Happiest Minds Technologies Ltd (NSE: HAPPSTMNDS) Q1 2026 Earnings Call dated Jul. 30, 2025
Corporate Participants:
Unidentified Speaker
Priyanka Sharma — Head of Investor Relations
Ashok Soota — Chairman and Chief Mentor
Venkatraman Narayanan — Managing Director & Chief Financial Officer
Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services
Analysts:
Unidentified Participant
Aditi Patil — Analyst
Ruchi Mukhija — Analyst
Vinesh Vala — Analyst
Dipesh Mehta — Analyst
Presentation:
operator
Sam, please wait while you are joined to the conference. The conference is now being recorded. It sa. Sam. It. It. It Sam. It. It. Foreign. Ladies and gentlemen, good day and welcome to Happiest Mind Limited Q1FY26 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions on after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on a Touchstone phone. Please note that this call is being recorded with this. I now hand the conference over to Ms. Aditi Patil from ICICI Securities. Thank you. And over to you, ma’. Am. Thank you.
Aditi Patil — Analyst
Good morning ladies and gentlemen. Thank you for joining us today on. Q1FY26 earnings call of Happiest Minds Technologies Limited on behalf of ICICI Securities, I would like to thank the management of Happiest Minds for giving us the opportunity to host this earnings call. Today we have with us Mr. Ashok Suta, Chairman and Chief Mentor, Mr. Joseph Anantharaju, Co Chairman and CEO Mr. Venkat Raman Narayanan, Managing Director. Mr. Rajiv Shah, Executive Director. Mr. Ram Mohan, CEO Infrastructure Management and Security Services. Mr. Sridhar Manta, CEO Generative AI Business Services. Mr. Anand Balakrishnan, CFO and Ms. Priyanka Sharma, Head Investor Relations. I will hand it over to Priyanka for Safe Harbor Statement and to take the proceedings forward.
Thank you. And over to you, Priyanka.
Priyanka Sharma — Head of Investor Relations
Good morning to all participants in the call. Welcome to this conference call to discuss the financial results for the first quarter ended June 30, 2025. I am Priyanka, Head of Investor Relations. We hope you have had an opportunity to review the earnings release we issued yesterday. Let me quickly outline the agenda for today’s call. Ashok will begin the call by sharing his perspective on the business environment and our results. Joseph and Venkat will then speak about our financial performance and operational highlights. After which we’ll have the floor open for Q and A. Before I hand over, let me begin with the Safe harbor statement.
During the call, we could make forward looking statements. These statements consider the environment we see as of today and carry a risk in terms of uncertainty because of which the actual results could be different. We do not undertake to update those statements periodically. Let me now pass it on to Ashok. Ashok, over to you.
Ashok Soota — Chairman and Chief Mentor
Thank you, Priyanka. Good morning everyone. It is truly a pleasure to have you with us today as we step confidently into a new fiscal year in Q1 FY26 Happiest Minds has powered ahead, delivering 17.5% year on year growth in constant currency and maintaining a robust margin of 21.4% firmly within our guided range. Our EBITDA this quarter stood at 124 crores, achieving a standout 12.9% sequential growth well ahead of most peers and industry trends in a quarter where most reported muted or single digit growth. Our strong profitability and disciplined execution clearly sets us apart. What makes this milestone even more significant is that we achieved it while continuing to invest deeply in our future, strengthening our delivery ecosystem, scaling our platforms, driving innovation across our focus verticals and making sustained investments in the GENIE Ag business unit and in the net new sales unit.
Friends as shared in our last call, over the past two years we have launched 10 transformational initiatives and it is gratifying to see them now taking root and delivering tangible results. These initiatives are helping us not only to grow but also broaden our horizons, unlock new opportunities and shape the digital landscape ahead. We are proud to have delivered another quarter of double digit growth backed by a superior margin profile which has been sustained for 20 consecutive quarters, earning our customers trust as their advisors and co creators in shaping their digital journeys. Last quarter we announced that Joseph has become the Co Chairman and CEO as a part of our planned succession, Joseph brings his steady vision and deep commitment to drive profitable growth and strategic strength.
Let me touch upon the foremost strategic transformations that have touched and shape this quarter’s performance and will continue to drive value in the years ahead. Through our acquisitions in the previous financial year, we have significantly deepened our capabilities in BFSI and accelerated our leadership in AI driven digital transformation. These entities are now fully integrated into the Happiest Minds fabric, delivering innovation across 13 countries, empowering performance that is well above industry benchmarks. Three other significant transformational changes were introduced in the second half of FY25 and we had shared that the impact would become visible in FY26.
