Thank you. At the beginning of the year. Now, in terms of, you know, how we see that happening, we do have, you know, it's a combination of all that you mentioned. You know, we have a few mid to large size deals in the pipeline, and we will need to convert a couple of them, which will start giving just inner revenues in Q3 and Q4. We've closed a couple of large deals, one of them in Q1 and another one just a little earlier this month. which will get into three digits in terms of the total size, and we have a few others, you know, that we have. We are implementing the first or executing the first project based on which we expect to get more such projects and engagement. And I shared a few of our wins in the commentary. In our press release as well, we have a few of these wins listed out which should lead to growth. So it's a mixture of all of these. And the third area I would say is some of the existing customers that we have. and initiative in place to expand our presence out there that also expects will contribute to our growth.

There is also... Last quarter, we had talked about a moment or right shifting of two Artha banking deals. One of it is getting extended. We are not very hopeful, to put it that way, but the other one is taking time to close and we are hopeful that it will close in the second quarter. Also, pipeline on non-linear growth platforms like, you know, Adobe, insurance in a box are quite reassuring. There is also that, you know, lumpy revenues that could come. There is also one point which Aditya at some point in time will discuss this with you because the growth is coming a lot from Middle East, India and Southeast Asia and APAC. Now that constant currency we are getting hurt because we are dividing you know the volume growth by dollars, but that is something that we will have to figure out how to how to you know account for that in our in our in our. So, these are the things that we are looking at helping us in the ensuing quarters.

Okay, got it. And my next question is on the nature of deals in Gen AI business unit. Are these more short cycle deals with lesser recurring component or do we see recurring component in these deals? And on the margins for JNI Business Unit, there was a sharp increase in the segmental margins in Q1. So what should we consider as steady state margins or steady state costs or investments in JNI BU? Good morning, everyone.

Hi, this is Brida. I like the question. The first part of the question is, still one year back, your observation was bright, as well as especially within Happiest Minds also, we used to work more on use case based engagements because the customers themselves were not very clear about what kind of ROI they can get and how technology with AI can help their business problems. However, in the last few quarters, more than a year, we slowly started shifting towards two specific models. One is more of a POTS kind of model where the customers want us to act as an external engineering team to help them with their AI journey. And second and last category is, as we mentioned in the previous quarter also, we started closing more deals that has both AI components as well as the digital transformation as a bundled larger So both of these are helping us to move very rapidly from point use cases, fixed bits into more of a long-term engagement and larger transformation. Just wanted to add one point out here.

I think what we need to start differentiating is the execution model and the contract model, right? Because with some of our customers, even though it would be TNM, but We have some SLAs or some outcomes embedded into those contracts, and I look at that as being more outcome-based, because if not for the fact that we are able to promise those outcomes, we would not have won those deals. So we are beginning to see that aspect as well, because in this model, the customer has some flexibility to move priorities around, while at the same time, holding us accountable for outcomes.

The second part of the question, Ajithi, is, of course, on the investments that happen, right? We did talk about the enterprise AI platform, and now the GBS revenue footprint being relatively smaller compared to the overall number. You may see some fluctuations within GBS because of the constant investments that can happen.

And on the margin front, Aditi, you know, at the end of the day, it's all got to do with utilization. Our utilization is nicely picked up. Also, there's quite a bit of bustling happening from the other BUs into AI, generative AI. That's also helping, which is showing up on margin. So, you know, the idea was when we when we started GBS, it could soon become at least 10% of the overall company's business. But while that is in progress, AI has, you know, penetrated into everything else that we are doing. We did mention this in the last call as well, maybe in the, by the end of next quarter when we, when we publish ourselves for Q2, we want to come out number of AI, most other companies have slowly, you know, started publishing that, but we want to have, we are Doing a thorough feed, run on those numbers and come back to you so that that gives. It gives you a total AI-led revenues, not GBA, but AI-led revenues, which is embedded in various other parts of the business, whether it's Infra, or, you know, SELC, and the like.

Okay, good. And just one confirmation. So, we usually do annual wage agreement in Q2. So, this year also, is it planned for Q2?

Yes, we have. Good point you make, yes, there will be an adjustment in our margin, which has been traditionally how it has been for us. We'll have to, you know, claw back on that through both volume increase and value increase and growth that we see.

Okay, so the entire increment impact will be in Q2, correct?

