EQUITY99

IPO X-RAY
HAPPIEST MINDS TECHNOLOGIES

Company Overview:
Happiest Minds Technologies is a digital transformation, infrastructure, security and prod-
uct engineering services company.It has capabilities to provide end-to-end solutions in
digital space. It offers digital business, product engineering, infra management and security
services. It supports the customers in innovating new ways to interact with their clients
which makes them more efficient, responsive and engaging. It offers solutions across the
spectrum of various digital technologies such as RPA, SDN/NFV, big data and advanced ana-
lytics, IoT, cloud, BPM and security. Company is headquartered in Bangalore, India and has
its operations in the US, UK, Canada, Singapore and Australia.

Objects of the Issue:

The object of the offer is to harness the benefits of listing the equity shares on the
exchanges. The net proceeds from the issue will be utilised for:
a) Meet long term working capital requirement (INR 1bn)
b) General corporate purposes
EQUITY99
IPO X-RAY
Investment Rationale:
Improved key account relationships and obtained new accounts
Company focuses significantly on understanding the behaviour, preference and trends of its customers
through research and a consultation process. This gives them a differentiated perspective theythey bring to
the client engagements. Company continuously expands its relations with existing customers by supporting
them in solving new problems and become more engaging and agile.Its tally of client accounts with mini-
mum spend p.a. of USD 1mn, USD 5mn and USD 10mn has grown in the last 3 fiscals and they aim to continue
to grow the key client relations. Strengthening of its relations with existing customers will remain a core
strategy as they continue to leverage knowledge of emerging technology and expertise in order to get incre-
mental growth in its business.

Improving existing partnerships and entered into new tie-ups with Independent software
vendors
Company’s focus on software product development for such ISVs has shaped key aspects of its service offer-
ings as well as its culture of software engineering excellence, enabling them to expand its services into other
industry verticals. To increase the efficiency of the software development process, company has created
proprietary software development lifecycle processes, applications and tools. Company’s aim is to be a
market leader in providing high-quality software engineering services for global ISVs and upcoming tech-
nology companies. They will continue to develop new solutions jointly with its partner ISVs, which will help
them in getting a greenfield customer base. This will aid the company in cross selling and upselling to newer
customers. They have already created multiple innovative solution accelerators on the Azure platform like
Connected Field Service Accelerator (IoT devices are connected with cloud technologies), external facing
chatbots available on websites for customer interaction, data lake and streaming analytics platform and
prediction models.

Financial Analysis:
Company’s revenue grew at a CAGR of 23% over FY18-20. EBITDA grew by 77%YoY to INR 971mn in FY20.
EBITDA margins expanded by 460bps to 13.9% in FY20. Company’s EBITDA loss was INR 186mn in FY18.
Company’s PAT grew multi-fold by 405% YoY to INR 717mn in FY20. In 1QFY21, Company’s
Revenue/EBITDA/PAT stood at INR 1,770mn/INR 379mn/INR 502mn respectively. EBITDA margins stood at
21.4% in 1QFY21. Company’s operating cash flow has been positive in all the recent fiscals. OCF stood at INR
1,122mn in FY20 (INR 576mn in FY19). Recent Gross Debt/Equity stood at 0.3x. RoCE/RoE stood at
26.3%/27.0% respectively in FY20. Happiest Technologies has shown significant improvement in its finan-
cial performance over the recent fiscals, and we believe this trajectory will continue given the strong
focus on growth strategy of the company.

Outlook and Valuation:

Happiest Minds Technologies repeat business (revenue from current customers) has steadily grown and con-
tributed a significant portion of its revenue from contracts with customers over the fiscals which highlights
a high degree of customer stickiness. Company has 148 active customers. Over the fiscals and currently
during the ongoing spread of Covid-19, they have successfully implemented its business continuity plans
including to achieve agile work-from-home practices to ensure connectivity across the group. Company is
valued at P/E of 34.5x based on diluted EPS of FY20 as compared to industry average of 26.9x. Albeit based
on positive sentiments around the IT industry and new technologies, we believe this would be a good
opportunity for investors. Therefore, we advise “SUBSCRIBE” to this IPO
EQUITY99
IPO X-RAY
Disclosure:
Authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report
accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation
was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research
Analyst or his/her relative or Equity99 Ltd. does not have any financial interest in the subject company. Also Research
Analyst or his/her relative or Equity99 Ltd. or its Associate may have beneficial ownership of 1% or more in the subject
company at the end of the month immediately preceding the date of publication of the Research Report. Further
Research Analyst or his/her relative or Equity99 Ltd. or its associate does not have any material conflict of interest. Any
holding in stock – No.

Disclaimer:
This report has been prepared by Equity99 Ltd. and is meant for sole use by the recipient and not for circulation. The
information and opinions contained herein have been compiled or arrived at, based upon information obtained in
good faith from sources believed to be reliable. Such information has not been independently verified and no guar-
anty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such
information and opinions are subject to change without notice. This document is for information purposes only.
Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and
this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or
other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing
or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country
or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or
regulation or what would subject Equity99 Ltd. or its affiliates to any registration or licensing requirement within such
jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same
may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or
published for any purposes without prior written approval of Equity99 Ltd. Foreign currencies denominated securities,
wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or
price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influ-
enced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell
or a solicitation to buy any security. Equity99 Ltd. may from time to time solicit from, or perform broking, or other
services for, any company mentioned in this mail and/or its attachments. Equity99 Ltd. and its affiliated company(ies),
their directors, analysts and employees may; (a) from time to time, have a long or short position in, and buy or sell the
securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities
and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict
of interests with respect to any recommendation and other related information and opinions. Equity99 Ltd., its direc-
tors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages
sustained due to the investments made or any action taken on basis of this report, including but not restricted to,
fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the
dividend or income, etc. Equity99 Ltd. or its associates might have managed or co-managed public offering of securi-
ties for the subject company or might have been mandated by the subject company for any other assignment in the
past twelve months. Equity99 Ltd. or its associates might have received any compensation from the companies men-
tioned in the report during the period preceding twelve months from the date of this report for services in respect of
managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage
services or other advisory service in a merger or specific transaction in the normal course of business. Equity99 Ltd. or
its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third
party in connection with preparation of the research report. Accordingly, neither Equity99 Ltd. nor Research Analysts
have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts
is not based on any specific merchant banking, investment banking or brokerage service transactions. Equity99 Ltd.
may have issued other reports that are inconsistent with and reach different conclusion from the information
presented in this report. Research entity has not been engaged in market making activity for the subject company.
Research analyst has not served as an officer, director or employee of the subject company.