Happiest Minds Technologies Ltd (NSE: HAPPSTMNDS) Q3 2026 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Priyanka Sharma — Head of Investor Relations
Ashok Soota — Founder, Chief Mentor & Executive Chairman
Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services
Sridhar Mantha — CEO of Generative AI Business Services
Analysts:
Gaurav Lataria — Analyst
Aditi Patil — Analyst
Anand Soldani — Analyst
Vines Vala — Analyst
Sukrit D.Patil — Analyst
Dhanashree Jadav — Analyst
Rakesh — Analyst
Presentation:
operator
Ladies and gentlemen, good morning and welcome to the Happiest Minds Technology Limited Q3FY26 Earnings Conference Call hosted by Anandrati Share and Stock Brokers Limited. As a reminder, all participant lines will remain in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing Star then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Shishuvan Nayak from Anandrati Share and Stock Brokers Ltd.
For opening remarks. Thank you. And over to you. Thanks, Ray. Hi. Good morning ladies and gentlemen. Thank you for joining us today on the Q3FY 2026 earnings call of Happiest Minds Technologies Limited. On behalf of Anandrathi, I would like to thank the management of Happiest Minds for giving us the opportunity to host this call. Today we have with us Mr. Ashok Suta, Chairman and Chief Mentor. Mr. Joseph Anant Raju, Co Chairman and CEO. Mr. Venkatraman Narayanan, Managing Director. Mr. Ram Mohan, CEO, Infrastructure Management and Security Services. Mr. Sridhar Manta, CEO, Generative AI Business Services. Mr.
Praveen Darshankar, Company Secretary and Compliance Officer. Mr. Anand Palakrishnan, CFO. Ms. Priyanka Sharma, Head of Investor Relations. I will now hand it over to Priyanka Sharma for the Safe harbor statement and to take the proceedings forward. Thank you. And over to you, Priyanka.
Priyanka Sharma — Head of Investor Relations
Thank you, Shishoban. Good morning to all the participants on the call. Welcome to this conference call to discuss financial results for the third quarter ended December 31, 2025. I am Priyanka Sharma, Head of Industry Relations. We hope you have had an opportunity to review the earnings release we issued yesterday evening. Let me quickly outline the agenda for today’s call. Ashok will begin by sharing his perspective on the business environment and our results. Joseph and Venkat will then discuss our financial performance and operational highlights. Following that, we will open the floor for questions. Before we begin, let me read the Safe harbor statement.
During this call, we may make forward looking statements. These statements reflect the environment we see as of today and involve risks and uncertainties that could cause actual results to differ materially. We do not undertake to update these statements periodically. That. Let me now hand it over to Mr. Ashok Suta.
Ashok Soota — Founder, Chief Mentor & Executive Chairman
Thank you Priyanka and good morning everyone and thank you for joining us. When we spoke last quarter, we had highlighted that our 10 strategic transformations were beginning to deliver visible and measurable results. And before I Get into all of that. I want to take cognizance of a recent announcement on AI which has created turbulence in global markets for software companies. I want to assert that that this development is an opportunity and not a threat for Happiest Minds and we believe also for other IT services companies. You need to be here. You can lead me to do this.
And in many ways this reinforces the strategic choices we have been making. In Q3. We have taken the next step forward in our strategic journey by learning opening AI first agile always as a 11 strategic transformation. This is a structural shift on how Happiest Minds builds, delivers and scales value in an AI driven world. This transformation is itself supported by 11 strategic programs. While the foundations, talent, platforms and governance were built over the last several quarters, the outcomes are now becoming visible in customer engagement and execution. Before I speak about the environment, let me briefly touch upon the performance.
In Q3 we have had a 2.4% Q over Q growth and 10.7% year over year and for the nine months growth stood at 10.2%. This reflects steady execution even as we continue to invest heavily in our AI capabilities and reinforce our confidence in the 4 year 10/% revenue growth commitment we outlined last quarter. A key enabler of our AI first strategy is really our AIC Services delivery platform which is already being used by customers to move initiatives from pilots to production. We plan to take this platform to multiple customers so that this will help them reduce their own time to market.