No, it will be, obviously, we will have to look at numbers, you know, the industry and all of that. So, that is one. But whatever is being done, a large part of it, because you have got structures of up to C7 is in Q2 and above C7, C8 is in the month of October. So, we split that and we do. While we temper that in line with you know business and the demand scenario that we are We are also, you know, that is why I gave you a little bit of an insight into real margins that we had this time, just because of those runoff noises, it did ah it it kind of ah percent us at back at 17.5 percent. Some of that will also come to help us for the Q2 and the margin ah when when the wage I think this happens.

Okay. I will join back in queue. All the best for FY27. Thank you.

Thank you. We take the next question from the line of Dinesh Vala from ACP Signority.

Yeah, sir. Thanks for giving me the opportunity. So I have a few questions. First, on the guidance part, as you told that 12.5% revenue growth for FY27 will be driven by pipeline conversion in which we have strong pipeline and new dual wins in the line. As you told that discretionary spending client is trying some cautiousness. So, what are the key risks that could impact our guidance of 12.5%?

But mainly... I made my statement on discretionary spend. I also said that it's happening in the right areas, and what we are seeing... Can you hear me?

You are going in and out, so maybe.

Okay, let me start again. So, Ginesh, if you notice the statement that I made on discretionary spending, I said that it is being pushed or happening in specific areas, right? And what we are seeing is that the... The customers are optimizing using AI, some of their support and, you know, maintenance and infra activities, the run part of the operations, right? And then taking that savings and deploying it on some of their AI and other innovation, right? And so that's, you know, that's what we are seeing. And if you ask me, what is the risk that I say? It's the elephant in the room, right? If you look at the current war and the impact having on inflation and other things, I think that dragging out for too long is what I would see as a risk right now to sustaining the kind of performance that we...

Another thing was on the FY28 aspiration we had of 15% growth. So, are we sticking back to that 15% aspiration of FY28 or we are good to give only FY27?

Vinesh, that's an aspiration that continues, so there is no change to it. So, we had 0.5. The idea is that this helps set up a good platform for the growth in 2015. Obviously, like every good thing that you say, there are risks attributed to that, which is what Joseph just called out in terms of, you know, war, a possibility of maybe, maybe, yeah. I don't know if I'm reacting too much, but there seems to be some sort of a reality check in the AI world itself about what's the capex and how spends has to be. So, you know, these things have a kind of a trickle-down effect on sentiments, just not the macro picture. The macro picture, obviously, is what it is you have all the geopolitical disturbances. But accounting for all of that, I think the target for the year for us is 12.5. If we do that, that will really set up a great platform. Because you know we are making all these transformation changes only to make sure that the platform is in place for the growth aspiration of the team next year. So, be it the long the good pipeline, the deal sizes in our pipeline are increasing. We are seeing business commitments in our new signups go up. Repeat business is improving. The new business pipeline is changing for the better, because that was a change that we did bring in through Mananda, heading business. The entire restructuring of the business into 2BUs under PDS and, you know, infra security and infra and security also doing well. So, see, all of this is, all of it comes together, pistons, fires. Our aspiration should not change, the platform should be in place for us to do that.

Okay, thank you sir. And last one from my side on the vertical front as I see the EduTech vertical last quarter also sequential growth. This quarter also we had a sequential growth. So do we expect that growth to sustain? And on the high tech vertical again from last two quarters there was a sequential decline. And this quarter we did a good phenomenal growth in this vertical. So what's your outlook on these two verticals?

So, you know, the EdTech vertical, even last time I said that we feel that it's kind of the risk that we had, had all manifested and we expected the vertical to stabilize in terms of business. As I mentioned last time, there are a couple of things that we are doing which should help us sustain this recovery that we are seeing in the EdTech vertical. The first is that we have our EduWeave platform, and I talked about it last time. It's more like a digital edtech platform for universities, and we're building that based on a couple of... I think we have... of them that are very close to signing, right? And it's a modular platform, which gives us flexibility. The second is we're targeting increasingly universities, you know, that's a segment that we hadn't really pursued earlier. So, you know, we're hopeful that with these two, we should be able to infuse growth into the tech vertical, the high tech vertical, the growth that we saw this quarter is on the back of Large engagement we signed with one of our customers, who we have started working with a few months back. We're doing work at a smaller scale, and we've been able to get a large engagement going with them. There's a possibility of a second large engagement happening with them, and we've also signed a customer recently that is expected to ramp up. So, between the two of them? Hopefully, they should be able to, you know, at least lead to growth. The growth we had this year was quite high, and that's not something that we can expect sequentially every quarter. We had 10% quarter-on-quarter growth, but we should be able to continue growing at the high-tech vertical as well.