We are seeing this exactly this position unfold in this quarter and will continue hereafter. Reorganizing Hatteras mines on six industry verticals basis was one of these changes. We are noticing that this verticalization strategy is already fueling accelerated growth in travel, media and entertainment and manufacturing. BFSI has become our largest vertical and Healthcare our third largest, is also gaining strong momentum. At the same time, our focused investments in the Genai business unit under Sridhar Manta’s leadership and the net new sales engine under Maninder are not only advancing this quarter’s growth but have also built a strong foundation for sustained high quality growth in the quarters ahead.
Friends, as you are aware, the global IT industry continues to face its own set of challenges. With many peers reporting flat or subdued performance. Our 10 strategic transformation and focused investments have enabled us to navigate this environment with clarity and conviction, driving growth ahead of industry levels. We believe the impact of these transformational changes will continue to drive strong momentum through the coming quarters this year and even More so in FY27. We are confident that this momentum will help us deliver double digit growth over a three year cycle that began last year and will carry through FY27.
On that note of confidence and progress, I will now hand it over to our co Chairman and CEO Joseph who will bring these strategies to light with stories from the ground, recent wins across our business and updates on the other key initiatives.
Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services
Can you hear me clearly now?
operator
Too much echo, sir.
Ashok Soota — Chairman and Chief Mentor
I think. Joseph, can you step back a little bit from microphone and speak? Sure. Is it better?
operator
No, sir. Yeah, yeah. A little better though.
operator
Venkat, is it better now?
Venkatraman Narayanan — Managing Director & Chief Financial Officer
Yeah, much better.
Ashok Soota — Chairman and Chief Mentor
Yeah, better.
Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services
Thank you Ashok and good morning to everyone on the call. I’m delighted to share that this quarter has been another period of solid growth and outstanding performance for Happiest Minds across all fronts. Leveraging the strong foundation we have built and the 10 transformational initiatives underway, we are seeing momentum accelerate across our key business units and geographies, translating into strong double digit growth of 17.5% and healthy profitability. Active customers have grown from 281 to 285 and million dollar plus customers have increased from 57 to 59, showing how we are deepening relationships and converting early engagements into multimillion dollar partnerships.
Repeat business remains strong at 94%, a consistent metric that reflects both customer loyalty and a stable growth engine. Let me briefly touch upon the demand environment. The global IT industry continues to face a mixed environment marked by macroeconomic and geopolitical uncertainty. At the same time, customers need to execute on their digital and AI strategies to remain competitive and deliver growth. Demand remains resilient in key verticals such as BHSI and healthcare, while technology, media, entertainment and manufacturing are beginning to show early signs of renewed investment. Against this backdrop, Happiest Minds has delivered a standout quarter. In an environment where customers are seeking partners to help them achieve more with their modernize data and adopt AI Genai for greater efficiency and resilience, our continued investments in these areas are clearly paying off.
These focused investments have translated to strong results across our portfolio. Our Genai business unit led the way this quarter with 12.7% sequential and 82% year on year growth while showing significant traction with multiple pilots, scaling into long term engagements and utilization improving sharply from 34.3% to 48% 40.8% IMSS is driving growth with stronger realizations and three new global clients added this quarter and both IMSS and PDS delivered healthy year on year gains, underscoring the broad based momentum we are building, I’m also delighted to share that Our annual flagship TechEvent Blips 2025 concluded successfully on the 24th of July under the theme Generate and Innovate, our teams showcased how we disrupt, how do we drive disruption, innovation and acceleration, highlighting our commitment to building future ready solutions and platforms.
Many of the solutions and concepts showcased in Blitz hold huge potential and should contribute to our growth in the coming years. When I look at this quarter, I see three pillars of unifying strengths, igniting innovation and cultivating enduring partnerships coming alive in tangible ways. When I stepped into this role, I carried a clear vision to build happiest minds into an organization that integrates seamlessly, innovates relentlessly and forges partnerships that stand the test of time. This quarter that vision is translating into action and measurable results. We are unifying strengths by integrating our acquired entities, harmonizing processes, platforms and talent to build a stronger, better and bigger organization.
We’re igniting innovation by investing in next generation solutions, advancing cloud AI and gen AI offerings and leveraging domain expertise to power client transformations. Third, we are cultivating enduring partnerships with some of the leading technology companies, deepening engagements, co creating on priorities and earning long term trust. Let me share a few stories from the ground. A leading US airport chose us to reimagine the customer interaction platform not as a proof of concept but as a full production grade gen air deployment. Transforming passenger experiences in the airport in bfsi, an insurance major entrusts us to automate critical workflows using Microsoft’s Power platform.