Across the organization we are seeing growing demand for AI embedded into workflows, intelligent agents and govern platforms that enterprises can deploy with confidence. We now have 32 gen AI and agentic AI use cases that have moved prototype with several scaling into production. To summarize, AI first is already influencing how customers engage with us and how we deliver. It builds naturally on the earlier transformations we have undertaken and positions Happiest Minds very well for the next phase of growth. An inevitable question that arises from the above is what is the difference this is going to make to the growth of Happiest Minds? When we announce our Q4 results, we will give you these numbers.
It’s too early for us to do that now and we expect to show significant increase in the guidance we have been giving over and above the 10% we have committed for four years. With that, I will hand it over to Joseph to talk about the business environment, customer traction and outlook.
Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services
Thank you Ashok. Good morning everyone. In Q3 we saw customer conversations becoming more decisive. Enterprises are moving beyond experimentation and are increasingly focused on EMBEDDING AI into core workflows and platforms where the business impact is clear and scalable. This shift is reflected in our Q3 and nine month performance with currency revenue growth and EBITDA margins remaining within our guided range. The demand environment remains selective but increasingly intentional as they prioritize initiatives where the business case is well defined. Automation of workflows using Gen A and Agent Ki AI led productivity and modernization of platform are seeing traction as enterprises focus on measurable outcomes and faster time to value.
As a result, AI is no an add on in customer conversations. Increasingly, discussions are centered on how AI can be embedded into core workflows and platforms, governed effectively and scaled across the enterprise. This is where our AI first positioning is making a tangible difference. An important dimension of this shift is how customers are approaching modernization and productivity at scale. Many are now looking to apply AI to core applications and platforms that were traditionally difficult to modernize due to complexity, legacy dependencies and execution risk. In this context, our Agentika approach which combines coding agents with human developers in a hybrid delivery model is resonating well.
This enables customers to address technology debt in a more cost efficient manner and lower risk manner by delivering high productivity improvements. We are seeing interest in this approach not only for enterprises but also from private equity firms and their portfolio companies. During the quarter we saw several AI wins that reflect this shift including Genai driven vendor compliance and automation for a global FMCG client, enterprise wide map and reference architecture for a US Insurance provider, AI powered sales and quote management solutions for premium retailers in Australia and Anz, AI led cloud optimization for a US Healthcare BPO and digital and AI driven transformation initiatives for leading academic institutions in Asia and India.
A common theme across these engagements is scale and repeatability. These are not proof of concepts. They’re designed as platform led or reusable solutions that can be deployed across multiple customers with similar requirements. Let me touch briefly upon how this is reflecting in our views. PDS continues to be our largest business anchored around product engineering and platform modernization. With AI increasingly embedded into core engagements. IMSS continues to benefit from demand for AI enabled infrastructure management optimization and automation led efficiency initiatives. GBS and AI services saw strong momentum with revenues growing close to 50% quarter to quarter as customers move decisively from pilots to production deployments.
From a geographic standpoint, the US remains a large market with continued traction across other geographies. From a vertical perspective, BFS and Healthcare led growth this quarter with industrial showing a modest uptick while the rest of the portfolio remained broadly stable. Recent deal wins and the pipeline which showed a big jump during the quarter provide greater visibility and potent wealth for the upcoming quarters. At an industry level, Q3 saw resilient but selective growth with digital and AI led programs holding up better than discretionary spend across the IT services sector. Looking ahead, while the environment is likely to remain selective, our focus remains clear AI led growth, deeper client engagement and disciplined execution.
The AI first approach positions happiest minds well as customer priorities continue to evolve. With that, I’ll hand it over to Venkat to walk you through the financial and operational performance. Good morning everybody. This is Venkat. Thank you Joseph Good morning everyone. I’ll take you through the financial and operational performance for the quarter that just ended, followed by a brief Update on our 9 month performance as well. For the quarter, revenue stood at $65.7 million, showing a growth sequentially and year over year in constant currency of 1.2% and 7.1% respectively. In rupees, revenues were 588 crores, up 2.4% sequentially and 10.7% on a year over year basis.
Total income for the quarter stood at 604 crores, growing at 1.4% QoQ and about 8.9% YoY. EBITDA was 123 crores translating to a margin percentage of 20.4% compared to the 20.2% in Q2 and this range of 20.4 to 20.2% is well within our guided range of 20% to 22%. Operating margin for the quarter improved to 17.4%, that’s 40 basis points sequentially from 17%. Our utilization for the quarter was was 82% and the highest in recent times. Margin expansion was thanks to the favorable foreign currency and improved profitability in the GBS segment. These gains were despite fewer working days in the quarter and a forex loss of crore 6.2 crores.