Okay. Thank you, sir. And that's it from my side, and all the best for the year.

Thank you. Thanks, Vinesh.

Thank you. We take the next question from the line of Kubert, from Access Securities. Please go ahead.

Yeah, thank you for taking my question, and congrats on a set of numbers. There are a couple of questions from my end. So, when I look at your contracting model, you can see that we are moving into fixed-price contracts. So, is it hard to say that...

Yeah, go ahead.

Yeah, is it fair to say that we are deliberately moving to a fixed price? And second question is on business units. So out of three, product, product, digital, and gen units are growing at a very faster rate. So, what is leading to that growth, and how do you see three of the verticals going ahead? And the third question is on, are we facing any kind of pricing pressure, as all our peers are moving into, like, contracts and everything? So, in terms of pricing pressure, are we facing any kind of, yeah, that's all.

Yes.

Take the first moment.

Yeah, I think I had mentioned this last time also. There is a confusion of AI business seems to be largely oriented towards outcome and output based model, whereas you don't have that in your numbers and so are you doing AI. The question that is very legitimate question no doubt, but the point is the what we have here is a you know pricing contract structure, it is not a business structure as I have been talking about. If you if you have a person being billed um. Thank you. He can be a AI FDE and gets billed on a monthly basis, he is classified as a fixed monthly billing and it goes into TNN. But just not that we get to bill him at the end of the month irrespective of what he delivers.

There is a clear SOW which .

Welcome that's required from the engineer and the team. You have every SOW detailing out the kind of work that's required from the team at the end of sprint A or B or C. You need to have delivered a few things. It could be lines of code. It could be a part of the platform using AI as a technology. All of that is there in your SOW. And so, but we capture it in the two, you know, two buckets that we are given. It's, Like, even two buckets, tell me if it is FB or if it is TNM, I put it in. So, it just does not mean that we are not doing outcome-based. Most of the things within the TNM or the FB is outcome or output-based. I am not going to get paid just for showing up for work or having my people show up for work in office. So, that's the point I want to make. We are trying to see how to, you know, capture that as the third bucket or So, it has to be a completely different bucket of how we are pricing the deeds. Are we pricing it based on outcome output or, you know, just showing up to work? So, that's something that we have to see. We will get back to you. So, that's on the TNM and FP. You are right, people want more of a SDLC to be used into used while we develop you know solutions for them. How does it come in the pricing model? There is no definition of what I think and I have been trying to come in through the last two three quarters. So, that is not a pricing thing. Joseph?

Yeah, sure, Venkat. Do you, for comments, obviously, GPS has grown handsomely, and, but it's on a... Smaller revenue base, and we expect GBS to continue growing quite well right through the year, given the investments we made, the opportunities in the market, and the capabilities that we have built in this area. PDS and GBS, there's a pull-through from GBS as far as PDS revenues is concerned. I want to give a small clarification on IMSS, business unit. I know we do see a sequential drop, but it was all driven by a one-time license revenue that we did get in Q4. We didn't have a repeat of that in Q1, and that was the real thing. But the pipeline on IMSS is strong, and when we meet again next quarter, we will see that That, you know, the business unit would have demonstrated good growth. And the last one, whether we are facing the third question, whether we are facing any pricing pressure. So, you know, every year there will be a few customers who will come back and, you know, they'll have discussions, negotiations. So, this year is no different. At the same time, we have quite a few customers where, in spite of the environment, where we've been able to affect a rate increase. So, I would say there's no systemic trend of customers coming back and asking for, you know, rate decrease or negotiating rates. That is... Ask from customers to show the impact of using AI tools in the SDLC, and that we are working out some metrics and other things to show customers what is the value that you're bringing to the table, what is the value that these tools are delivering.

Oh, okay, okay. Thank you.

We take the next question from the line of Rajveer Singh from Vivek Investment Manager. Please go ahead.

Hi, am I audible?

Yes.

Yeah, thanks for giving me the opportunity and congratulations on a good set of numbers. My first question is on the AI productivity versus revenue. Generative AI improves developer productivity. So, how are we ensuring that the productivity gains translate into higher revenue rather than lower billing? Sure.