In Australia, a mining services company engaged us to overall IT infrastructure and cyber security at a time when operational resilience is a boardroom priority. We’re also working with the global home improvement retail chain on custom finance and IT solutions and with a multinational logistics company to embed Genai into the operations. These are some of the many wins powered by investments in net new sales combined with a proven land and expand approach. Our industry group virtualization strategy is also showing results. We are seeing strong momentum in technology, media and payment and in industrial manufacturing with a resurgence in discretionary spending.
BFSI our largest vertical contributing 26% to revenues and healthcare as third largest vertical. Continue to build on the momentum. We’re also witnessing strong traction global capability centers or GCCs and within the private equity ecosystems, we continue to support PE portfolio companies in their post acquisition journeys, unlocking synergies while enabling GCCs to to modernize operations and deliver greater value. These initiatives are gaining momentum and we expect them to drive meaningful results and growth in the coming quarters. A product led SaaS strategy is another important driver. ATA, a flagship unified banking platform, is showing encouraging signs of expansion in bfsi.
Our insurance in a box platform is replacing fragmented systems with a unified low code solution that streamlines insurance operations, accelerates product launches, lowers costs and ensures compliance. Together these efforts are enabling insurers and VMAs to operate smarter, faster and at scale. A revolutionary healthcare product built on unmatched bioinformatics capabilities and collaboration with leading research institutions is progressing well too, with development on track for a potential launch by Q1 of FY27. In Q1, FY26 we delivered EBITDA with a 21.4% margin, achieving 12.9% sequential growth. Sustaining this level of profitability while integrating acquisitions, investing in Genai and strengthening our sales engine is a testament to the resilience and scalability of our business.
When you connect the dots, our strategic transformations and focused investments and are clearly driving strong financial outcomes, telling a compelling story of forceful change, seamless integration and long term value creation. Friends, as I reflect on this quarter it is clear in a challenging industry and demand environment our transformation initiatives are working, our growth is broad based and our outlook remains strong. With that note of confidence and excitement about the road ahead, let me now hand it over to Venkat, our Managing Director to walk you through the numbers and share how we are thinking about the future.
Venkat, over to you.
Venkatraman Narayanan — Managing Director & Chief Financial Officer
Thank you Joseph and good morning everyone. The next few minutes I’ll cover the financial and operational highlights of the quarter. First quarter of FY26 to start with we posted a very encouraging set of numbers. Seeing numbers and results tricking in from others in the industry, I do feel even more so. I At 64.4 million we have shown a sequential growth of 2.3% in dollar terms. Coincidentally, growth in constant currency has been also at 2.3%. Our year over year growth on discount was 16%. This is the 20th quarter after our IPO where we have shown sequential and year over year growth in our revenues.
Our revenue CAGR in constant currency if counted from IPO is about 25%. Coming back to the quarter in rupees, we reported a total income of rupees 580 crores, a growth of 18.5% year over year. I would like to mention that our results reflect our unwavering focus on growth alongside with profitability. Operating margins at 17.6% showing a sequential growth of 19.6% reflects a swing back over the temporary dip we saw in the previous quarter. Year over year growth of 5.8% in our operating margins. Despite continued investments in our Generative AI business, new sales, engineering and other transformational agenda items reflect our commitment to our vision of profitable growth.
Now if you look at our segmental results, Generative AI Business Services has broken even at an operating margin level this quarter. This is a swing from a loss of about 2.53 crores in the previous quarter to a marginal profit of 24 lakhs this quarter. This business ran at an average utilization of about 55%. Our opportunity cost, or rather I would like to call investment in the segment for the quarter continues to be about 3 crores. That’s computed on the basis that generative AI services, if it was to deliver similar levels of profitability as our PDES business or slightly higher, we should have seen a margin increase by about 3 crores.
Now if we adjust our operating margin for the above number and similar investments in our new sales engine, the number on profitability or operating margin we would get is about 18.4 to 18.5%. I refer to these adjustments to highlight the path we are taking to improving operating margins as we will see some cost pressures going forward into Q2 due to our planned pay increases in sum efficiency in our established businesses. Payback Start from our new business segments of Generative AI and our new sales engine and some bit of luck or benefit from foreign currency movements will be definitely required to mitigate people cost increases that we’ll see in the coming quarters.