Profit before tax for Q3 stood 54.2 crores while profit after tax was 40.3 crores. This number takes into account the one time impact of the new wage code leading which is a one time charge of 22.3 crores. So if you really want to look at our numbers, adjusted pat, which is PAT adjusted for the non cash acquisition costs and exceptional items which includes the charge for the new wage code was at 11.6% compared to the 11% in the previous quarter. So a real depiction of our numbers is essentially the adjusted PAT which is what I’m drawing our attention to.
Overall margin improvement underscores sustained operating efficiencies and disciplined cost management that we follow. For the nine month entered 31st December 2025 revenues was 193.2 million showing a year over year growth of 10.2%. We are keeping to our double digit growth percentage of 10.2% in dollar terms. In rupee terms revenues were 1711 crores up 12.8% year over year. EBITDA for the nine month period stood at 367 crores with a margin of 20.6%. Profit before tax was 204 crores and profit after tax was 152 crores, both impacted slightly by the one time wage code cost that I talked about earlier.
However, adjusted pat which is again pat adjusted for the non cash cost coming from acquisitions and the one time wage code impact for the nine month period stood at 208 crores compared to 195 crores in the previous year. Operationally as highlighted, utilization improved to 82% in Q3 reflecting better deployment and improved execution discipline and the scaling of our AI led engagements. Attrition on a trailing twelve month basis stood at 17.4% and and largely stable DSO increased to 92 days from 87 in the previous quarter and we remain focused on collections and billing discipline. The idea is to bring that back down to the 85 day number and that’s where we’ll be focusing our efforts on Headcount the end of the quarter stood at 6,548 employees supported by a strong offshore delivery model.
Our return ratios remain healthy with ROCE at 22% and ROE at 12%. Looking ahead, our priorities remain unchanged, delivering 10 plus percentage on revenue growth in constant currency and maintaining EBITDA margins in the 22% range. This is for the current financial year aligned to our AI strategy. We plan to grow our AI genai team to 1000 happiest minds by the end of FY27 while maintaining financial discipline in the process. With that I will hand it over to Sridhar to conclude and share more details on our AI first approach. Thank you Venkat. Very good morning everyone.
Q3 represents very important inflection point for our generative AI business services and AI as industry is getting more confidence about the use cases and how to derive roi, leveraging Generative AI and subsequently Agent tki More and more use cases are moving beyond into production grade deployments with many of them scaling across multiple customers and and verticals creating repeatability and operating leverage. Also we are working on and delivering multiple end to end digital solutions and these are primarily driven by the AI features that are on the top of the digital platforms and the digital infrastructure. Our AI services delivery platform has been central to this progress, enabling faster movement from concept to production while improving delivery, productivity and governance.
Following a successful healthcare solution deployment, the platform is now being scaled across industries. The platform covers frameworks, tools and agents that cover entire spectrum of our service delivery including agentic software development, modernization and tech, debt reduction, data engineering, cybersecurity, infrastructure management, et cetera. Leveraging Yay. And also this platform helps in implementing aesthetics AI solutions faster. We are delivering AI assistance embedded into workflows, domain specific copilots, AI native modernization of legacy systems and AI powered operations across IT sales and support. Importantly, GBS turned profitable this quarter reflecting improved execution discipline. Our focus going forward is very clear scale responsibly, deepen reuse and ensure AI delivers measurable business outcomes for our customers.
That concludes the management commentary. We will now be happy to take your questions.
Questions and Answers:
operator
Thank you ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, a reminder. If you wish to ask a question, please press star and 1. We take the first question from the line of Gaurav Lataria from Morgan Stanley.
Please go ahead.
Gaurav Lataria
Hi, thank you for taking my question. My first question is on generative AI deals that you talked about.
Joseph Anantharaju
Yes, can you please speak up a little?
Gaurav Lataria
I hope I’m audible now.
Joseph Anantharaju
Very well, very well.
operator
Yeah.
