Mid-size IT services firm Happiest Minds reported a nearly 29 per cent drop in net profits to Rs 37.5 crore in the quarter that ended June, even as its revenues increased by 41 per cent to Rs 331 crore compared to the corresponding three month period in the previous year.

The company attributed the decline in profits to higher effective income tax and an exceptional expense of Rs 6.1 crore in the first quarter on account of loss of fair valuation of warrant liability linked to its acquisition of Pimcore Global Services.

EBITDA margin for the company stood at 26.1 per cent in Q1 FY22 compared to 25.6 per cent in the year-ago period. Happiest Minds had previously guided that EBITDA margins would be in the range of 22-24 per cent.

“We have seen significant double digital growth of our total income and revenues. We have been able to maintain the EBITDA despite the increase in costs we’ve seen in wage and people-related areas,” said Venkatraman N, MD, and chief financial officer at Happiest Minds. “It’s a cracking start to a great year.”

On the decline in profits, Venkatraman said that the company saw a swing of Rs 25-26 crore on account of taxes, which in Q1 last year was actually negative because of deferred tax accounting. On the exceptional expense of Rs 6.1 crore, he said its essentially due to increasing business performance for its acquisition which has an earnout structure.

Happiest Minds said that it had 180 clients, including 18 additions in the course of the quarter ending June. The company said it was seeing strong demand in retail, ed-tech, and media and entertainment verticals which are seeing growth in digitisation, apart from manufacturing and energy.

The company said it won an analytics deal from a US-based electric vehicle charging infrastructure provider in the quarter.

“We saw three or four decent size deals in the quarter and demand has been quite broad-based, which we expect to continue for the next few quarters. In terms of technologies, there’s always demand for cloud and user experience, but we’re also seeing an increase in use cases for automation both on the infrastructure side and on the process side,” said Joseph Anantharaju, executive vice-chairman and CEO – Product Engineering Services at Happiest Minds.

In terms of people, the company closed the June quarter with 3,538 employees, with 310 net additions in the quarter. The company said it would continue to add people at a similar or slightly higher pace in the next three quarters of the current fiscal year. Happiest Minds has also declared a 100 per cent payout of variable pay for the year, as it looks to better retain talent.

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