Now coming to EBITDA we are back to 21.4 for the quarter which is about rupees 124 crores. Our profit margin percentage is within our estimated range of 20 to 22% on total income sequential year over year. EBITDA growth was 2012.9% and year over year was 6.2%. Will not delve too much into these as I’ve covered the rationale for growth and improvement while talking about operating margins. Our pat for the quarter at 9.9% and rupees 57 crores showed a sequential and year over growth of 68% and 12% respectively. Adjusted EPS as I mentioned in my earlier call, a better indicator of stable shareholder return was rupees for the quarter.
Coming to certain operational metrics, utilization for the quarter stood at 78.9%. This has been the best in the last nine quarters and reflects some of the steps taken towards improving efficiency in delivery and demand aligned resourcing that we are resorting to. As we had shared in our previous call, enhancing utilization remains a key priority and we are pleased to see our efforts yielding tangible results. We ended the quarter with 6,523 happiest minds showing a reduction of one. But here the story would not be complete if I didn’t tell you that our gross additions were close to 150.
Our attrition has trended upwards to 18.2% and efforts are on to manage this and bring this in line with previous quarters. Our DSO has slightly increased to 91 days and that’s being brought back or we’re trying to rein that in and bring it closer to a long term average of between 85 to 88. Capital return ratios of ROE and ROE has shown substantial improvement with 3% and 14% respectively. On customer we increased our million dollar clients to 59 from 57 in the previous quarter. Total customer increased on a net number basis by four to $285 billion.
Customers at state constant at and so has the average revenue customer remaining range bound at about $900,000 per customer. Looking ahead, we continue to drive growth in areas like cloud data, cybersecurity and AI led transformation in our verticals of focus while maintaining financial discipline for the year. Our effort is to deliver double digit growth in constant currency while maintaining our EBITDA margins in the range of 20 to 22%. Thank you for your time and continued trust. We’ll now open the call for questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press Star and two Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of Ruchi Mukeeja from ICICI Securities. Please go ahead.
Ashok Soota
Thank you.
Ruchi Mukhija
Thank you for the opportunity. Firstly, the question on your geographic growth mix. This quarter we saw our largest market US sequential revenue decline because in tandem our top client revenue has also declined. So could you help us Understand how the US market performed for us on CIRCLE accounts.
Joseph Anantharaju
You see, one of the criteria for the acquisitions we made last year was the diversification of our geographic revenues. If you remember recall maybe a year and a half back, our share of revenues from us was 75% or so, which was uncomfortably high. And through organic means and inorganic means we’ve been able to diversify. So it’s a deliberate strategy to get the share of US revenues around 60% or so. Now there’s been a small sequential decline in the revenues of revenues from India and there are a couple of reasons to this. The first reason is that one of our customers had a program that was a one and a half year program that just got completed.
We finished it in Q1, sorry, Q4 and therefore we’ve not redone the engagement. So excellent engagement and therefore that’s had some impact. Secondly, we had a customer that is relooking at their overall strategy and therefore they had a couple of programs there on pause. But as I mentioned earlier at a broad level I think while there are some challenges in the macroeconomic and geopolitical environment, I think customers are still, I see resilience in the demand environment and customers wanting to undertake and execute on their strategic initiatives especially so in the second half of Q1 and I think this momentum will carry over into Q2.
Ruchi Mukhija
My second question was for your geographies which strong growth this quarter, India and apac. So do we expect this kind of momentum from India and APAC to continue in the near future?
Joseph Anantharaju
If you look at the growth from India and apac, I would say it’s much on the higher side in this quarter. So while I expect the growth to continue, it would not be at the same level. But if you look at APAC through our acquisition of Pure Software, we did get a couple of large accounts on those accounts in the BFSI space. One of them is a leading banking and financial services company. It’s a global major, but we are doing most of our work with the units in APAC and that’s shown very good growth. We have solid relationships, good track record and we expect this account to continue growing and get into the $10 million range by end of the year.
And in India we do have healthcare company that we’re working with which has done quite well. We also had a few of the engagements that we’re doing with the US entities. Those have been transferred to India, the GCCs and and we’re engaging with the GCS out the movement of money dollars from US to India which has contributed to the slight drop in the North America revenues that you talked about and increased the growth in India. Having said that, I think India is a GEO that we are quite bullish about. Probably our share of revenues from India is among the highest.
And just given the the expected growth rate in the US GDP continued growth rate, I would say this is a GEO that we will continue focusing on.
Ruchi Mukhija
Sure. Secondly, last quarter we had mentioned that we will relocate our 1 billion revenue target. Now could you please share any Updates regarding over 1 billion revenue targets that we had earlier set?