Yes, go ahead, go ahead, go ahead, please. Ask the second question as well.

Yeah, the second question is about the competition. So, the large IT companies are investing heavily in AI as well. And where does Happiest Minds believe that it has a sustainable competitive advantage against companies like DCS, Infosys, or Persistent, who are also heavily investing in AI? Those are my two questions.

Sure. So, if you look at the air productivity, I would say that most... of our customers are using some form of productivity or the other, except if it's, let's say, an area like hardware, maybe to some extent embedded, or if the customer is in an industry or a state where, you know, the risk of using AI is high, right? Now, the way we are able to monetize this or to get revenue out of this, I have to be honest with you. With many of our fixed-price projects, we're able to... And what we'll end up doing is sharing some of the upside. Thank you. So that's what we're mentioning. So in terms of competition, I'll take a stab and I'll give it to Shida. I think the very fact that we created a generative AI business unit has allowed us to build a lot of depth out here. And, you know, if you look at AI, I would say that... We were one of the, I would say, companies on the forefront helping a lot of retail, travel, and other customers adopt these things for things like, you know, what are very commonplace now, personalization engine, recommendation engine, adaptive learning, and things like that. So I believe that given our revenue, our debt is much more, relatively speaking, because if you go to a TCS or a Infosys, In terms of numbers, they would have more AI engineers, they'd be able to give you more case studies. But I would say that, you know, relatively speaking, we would... Thank you.

Just to add a little bit more. The biggest advantage we as Happiest Minds had was the digital foundation that was created and the specialization around digital. So one way or other, as you can very clearly see, the AI is the new tick of the iceberg and none of the water is completely the digital set of technologies. Even three years back, also, customers were looking at us for the digital transformation as the niche player at our size, right, in the marketplace. That's one of the reasons that is really helping, and the same positioning is helping with our customers and the new customers we are acquiring. The second and last part is, of course, as part of our earlier tagline, it used to be the agile always, and we still preserve it. Now, with the way and the speed at which the AI technologies are changing, the agility as an organization for us to quickly change our investments, change our direction. I'm not saying it is 180 degrees, could be 5 degrees, 10 degrees, etc. That agility as an organization also is really helping us to help our organization with the needs of the customer. And of course, the best example they've also provided was creating a business unit itself. Sounds good.

Just to follow up, how much of our current hiring is AI-specific right now?

So, in terms of the hiring, how much is AI-specific is your question, right? Yes. Of course, you... Sure. So, we are actually looking at the combination of both categories because now with the pace at which technology is changing, it is really difficult for us to find anybody more than six months experience or even one year experience with the AIS case. So, we heavily created internally through our learning and talent management. Thank you very much, everyone, and thank you very much, everyone, and thank you very much, everyone, I can't say anything.

Hey, Vinesh, even I think I lost them. See you, sir. While Shriza joins Vinesh Kuber, sorry, the point is we have got both replacement hire and fresh hiring. Fresh hiring is more accentuated towards people with AI skills, and it's for the need, need of the project, because if there is a project which requires a specific cloud skill, you need hire for that, so you can't go ahead of time. So, it is all predicated between replacement, hiring for future, and hiring for the current product, which we have on hand. So, if you delete, if you really split our total hiring onto these three buckets, what we are doing for the current projects, yes, this is what. But with an accent on AI helps. For the future, we are obviously looking at people at the junior levels with AI skills. So that's something that they're trained to become more AI experienced engineers. And replacement is if you have lost a person who is doing cloud and security work, you have to have cloud and security work. Now if he comes with an AI as an additional, you know, experience, that's really good. That makes sense.

That's it from my side. Thank you so much.

Thank you. Thank you.

Thank you. Yes, sir. They are just connected with us.

Okay, great.

Go ahead. We take the next question from the line of Amit Chandra from HVAC Securities. Please, please.

Yes, sir. Thanks for the opportunity. So my question is on the, you know, on the, on the GNI business unit. So obviously that has been scaling very, you know, strongly for us. And it's around five and a half to six percent of revenues. And if I see in this quarter, bulk of the incremental revenues coming from this unit. So if you can, if you can throw some like more light in terms of how things are progressing here, in terms of the engagements that we're having in the, you know, in this segment is largely coming from the existing clients. And, you know, last you also mentioned that, you know, some of the engagements are here in, you know, the POC stages, which can move and scale up. And also in terms of what investments are we doing in this like business units and And maybe two years down the line, how you see the mix changing from, say, like, cloud engineering to, you know, the GNI side. So that's the last question, sir.

