Happiest Technologies Ltd - IPO Note

Private Client Research




IT - Software


Happiest Technologies Ltd

IT - Software

September 07, 2020

Rating: Subscribe

Sensex: 38248.88

CNX Nifty: 11291.10



Price range
INR 165-166
Issue Period
Sep 07, 2020 - Sep 09, 2020


September 07, 2020



CNX Nifty








Issue details

Face value (Rs.)
Market lot
Issue size
697.79 - 702.02 cr
Public Issue
Market cap post IPO
2,424 -2,438 cr
Equity Pre - IPO
28.05 cr
Equity Post - IPO
29.37 cr
Issue type
Fresh Issue and offer for sale

Shareholding (Pre IPO)


Shareholding (Post IPO)


+91 22 6639 3000


Strong Brand in Digital IT Services
HMTL’s target market includes business services, IT services, infrastructure-as-a-service, applications, application development and deployment. HMTL’s brand positioning “Born Digital. Born Agile” is a reflection of digitalization being built into the essence of itsbusiness. Since inception, it has focused on software product development, which has been refined through repeat, multi-year engagements with various global Independent Software Vendors (ISVs).The company has developed a culture focused on innovation, technology leadership and process excellence, which helps in maintaining a strong reputation with its customers. Its work with renowned ISVs and emerging innovative technology companies which focus on new trends, exposes it to customers’ business and strategic challenges, allowing to develop vertical-specific domain expertise. HMTL’s experience with ISV and technology company customers enables itto grow its business in multiple industries, including Edutech, HiTech, Industrial/Manufacturing, BFSI and Retail.

Growing high revenue generating customer accounts with a high proportion of repeat revenues -
HMTL has generally witnessed an increase in the number of its top accounts by revenue contribution. HMTL has repeat business from its customer base, which includes more than 35 Fortune2000 / Forbes200 / Billion $ corporations (Source: Frost & Sullivan Report). Its broad range of offerings helps it to up-sell and its multiple business units help it to cross-sell to itsexisting customers as well as to acquire new customers. Average revenue per customer has increased from USD 471,472 in Fiscal 2018, to USD 501,562 in Fiscal 2019, and to USD 614,675 in Fiscal 2020. It has witnessed a steady generation of revenues from its existing customer accounts

Scalable business model with multiple drivers of steady growth -
HMTL’s business model is scalable across customer industries, functions and geographies. In addition to its spread across customer industries and geographic markets, it has also developed key operational drivers delivering steady growth. These drivers include its revenue mix, contract structure, utilization rates and bill rates.

Strong R&D capabilities with strength in disruptive Technologies -
HMTL’s experience in next-generation technologies drives its ability to provide solutions for digital evolution, agile transformation and automation. Its expertise includes technological capabilities developed to support mobile connectivity with other devices, social media, big data analytics and cloud delivery, among others. However, technologies that power digital evolution are rapidly evolving with new technological breakthroughs, and the company has shown an ability to rapidly evolve its offerings into newer areas such as AR/VR. HMTL has created offerings in emerging technologies such as Automation, Blockchain and Drones and Robotics which will help its customers to future-proof their digital transformation initiatives.

Strong Promoter Pedigree
The promoter of HMTL, Mr Ashok Soota has a very strong pedigree in the IT industry, having been the Vice Chairman of Wipro and the Chairman and CEO of Mindtree, thus having experience in running a top-tier IT services firm as well as having founded and run a mid-sized IT services firm from scratch, having achieved success in both roles. This is likely to stand the company in good stead going forward, given Mr Soota’s deep domain expertise and good connect with client boardrooms



The global technology spend is estimated to be USD4,218.7 billion in 2019. A growth of 6.3 per cent is expected year-on-year, reaching USD 6,080 billion by 2025. Software and engineering research and design (ER&D) are expected to lead the growth going forward. The accelerated spending on emerging technologies and the increase in the technology product mix within organisations that have conventionally invested in non-IT solutions are key reasons for the projected market growth. Digitisation and connectivity has created opportunities for service providers to focus more on R&D and consequentially created a demand within the software space, which is expected to increase going forward.

In 2019, the global enterprise digital spend stood at USD691 billion and represented about 16.3% of the total technology spend within the IT sector. By 2025, the enterprise digital spend is projected to be around 34% of the total technology spend with the digital spending growing at a healthy CAGR of 20.19%. With organisations looking to capitalise on the benefits of digitisation through leveraging capabilities around cost-reduction, service automation and efficient work channels, the adoption of digital technologies will improve. Legacy investments are already deemed as cost-overheads and the cloud-based digital service offerings present valuable opportunities to small and mid-size organisations that look to benefit from the digital era.

The global IT spends across key emerging technologies are expected to grow from USD 1,160 billion in 2019 to USD 3,558 billion in 2025 growing at a CAGR of 20.5%.

The increasing utilisation of robotic process automation (RPA) in business process integration is expected to deliver a healthy growth of the segment that is projected to reach a market size of over USD 7 billion by 2025, growing at a CAGR of 25%.