Joseph Anantharaju
You want to take that Venkat? So you know Ruchi, as part of our vision we had set ourselves a goal of being a billion dollar company by FY31. And the market environment in which we had set that goal was a more conducive environment. There were several other goals that we have set as part of that vision on which we are progressing well. And if you really look at our CAGR from FY21 to FY25, we’ve done a CAGR of 28.5%. And to get to a billion dollar by FY31 we need around 22 to 23%. So it is doable.
But the market conditions are different. As we pointed out last time. We are relooking, we are tracking and reviewing the situation and when we feel that we need to make an announcement or an adjustment, we will come back. But as of now we are holding force.
Ruchi Mukhija
That’s the issue here. Thank you. Thank you.
operator
Thank you. The next question comes from the line of Ms. Aditi Patil from ICICI Securities. Please go ahead.
Aditi Patil
Thank you for the opportunity. So my question is an order book and pipelines. Can you give some color on how has the order book shaped up, maybe the bioi growth and how is the pipeline shaping up? And do you expect H2 to be better than H1 or we should see the normal seasonality in Q3?
Joseph Anantharaju
I think while we don’t share numbers on our order book and pipeline, we addressed this several times. I think there’s been a healthy growth in our order book and pipeline and this is cutting across multiple geos and verticals. So that’s the happening part as we speak. There are and I’d say it’s coming from two angles. One is the NN strategy that Ashok referred to. The team has come together over the last in Q1 and we had several large customers that have already got close and some that are in later stages. And a few of them have started with discoveries which should lead into larger implementations in Q2 and Q3 and others are starting off at good to decent size right off the bat.
So that’s on the NN part of it. A land and expand strategy which is something that has worked out really well for us, continues to do well. If you see the number of million dollar customers that’s gone up, we have one additional $10 million plus customer and one additional three to five million dollar customer. The million dollar customers have gone up from 57 to 59. So all of these metrics point or reflect the increased pipeline and the order book that we have.
Aditi Patil
And so therefore should we expect H2 to be better than H1?
Joseph Anantharaju
So Venkat, you want to take that one? Venkat?
Venkatraman Narayanan
Yeah, yeah, yeah, Aditi, I hope you guys can hear me now. Better somehow. Something glitchy right now, but yes, started the quarter with about 2.3% growth. Like we, like we mentioned and talked about on the call earlier, want to keep the same momentum and build on it. Obviously is expected to be better except you know, for the seasonal issues of some holidays in Q3 we should hopefully do better and that’s how we’ll achieve that double digit growth that I talked about.
Ashok Soota
Right.
Venkatraman Narayanan
For the year.
Aditi Patil
Okay, okay, got it. Yeah. My second question is on so we give the share of revenue from automation and there has been a significant increase in that. In so how do you define automation and what has driven this sharp growth?
Joseph Anantharaju
I think look at automation Aditi, the various components out here is RPA that includes infrastructure automation, bpa, business process automation and low code. No code related work. And if you just see that Genai also coming in, there’s a huge push towards automation. We’re looking at how do you automate most of L1 activities from an infrastructure monitoring standpoint and automate quite a bit of the L2 activities and we are building some solution accelerators internally to enable and to accelerate that. Again on business process automation, there’s been a huge push by customers to bring in more efficiency and to accelerate some of the process, whether it’s order to cash or managing inventory and other processes.
Just because of the cost pressures that they are facing. They’re making these investments in various automation activities which plays very well to our DPS UE that we created six, seven years back. And low code, no code is something that customers are looking at to enable citizen developers and to get applications out faster. And so all of these have contributed to the growth that you see of the revenue from automation from 25.3% to 28.2% in Q1.
Aditi Patil
Okay, okay, got it. The next question is on the high tech vertical. So this vertical has been soft for last two quarters and is on flat on Y or Y basis. So what has led to the softness and when should we expect recovery in this vertical? Joseph.
Joseph Anantharaju
You know the picture from the industry standpoint there is a slight, you know, correction to that number because of. The then.
Aditi Patil
And that that was reasonably large. Large customer and he was in the high tech vertical. Yeah, Joseph, sure, yeah.
Joseph Anantharaju
Even accounting for that movement that Venkat talked about, if you really look at that vertical, it’s like a duck speed under the water. There’s fair bit of movement between increases and drops. So we’ve had a couple of customers in the networking space and one in the tech space grow quite significantly during the quarter as reflected in the top 20 customers. At the same time, if you remember last earnings call we talked about a customer called vbc. We took a hit on our margins as well because of the write offs that we had to do. They were not able to raise the next round of funding and that project we had to stop and we talked about it in the last earnings.