Sure. So, I take it on while Sridhar joins and see what's happened is GBS was that we set up about a year, year and a half as part of the, you know, the AI onslaught that we were having, right? Everybody was trying to get gear themselves up to meet the AI requirements and we had to call it out separately so that we, just like we had an identity in the, during the digital onslaught, we have also now created an identity for the, for, from an AI generation. Thank you. Well, customers appreciated it, you know markets appreciated it, and it obviously has helped us go deeper into our existing customers and new customers. Now, any BU that's created has to be 10% of, has to have, you know, to stand on its own feet, should ideally be for 10%. So, the growth objective of that was all very clear. With all the, you know, mandate clear, they started going to new customers and also existing customers, started selling. You rightly pointed out, we started with POCs, which have been since, slowly migrated to more sustaining, larger size projects. But we are also seeing a lot more demand coming in from existing projects, which is why, you know, the profitability, Ajithi had asked earlier in the call that we are showing a decent level of profitability. That's because we are able to sell into our existing customers. We sell into existing customers. Sales effort is lesser. The turnaround time from prospect to potential to, you know, thing is short. So, all of that has helped us, you know, get us very quickly started on that view. I just want to caution to you, while I say all of this, AI within the company is not completely you know captured within the GBS bucket, it is there across the. That is something that has been happening and it would be unwise of us to say if you do not, if you do not think it has to be listened to, otherwise it should not be done, is something which will stymie growth and the development within the larger part of the organization. So, AI has taken over many parts of . Just to take a, you know, example, security. Security, SecAI Genie is a platform that is used for us on a security delivery, and it is now part of our security offerings. It, it has AI. Now, this is part of GBS, which is why. We said that we have to look at our entire revenue stream, go by project, carve out, not by technology, but what is, what is the impact or elements of AI, carve it out and then give you this number which is called AI-led revenues of the total. So, if we are 625 crores this quarter, how many crores did we get by AI? That's the attempt that we have started. Do you have a ? You will end of Q2. Yep, Joseph, Sridhar, I was, I guess.

Okay, sir. And, you know, secondly, on the investments that we have made, obviously, we have done some investments in terms of, you know, the sales engine and for, you know, better, you know, better client engagements, account mining and all. So, you know, just an update in terms of, you know, what kind of benefits we're seeing from there. Are we seeing more larger deal sizes or the pipeline, you know, getting more, like, better? And in terms of better engagement with existing clients. So any update on that would be helpful.

Sure. So, you know, let me take, you know, the NN sales engine first, and then I'll get into the client engagement client. You know, as I mentioned, we've had, in response to another question, we've had, we've had large deals that we've closed. One of them, you know, we had, we had the customer little. Earlier in the year, but the large engagement, a pretty large TCV, that started in April, and that's what contributed to the growth that you see in the high-tech vertical. And as we speak, we just find another customer, which will again run into, you know, three figures. So, we are getting large deals. Again, in the pipeline, we have several deals that are much larger, much larger, spanning across multiple years. And, you know, we're hoping that a couple of them would close during the quarter and help. Growth in the next couple of quarters. In terms of client engagement, if you see our repeat business, that's gone up from 92.5% to 94.5%. An indicator of how some of the investments we are making is helping with client retention. And we're also seeing in some of our existing customers opportunities that are much larger in size than what we typically get. We are, I would say, transforming our sales team because we have more of hybrid BDMs, and we are segregating them into NN BDMs and account managers. There are some changes and churns that are taking place out here, but I believe that our hypo strategy that's coming together well, there are... We have decided to focus on 6 to 10 accounts and give them a disproportionate attention with the goal of making them into not 20 million dollar kind of accounts.

Okay. Okay, so thanks and all the rest.

Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now have the conference over to Ms. Priyanka Sharma for her closing comments.

Thank you, Ryan. Thank you, everyone, for joining us today. We would also like to sincerely thank ICICI Securities for hosting this call on our behalf. We appreciate your continued engagement and support. Should you have any further questions? Please feel free to reach out to the Investor Relations Team at ir at the rate happiestminds.com. Thank you once again, and have a great day ahead.

Thank you. On behalf of ICC Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.