AI and machine learning are increasingly being adopted as a modern solution by organisations that are looking to leverage automation and intelligence from technological solutions to iron out their business inefficiencies. The combination of these two technologies is expected to grow at a rate of 55% from 2019 to 2025.

Blockchain solutions have already gained significant traction within the IT landscape and are expected to see a considerable momentum going forward owing to the success demonstrated in the finance and trading sectors. Being one of the fastest growing markets, it is expected to have a healthy growth rate of over 80% from 2019 to 2025.

Cybersecurity has always been a core component within the IT sector and is increasingly gaining importance with the advancement of connected technologies. Organisations are looking for increased security solutions, which is expected to drive the market at a CAGR of 14% and is projected to reach a size of USD 266.7 billion by 2025.

Immersive media has already gained considerable momentum and the growth within the segment is projected to catapult over USD 700 billion dollars by 2025 due to the number of immersive, innovative solutions created within the market space.

Cloud computing and related services are expected to have a steady growth of 21.4% CAGR, owing to the ability to deliver cost-efficient and customised service.

The increasing demand for connectivity is already creating acceleration within the IoT segment, which is expected to have a healthy CAGR of 14.2%.


  • In Fiscal 2018, 2019 and 2020, revenue from United States contributed 73.5%, 75.5% and 77.5% respectively,of total revenues. Any worsening economic conditions or factors that negatively affect the economic conditions of the United States could materially adversely affect the business, financial condition and results of operations.
  • HMTL generates a significant portion of revenues from a small number of customers, and any loss or reduction of business from these customers could reduce the revenues and materially adversely affect the business, financial condition, and results of operations.
  • HMTL has substantial dependence on the US and UK for business. The company is likely to get impacted by major foreign currency swings, mainly of the USD and GBP against the INR, which could impact revenue and profitability.
  • HMTL has been one of the front runners in the digital race; major competitors include top-tier and mid-tier IT firms such as Accenture, TCS, Infosys, Wipro, HCL Technologies, Mindtree and Persistent Systems, which arerapidly expanding their digital offerings and gaining scale. This could pose a challenge for the company going forward

Company Description

Happiest Mind Technologies Limited (HMTL), promoted by Ashok Soota,was incorporated on 30th March, 2011. The company, positioned as “Born Digital. Born Agile”,focuses on delivering a seamless digital experience to its customers. It helps their customers in finding new ways to interact with their users and clients enabling them to become more engaging, responsive and efficient.Its business unit comprises of Digital Business Service, Product Engineering Services and Infrastructure Management and Security Services. Its business unit is supported by the three Centres of Excellence (COEs) -Internet of Things (IOT), Analytics/ Artificial Intelligence (AI) and Digital Process Automation (DPA). In FY20, 97% of HMTL’s revenues came from digital services, which is one of the highest among Indian IT companies.

As of Q1FY20, HMTL had 148 active customers, with repeat business growing steadily and contributing a significant portion of its revenue over the years indicating a high degree of customer stickiness. Since inception, the company has focused on software product development, which has been refined through repeat, multi-year engagements with various global Independent Software Vendors (ISVs). The company has partnered with global ISVs such as Microsoft, Amazon Web Services Intel, IBM, McAfee, Netsuite, Salesforce, Cloudlending, Pimcore, Mindsphere etc. HMTL’s agility and resilience has stood out in recent years. In Q1FY20/FY20, it delivered 90.1%/87.9% respectively of its projects through agile delivery methodology.  Over the years and currently during the ongoing Covid-19 pandemic, the company has successfully implemented its business continuity plans including to achieve efficient work-from-home practices to ensure connectivity across the enterprise.

Business Unit
Digital Business Services (DBS):
DBS offerings are aimed at (i) driving digital modernisation and transformation for its customers through digital application development and application modernisation for an improved customer experience, enhanced productivity and better business outcomes; (ii) implementation of solutions, development and implementation of solutions, capabilities for improving data quality of the customer’s platform, assistance in designing and testing of operations and management of platform and modernisation of digital practices; and (iii) consulting and domain-led offerings such as digital roadmap, mindful design thinking, and migration of on-premise applications to cloud.

Product Engineering Services (PES):
HMTL’s PES helps the company’s customers to capitalise on the transformative potential of ‘digital’ by building products and platforms that are smart, secure and connected. Itprovidesits customers a blend of hardware and embedded software knowledge which combines with its software platform engineering skills to help create high quality, scalable and secure solutions. Its offerings extend across the development lifecycle from strategy to final roll out while ensuring quality. HMTL gets its clients started on this journey with digital foundry that allows building rapid prototypes for customers and providing a scalable Minimum Viable Product (MVP). HMTL embraces a cloud and a mobile friendly approach along with an agile model that is supported by test automation to help clients accelerate their time to market and build a competitiveadvantage.

