Informist, Tuesday, Aug 3, 2021
By Sai Ishwarbharath
CHENNAI – Happiest Minds Technologies Ltd has retained its margin guidance of 22-24% for this financial year and the medium term, despite exceeding it for four straight quarters since listing.
"At the current operating margin range, we will not hesitate to hire newer vertical heads or give better packages to them. Secondly, we expect expenses like rent costs, power, employee travel to come back into the system once normalcy returns," Managing Director and Chief Financial Officer Venkatraman Narayanan said. "These expenses may come back, and we may see margins contracting (from current levels)."
Business decisions on top-level hiring or other decisions might be impacted if the profitability is upgraded to 26% levels, he said.
For the June quarter, the company clocked 26.1% in terms of operating margin, down 20 basis points sequentially.
The company would also focus on business volume growth and better utilisation of employees to make up for the impact of compensation increases on margin, Narayanan said in an exclusive chat with Informist.
Employee utilisation stood at 82.1% in Apr-June, falling from an all-time high of 82.6% in the previous quarter.
The company sees rent, power and travel costs inching higher as its employees may start returning to offices gradually from January. Currently, around 55% of its workforce has been vaccinated.
The company's selling, general and administrative expenses fell close to 20% on year to 1.38 bln rupees for 2020-21 (Apr-Mar).
The Indian IT industry has been facing a record number of digital transformation deals after the outbreak of COVID-19, as clients are expanding their e-commerce presence and upgrading infrastructure to ensure seamless working.
Happiest Minds, for which 96% of the revenue comes from digital offerings, added 310 new workers in the Apr-Jun quarter, and is struggling to retain talent amid growing demand for digital skills.
Joseph Anantharaju, executive vice president and chief executive officer (product engineering services), said the company was also eyeing the addition of 300-350 net new workers each quarter for the rest of the year, and was on track to end the year with a record number of net additions.
"We have also tapped into alumni network and former women workers who having a career break to fill in the shortage. We had quite a few of them come back, especially in the last six months," he said.
Overall, the mid-sized IT company had 562 net new additions in 2020-21.
The company has announced 100% variable pay for its employees for this financial year and also awarded "industry-leading" wage hikes in a bid to retain talent, Anantharaju said.
With growing demand, attrition has inched up 140-400 basis points for the top five Indian IT players sequentially in Apr-Jun. Tata Consultancy Services is the only company in the pack to have an attrition rate in single digit at 8.6%. Happiest Minds' metric stood at 14.7%, up 230 basis points sequentially.
Shares of the company today closed 0.4% lower at 1,364.50 rupees on the National Stock Exchange. End
Edited by Avishek Dutta
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