Gaurav Lataria
My first question is on the generative AI deals and services that you talked about. Just want to understand from an enterprise context, are these completely new areas of spend or are these the same spend they would have done in a different manner but because of new technology they are kind of redirecting and re pivoting doing it in a different manner. So is it a net new? Is it just a, you know, repeat of something they would have done earlier? My second question is on what are the various engagement models that you have on some of these repeatable platforms that you talked about? Are these more like a license based solution that you are selling? Are these a fixed price project? Are these based on certain outcome that the client is achieving and based on that outcome you are going to get paid or is it still a plain vanilla Effort based projects.
Thank you.
Sridhar Mantha
Sure. This is Sridhar and I’ll take the first question and second question Joseph will address. And regarding the first question, of course for quite some time we have been seeing a lot of that happening in the GENA space because the clients were not really clear about either the use case definition or the ROI. Such prototypes and POCs were generally done by scratching some component of the budget from somewhere. However, as Joseph and Ashok mentioned, in the last two quarters including the current quarter, we started seeing more and more customers are extremely clear about their entire roadmap and what kind of agent TK foundation and the platform they want to build, what kind of use case they want to create.
And these roadmap projects are very clearly part of their overall budget definitions and having more of one to three years kind of roadmaps. So the answer shortly is of course earlier it used to be more of scratching the budget here and there but nowadays we are seeing more and more large initiatives. Well and as part of their overall budget.
Joseph Anantharaju
And just to add to that Gaurav, the other area that we are seeing is, you know when you look at many of these platforms and applications that enterprise and even SaaS providers have built, there’s a level of tech debt that they’ve incurred over a period of time which either for reasons of the risk involved, if it’s an old enterprise application or if it’s a SaaS provider or a company that is looking at its bottom line, they may not undertake this because of the cost and that is being enabled by your agentic approach where you can deliver a huge improvement in productivity.
That will be a new spend. As we and we are in discussion with a few customers on this, we’ll be able to report more I think by next quarter. We are very, very hopeful on that. In terms of the various engagement models that you talked about, we are looking at multiple areas. One of them is looking at how do we take these platforms or solutions and if you look at Arthur or insurance in a box we embedded Agent Ki, we’re looking at couple of platforms in the education space and the healthcare space and our expectation is that we will be able to get subscription or direct license revenue.
The second that we’re looking at is how do we take some of these platforms including the AI delivery platform that Sridharan Ashok alluded to and how do we package this into a solution and deliver it to customers and look at it whether this can be repeatable solutions so that the selling process, the pre sales and the delivery gets optimized and we can manage our gross margins better. The third is obviously fixed price projects. In some cases, whether it’s when you’re modernizing some of these applications or taking on new AgentCare and Genai based features, we’d be able to do it in a fixed price manner.
As long as the customer is clear on what the outcome should be. If they are in an ideation phase then it becomes a little bit more challenging. The other area that we are very actively considering because it would allow us to capture more value is outcome based. And here there is quite a bit of ideation going on internally as to how we can take this to customers. We need to think this through, but we have our initial thoughts and we are bouncing it off customers and sensing them out to evolve this approach. Just to add on that, Gaurav, our.
Ellipse platform for the infrastructure management has. Got AI ops infused in IT and so does our security platform which is SEK genie, which has got AI completely infused in terms of threat management and mdr. Now both these platforms help in shared services as well as complete managed services, thereby adding value. And these are not just routine vanilla services which you’re going to provide, but it includes AI based operations which actually benefits the customer in terms of cost saving as well as improved service quality.
Gaurav Lataria
This very comprehensive thank you.
operator
Thank you. We take the next question from the line of Aditi Patil from ICICI Securities. Please go ahead. Aditi, please unmute your line and proceed with your question.
Aditi Patil
Hello, Am I audible? Hello please.
Joseph Anantharaju
Yes you are.
Aditi Patil
Yeah. Thank you for the opportunity. My first question is on the healthcare vertical. So it has grown at a healthy pace for last three quarters. Can you share more color on this? What is driving growth with service lines, markets and client subsegments? And how is our pipeline in this vertical? And also update on the you had mentioned in the 10 point transformation plan about a healthcare out of the box solution. So update on that.