Infrastructure Management & Security Services (IMSS):
IMSS offerings provide an end-to-end monitoring and management capability with secure ring-fencing of the company’s customers' applications and infrastructure. It provides continuous support and managed security services for mid-sized enterprises and technology companies. Specialized in automation of business and IT operations with DevSecOps model and with NOC/SOC, it strives to ensure that the data centre, cloud infrastructure and applications are safe, secure, efficient and productive. HMTL security offerings include cyber and infrastructure security, governance, risk & compliance, data privacy and security, identity and access management and threat and vulnerability management. Its infrastructure offerings include DC and hybrid cloud services, workspace services, service automation (RPA, ITSM & ITOM), database and middleware services and software defined infrastructure services.

Key Details

(Rs. Crores)

Particulars FY18 FY19 FY20 1QFY21
Digital Service Offerings (% of revenue)
Digital Infrastructure/Cloud 40.90 31.20 43.70
SaaS 28.60 29.40 23.60
Security Solutions 10.20 14.90 7.60
Analytics/AI 9.10 11.60 12.10
IoT 8.40 9.80 9.30
Total 97.20 96.90 96.30
Vertical Break-Up (% of revenue)
Edutech 18.00 21.30 21.30 27.00
Hitech 24.60 21.00 21.00 20.50
BFSI 17.90 18.20 17.50 17.40
Travel, Media & Entertainment 11.00 13.80 17.10 12.90
Retail 7.00 6.90 7.50 5.60
Industrial 6.20 8.10 7.00 6.40
Manufacturing 3.20 3.80 3.70 5.60
Others 12.10 6.90 4.90 4.60
Total 100.00 100.00 100.00 100.00
Geographic Break-Up (% of revenue)
USA 73.50 75.50 77.50 77.30
India 11.70 11.90 11.90 10.90
UK 11.40 9.50 7.20 9.80
Others 3.40 3.10 3.40 2.00
Total 100.00 100.00 100.00 100.00
Delivery-Wise Break-Up (% of revenue)
Onsite 21.40 22.00 22.50 21.00
Offshore 78.60 78.00 77.50 79.00
Total 100.00 100.00 100.00 100.00
Project-Wise Break-Up (% of revenue)
Fixed Price 18.40 16.80 19.00 18.80
Time & Material 81.60 83.20 81.00 81.20
Total 100.00 100.00 100.00 100.00
Billing Rates US$/hour)
Onsite 89.40 90.40 91.10
Offshore 24.20 25.50 25.60
Customer Size Break-Up (Nos.)
USS$ 1-5 million 14.00 18.00 24.00
US$ 5-10 million 2.00 2.00 0.00
>US$ 10 million 0.00 1.00 1.00
Total 16.00 21.00 25.00
Utilisation rate (%) 68.40 77.30 76.90 74.90
Source: Stockaxis Research, Company Data

Profit & Loss Statement:- (Consolidated)

(Rs. Crores)

Particulars (in mn) FY18 FY19 FY20 Q1 FY21
Net Sales 4629.00 5904.00 6982.00 1770.00
Total Expenditure 4815.00 5355.00 6011.00 1392.00
EBITDA -186.00 548.00 971.00 379.00
EBITDAM(%) - 9.00 14.00 21.00
Depreciation 208.00 248.00 202.00 51.00
EBIT -394.00 301.00 769.00 327.00
EBITM (%) - 5.10 11.01 18.47
Int. and Finance 100.00 159.00 80.00 19.00
Other Income 262.00 115.00 160.00 100.00
PBT -231.00 130.00 736.00 408.00
Tax -6.00 -12.00 19.00 -93.00
Reported PAT -225.00 142.00 717.00 502.00
PATM (%) - 5.00 12.00 28.00
Diluted EPs -1.50 1.80 5.60 13.70
Source: Stockaxis Research, Company Data


Happiest Minds Technologies has 148 active customers as on 1QFY 21. Its repeat business has steadily grown and contributed a significant portion of its revenues from contracts with the customers over the years, which indicates a high degree of customer stickiness. As per the Promoter, ~76% of the company’s total revenues has not been affected by Covid-19, and the existing cash balance in the books is for future strategic acquisitions. Investments in the digital space and cloud computing are expected to increase owing to a shift towards remote business models and a rise in the number of online channels utilised by multiple industry verticals during the pandemic.

At the higher end of the price band, the issue is valued at 34.01X FY20 P/E as compared to industry average of 26.9X. Investors with the long term view can subscribe the IPO.

Key Information:

Use of Proceeds:
The IPO aims to mobilize INR110 crore (INR1.1 billion) by issuing fresh shares. However, there will also be an Offer for Sale (OFS) by promoters and existing investors, involving 35.7million shares amounting to as much as INR592.01 crore. This puts the total IPO size to INR 702.01 crore.  The net proceeds will be used to meet the long term working capital requirement and General corporate Purposes.

Book running lead managers:
ICICI Securities, Nomura Financial Advisory & securities Pvt Ltd

Mr Ashok Soota (Promoter, Executive Chairman and Director of the Company), Mr Venkatraman Narayanan (Executive Director and CFO of the Company)