So there’s been a slower effect of that and that was in the high tech vertical. But overall what I’m seeing is that there is spend in the high tech vertical but we put high tech and media entertainment together in some of the areas around networking on using more of Genai in these activities. On high tech analytics, which is a new initiative that we’ve started and our hope is that this work will demonstrate growth in the ensuing quarters.
Aditi Patil
Okay, got it. And color on the momentum in travel and manufacturing should we expect this momentum to continue going forward.
Joseph Anantharaju
So if you look at dme, there’s very little travel. It’s actually media entertainment if you ask me and we’ll probably reclassify it as such. But we had quite a few customers in this space who in one of the customers, which is one of the largest cinema chains in Mexico and globally, we did a discovery exercise on multiple digital areas and some of the implementation started in Q1. So that momentum should roll over into Q2 and Q3 as well as we ramp up the execution of these projects for another one of our US based customers who’s in the ad tech space case they’ve had good results in the last quarter.
I think the second half of last calendar year was not as good but they managed to recover and as such their spending has increased and we are their largest partner, engineering partner, so that has again contributed and that should sustain itself. Unless they do, their results improve and they decide to invest more. And there are a couple of other customers that have also contributed. Overall, I think in this space the areas to focus on are around data engineering, looking at how do you help them with ad management and generating additional revenue and those areas that our media entertainment domain is focused on.
Aditi Patil
Okay, thank you for the color. Just a last bit. Our unbilled DSO days has increased by next seven days. Qq. So is this like a quarterly phenomenon? Should we see this normalizing going forward?
Ashok Soota
We should see that normalizing. I did cover that in our DSO. It has gone up by about 4, largely because of the integrity the Middle east entity we acquired. We are coming. We are getting the inter.
operator
Sir, your voice is breaking.
Ashok Soota
Yeah, sorry.
operator
Your voice is breaking, sir.
Joseph Anantharaju
Yeah.
Ashok Soota
Okay. Aditi, can you hear me?
operator
Yes.
Ashok Soota
Yeah, so yeah, it’s because of the integration with gavs. We are getting our billing and systems online with them. So that that’s part of the process. We should be back to normal. It’s got nothing to do with the seasonality. It’s got to do with the integration and efforts around to get that back on track.
Aditi Patil
Okay, got that. Thank you for answering my questions.
operator
Thank you. The next question comes from the line of Vinesh from HDFC securities. Please go ahead.
Vinesh Vala
Hello?
operator
Yes sir, you’re audible.
Vinesh Vala
Yeah, thanks for giving me the opportunity, sir. So just basically on the vertical wise that our main focus would be on BFSI and high tech vertical which would be the growth driving vertical. What are the long term competitive advantage and market leadership position does we have to establish in that vertical and particularly in the sub segments within network it becomes.
Joseph Anantharaju
Sure. So let me take that question Vines. BFSI is going to be one of our growth verticals driven by the acquisitions that we made and come back into why I. I think that we are bullish about that vertical. But the second vertical is not high tech. But Healthcare is what I would say if you just look at the growth that we’ve demonstrated the last few quarters and the share of revenues and overall look at the market, Healthcare is the second month. So just thought I’d clarify that. Bfsi, I think there are several advantages that we have through the acquisition.
If you look at. I talked about the ARTA banking platform which is a huge demonstrator of our capabilities. If you have built our own banking platform, it signifies that we understand the space and the needs really well. So it helps a lot both in direct revenues from the banking platform and the pull through effect that it creates for this year. We are expecting the ARCA revenues to go up by 20 to 25%. So that will be one of the growth drivers. We also have the insurance space. There is quite a bit of capability that we got from Aureus and as we speak we have a couple of large prospects that are almost at the point of closure in the insurance space.
We also have insurance in a box which we’ve been selling to MGA’s and UMAs and to brokers. We started with Africa, but the plan is to extend that to other geos as well. Again there’s direct revenue and the ability to demonstrate our capabilities in this area. This is apart from various other accelerators and capability and competencies that we built both within the first world Happiest Minds and the pure software entities on healthcare. I think we’re very uniquely positioned as such. The market is going through a major transformation with data and connectivity being the core elements out here.
Whether you’re talking about MedTech or some of the devices that you see in the hospitals or the overall processes that customers are using, Genai is becoming a huge part of it. And as we speak collaborating, working with Happiest Health, we’ve been able to get deep knowledge and capabilities in multiple areas, whether it’s in medical devices, bioinformatics, applying Genai to various healthcare use cases. And this has helped us to build a healthy pipeline in this space as well as to get several new customers. And you know, we are very, very bullish about the contributions of healthcare vertical as we go forward.