Joseph Anantharaju
Sure. See one of the areas that we are seeing where spend is holding up well Aditi is the healthcare space and you’ll also notice that BSSI has demonstrated good growth during the quarter in healthcare. We saw uptake across jios as well as across various subsegments of healthcare. We had customers in India, in Europe and in US ramping up during the year. We also had a couple of new logos that we were able to close in healthcare. Some of the companies that have contributed to this growth. One of them is Health Tech company based out of India where we’ve seen building a platform for their delivery and for their business and that’s we finished the discovery ideation phase and we’ve got into the actual build out and this includes Genai at the core of the platform and that is contributing to some of the growth.
And the other area that we are looking at is a large pharma company that had ramped down in the second quarter to some extent. We saw them ramping up again. That’s also contributed to the growth. One of our large customers which is, which has a marketplace for medical supplies, they started off a couple of initiatives which ramped up during the quarter and that’s where a lot of the growth has come. We’re also working with a couple of medical research institutions on bioinformatics and using AI for optimizing some of their research activities. So we saw that contributing to the revenue.
In terms of the healthcare platform that we talked about, I think we have one platform that’s ready, the Multivomics platform. And as we speak we are running our go to market campaigns on this platform. We have a few prospects that have evinced interest. We are in the process of figuring out how do we package this platform and work with these customers. So it’s looking quite positive. There’s a second healthcare platform that is still in the ideation phase that will take maybe another quarter or two for us to get clarity on. But the Multa Omics platform is something that we are already going to market with as a team.
Aditi Patil
Okay, that color is helpful. My second question is on the high tech vertical, can you also let us know, I mean, was it mainly because of furlough that we saw a QQ decline and what is the outlook on this vertical?
Joseph Anantharaju
Sure. So there are couple of reasons that we saw a drop in this vertical. One of the customers that we’ve been working with for the last one and a half years, which is more of a, you know, which was more in a startup phase. We have completed the development of the product for this customer and it’s a US based customer. And so the team ramped down as the customer tries to take this to market and sell the product and figure out the viability of the product in the market. Our hope is that once they’re able to get their go to market going, we will see some revenues come back and this is a risk when we work with some of the early stage or startup kind of companies.
We also had, we were working with Airport Authority of India providing support on the platform that we had built for them. So that support contract came to an end. So both of these have contributed to the drop in high tech. And going forward what we expect to see is revenues to stabilize and hopefully demonstrate growth in the coming quarter. Aditi. Aditi, does that answer all the questions?
Aditi Patil
Hello. Hello.
Joseph Anantharaju
Yes, please proceed.
Aditi Patil
Yeah, sure, I just have two more questions. So the third question is on in terms of the renewals, some of the peers have highlighted that clients are asking for productivity, ask for higher pricing reductions. So are we seeing that more in high tech vertical line overall, how have been our renewal?
Joseph Anantharaju
Sure, if you look at our repeat business that’s stayed around the same. Aditi. So that’s one barometer that I would use. But you made a point that customers are demanding decrease in rate. In our case what we are seeing is that customers are driving and we are in many cases proactively going and evaluating to customers they can use various productivity tools to improve their quality, to increase their productivity throughput. And I believe that that would be the right approach to take for us to be proactive about it. And that’s what our team has been doing.
And what we’re seeing customers come back with is new additional features, tech debt that they have that can be managed by the same team so that the throughput increases. And we’ve not seen any customers coming back and ramping down because of productivity increases. At times a program could and come to a logical conclusion. And therefore like I mentioned with the startup in the high tech vertical that we are seeing, but we are not seeing any customers come back. In fact, a few of the CTOs that I met with in Q3, they are very categorical about this point that proactive and drive adoption and usage of productivity tools.
And don’t worry about ramp downs based on the increase in productivity. And where we are managed services of fixed price. We will share the productivity improvements, whatever benefits we get with the customers. That’s the approach that we plan to take.
Aditi Patil
Okay, got it. And my last question is on what is the threshold for TCV like above which you mentioned the deals in your press release. What is the criteria putting deals in the press release?
Joseph Anantharaju
You know, I think we’ve used a mixture of factors and criteria. Actually some of them are, you know, you would look at, you see, they’re more of discovery kind of work where the ACV could be lower but the follow up work would be higher. But what we’ve tried to highlight is deals that are large in size as well as work that we’ve done that can lead to more follow up work or that can lead us to other customers based on this work.