Vinesh Vala
Okay, thank you. Next one was on the margin front. As you told that margin, EBITDA margin, we are holding up between 20 to 22%. So what are the financial strategies which will be deployed to mitigate the risks such as investment which we are doing in the new business and the sales teams?
Venkatraman Narayanan
Yep, I did cover that in my speaking points or talk. We are looking at efficiency improvement. One is utilization. You know, we are seriously focused on that. We are at 5, 6 quarter high at 78.9%. Second is generative AI and AI services that we have. The new business unit into which we are making just turned around on an operational basis just broke even. We are now hoping that that should get to the same profitability levels by end of this year or at least early next year, similar to that we see in pde, the company at large, which, which adds to the profit.
Third thing is the new sales engine that we have put in place nicely has made the hires and they take. There is a lead lag effect to all hires on Sales and they start pulling in the revenues that that should also add to, you know, should start defraying the investments that we made. So these are the things that we see as an upside lever to our profitability. Obviously you know, the newer markets and newer customers, all of that also contributing to the profit lever. Whereas you know, you are seeing a attrition at about 18.2%.
Joseph Anantharaju
So we have to address some of.
Venkatraman Narayanan
Those through compensation adjustments, which is what we do. So the pluses I talked about and some on the swings in terms of the downward impact of cost increases will have to be deflated. In all we are trying to margin levels, we are at 21.4% already. So 20 to 22% is a story of maintain and grow.
Vinesh Vala
Sir, one last question from my side that the growth which you talked about, double digit CC growth that includes M and A also or it is organic basis.
Ashok Soota
See, we don’t differentiate between M and A and organic, we say growth. So I’ll stick to that line. Our Q1 revenues is purely organic. We want to look at it because the base we’ve got no acquisition numbers going into that the sequential growth number that I talked about. And as of now we don’t have any M and A which is likely to close. So you can assume that’s the pace of the business that we are looking to grow organically for the year. But if there is some inorganic it will be on top of it is what I would estimate.
Vinesh Vala
Okay, thank you. Thank you. And all the best, sir.
operator
Thank you. The next question comes from the line of Dipesh Mehta from MK Global. Please go ahead.
Dipesh Mehta
Thanks for the opportunity. A couple of questions. First about the wage hike which you indicated in quarter two. Can you help us understand what would be the likely intake because of wage icon margin? Second question is about utilization. What would be our comfort range considering all skill requirement and utilization? If you can give some comfort range then I have follow up question related to this utilization. Thanks.
Venkatraman Narayanan
On the comp increase I would, I would not give you any specifics because work is in progress. You know, our typical cycles are in July every year for the C1 to C6 levels. So what’s happening in the industry? Nobody’s talking about it. There is deferrals, there is, you know, silence. But we are evaluating it very seriously and that’s something that we’ll come back to you and we can share a lot more details in the next call. So that’s on the compensation increase. The second was on utilization. We are at 78.9% I think we have touched numbers of 80, 79 to 80 in the previous quarters.
So we have to look at that sort of a number. You know, we have got that headroom. Like I said, Generative AI services on a cumulative basis is at about 55 56% of utilization. Need to get that up. Numbers are not too large. So you know, we don’t expect that to impact too much. But every percentage point on that helps defray cost. So that will be a focus.
Dipesh Mehta
No, I understand why I asked is if I look let’s say our implied growth guidance require around similar to Q1 kind of growth in next three quarter your headcount is declined quarter on quarter. Why? Whichever one look at it for last few quarters headcount remain flat. And that is why I just want to understand now if you are looking expecting similar momentum to continue when we need to see linear equation between headcount and revenue. That is what I try to understand. And second question is about jnai. If I look your investment intensity, what I’m doing is your revenue minus profit which to give absolute cost.
What is the investment in JNA unit this quarter? It seems to be taper on both. So whether we are optimizing or how to understand because typically that investment intensity should be higher absolute term it is showing some declines. If you can provide some sense.
Venkatraman Narayanan
I think the last one, the investment intensity is high. That’s why I highlighted even though you we are at break even. You know, if you look at the opportunity cost, it’s about three, three and a half crores.
Dipesh Mehta
No, but if, if I look at absolute number. So let’s say from 14 odd crore or 14 and a half 4 crore last quarter which was the expense in that unit. Now that expense has declined to 13.3 crore. So there is a decline.
Venkatraman Narayanan
Yeah, that’s because of you’re asking about the people. You know there are two parts to the generative AI business services. One is the direct people and second is also the people from AI analytics, data sciences, data engineering who get pulled into the business unit as and when required.
Joseph Anantharaju
So that’s why you will see a. Little bit of, you know that variability in the people casting. We have a dedicated team of 120 people plus we are training the entire workforce on AI tools. Then the business unit pulls people from the other units. So to simply put the bench cost. Of those people do not come into the AI unit. I hope you are following only the 120 people of dedicated people’s cost. And that’s why you will see that little Bit of bench cost differential between quarter and quarter.
Dipesh Mehta
Understand if you can ask employee related.
Joseph Anantharaju
Just to add to that. Dipesh, you know the way to look at investments is to, you know, one is some of the numbers that Venkat explained. But as we speak there are two. There are two three areas in which we are investing from a gen A angle. The first is we’re getting all of our people trained. We’ve done 90% coverage on 101 courses. We have 201 courses that we’re rolling out to a larger set of the people. What percentage we’ll cover is still to kind of figure that out. That’s one investment. Second is a lot of solutions and replicable solutions that are being developed that we expect will contribute to both, I would say slightly nonlinear growth because these are solutions that we 50, 60% completed that we can take across to multiple customers and also replicable sales so that there’s ease of selling and we reduce the effort involved and get more output.
And the third is the there’s a whole list of use cases that we’ve come up with and we’re trying to build PoCs and demos that will enable us to get more revenues. So I would look at our investment from those angles and as long as we are doing all of these things it will lead to higher growth. Venkat, back to Venkat for the other question.
Venkatraman Narayanan
Yeah, no, his question is more from the segmental results. He’s asking have you investment intensity into generative AI business services? My simple thesis is that there is cost which is lying in IMSS within the verticals which is all not getting pulled and shown as part of generative AI, which is what you are also mentioning, Joseph. For example, Anander is adding salespeople within the vertical. Those vertical guys are today selling the generative AI solutions that we have. But is that cost being shown as part of generative AI may not be to that extent because we have not gone to that level of accounting where I’m coming from.
Joseph Anantharaju
So if you really do that split.
Dipesh Mehta
And push all of that cost into. Generative AI, maybe yes you will see. The investment intensity to be higher or the same ratio as last quarter or the previous quarters. Understand if you can ask answer the first part of the question. Employee headcount addition and the likely revenue implied group.
Venkatraman Narayanan
Ah, okay, okay, okay. So yeah, we got a gross addition of 150 people. That’s what I said. You saw the net and headcount reduction of 109 improvement in utilization. But that doesn’t tell you the full story unless you see the headcount addition of 150.
Joseph Anantharaju
So what what happened is you are actually getting people, I don’t want to. Use the word bench but who are not fully deployed onto projects getting replaced by people who are completely billable ready, AI ready or automation ready or who are, who are ready to get built from the word go. So that’s where I’m coming. Yes. The just in time hiring also repurposing of the people that we today have from project A to Project B will be how we’ll get into the higher billing or keep to the growth of 2.3% or 3% whatever that we do from here quarter on quarter. But given same even given that I’ve said that that we’ll add people. There is a little bit of, you know, divergence between linearity and you know, revenue growth. People, people addition and revenue growth from what we have seen past or seen in the past years in the IT industry. And that’s got to do with you.
Dipesh Mehta
Know, AI and last question, iteration. I think each of and I think over last few quarter on the higher side, are we comfortable or this is one of the things where we have to work more. So.
Ashok Soota
Yeah, go ahead. Sorry Joseph. Yeah, go ahead.
Joseph Anantharaju
I would say it’s a little bit on the higher side, but there are reasons for that as well. Patient. I’ll tell you what we’re doing as well. One is for the digital and AI skills that we have. There is huge demand in the market. That’s the reality. And our percentage of revenue from these areas is relatively much higher. And therefore that does put us under the scanner. The other thing that’s been happening is as you would see that utilization has improved a fair bit over the last few quarters. And we’ve done this through a very active program where we are looking at each of our individuals in the pool, happiest minds in the pool, looking at the skill set, what additional training they need.
And in some cases people are not able to get up to the level that they need to be. And that’s being reflected. But what we are also doing is we have initiated multiple people engagement programs, training and learning and development, all of which increase bonding and motivate people to continue. So I think we should have this number under control.
Dipesh Mehta
Understand? Thank you.
operator
Thank you ladies and gentlemen. We’ll take this as a last question for today. I would now like to hand the conference over to the Management Happiest Mind for closing comments.
Priyanka Sharma
Thank you for joining us today. We thank ICICI Security for hosting this call on our behalf. We look forward to interacting with you. You can reach out to us on iratehappiestminds.com. thank you again. Have a good day.
operator
Thank you. On behalf of ICICI securities limited that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.