Aditi Patil
Okay, so you don’t follow minimum threshold of deal TCV above which you put it in the press release.
Joseph Anantharaju
The minimum threshold is 250 but you see US dollars but you’ll see deals that are multi million and you could also see deals that are 300 or 400 which are more consulting and discovery oriented. I just want to give you that range. Minimum is 250 if that’s what you’re looking for.
Aditi Patil
Okay. Okay. Got it. Thank you. Thank you for answering all the question.
operator
Thank you. We take the next question from the line of Anand Soldani from Soldani Securities Ltd. Please go ahead. Anand. Please unmute your line and proceed with your question.
Joseph Anantharaju
Yeah. Please go ahead. You may have to speak a little.
Anand Soldani
Yeah. Yeah. Good morning to all the management of hmp. I would like to first congratulate you on delivering such a wonderful set of results for this quarter. So my. I have three questions for Mr. There’s in the recent reports that Mr. Has been exploring stake sale. So I wanted to understand the rational behind the ST sale and is he really issuing the stake sale or if. Yes and what’s the rational at? Since the share price of HMP is at the 50 week lows and it has corrected almost 50% in the last one year. One side slide has been there since the last one year.
The last time we had sold stake at around 850 rupees 6% stake. And since then it has corrected to almost half till now. Was the rational then selling a ST at such low levels.
Ashok Soota
Very muffled?
Joseph Anantharaju
Yep, Dani, it was quite muffled your line. But if I were to repeat. You wanted to know about his Mr. The News.
Anand Soldani
Yeah. Is it news? I mean correct. And is this a rumor in the market? Is it planning?
Joseph Anantharaju
Yeah.
Anand Soldani
And I also.
Joseph Anantharaju
Is it correct or is it a rumor?
Ashok Soota
Yeah, absolutely. You. You know I’m must tell you one aside just for you to understand where I am a whole. If you see a whole whether it is a press release or earning call or a press conference that we’ll have now we are completely AI focused. And you may have incidentally seen yesterday Mr. Chandrasekhar in TCS is saying I am going to start getting back into. Tata is now saying I am going to get back into looking after a lot more into TCs simply because of the importance of the change. Now we have launched a major program which I’m leading here along with Joseph and the whole team is here to work with this.
Anand Soldani
Okay.
Ashok Soota
That change IN itself has 11 strategic programs. Make no mistake. I’m here to completely see it through and there’s no change.
Anand Soldani
Okay, thanks for the first question. My second question is with respect to timeline of Hackless World, I think three years back you had said that you’ll be launching the IPO. Planning to launch it in somewhere in 2027 if I’m not mistaken. So is it on track?
Joseph Anantharaju
What’s the timing? You know, I wish I knew that. It’s a very young company. Revenues at the moment are actually rather sad. But it’ll change in the sense I’ll. It’s not a happiest health call. So let me still say it will be a very differentiated, completely integrated healthcare and wellness company of a type which doesn’t exist in this country. And in just one of the segments that we have, for example, which we have, you know, we work with clinics which are out of the hospital model and they’re specialty clinics. So that’s the beauty of the thing. And we have at the moment only six clinics, but within 12 months we’ll have 26.
Anand Soldani
Okay, so I mean, is the IPO on track for FY27?
Ashok Soota
I would imagine IPO could be easily six years.
Joseph Anantharaju
Yeah, IPO would be easily six years is what Mrs. Uta is saying.
Anand Soldani
From six years from now. Hello? Hello.
Joseph Anantharaju
Yeah, sorry, Yeah, I added the IP.
Anand Soldani
Will be six years from now. And we have seen IP at six years from now, from 2027.
Joseph Anantharaju
Yeah, that, that’s the thought. But like Mrs. Okay, that’s more for happiest health. But yes, yes.
Anand Soldani
Okay. Okay, that’s it. Thank you so much.
Joseph Anantharaju
Thank you. Thank you.
operator
We take the next question from the line of Vines Vala from HDFC Securities. Please go ahead.
Vines Vala
Hello sir. Thanks for giving me the opportunity. So my question was on the retail vertical. So the retail vertical which is growing on sequential basis from last nine quarter is showing a decline in this quarter. So is it related to the furloughs or is there any issues which we are facing because the industry was growing. Was facing the issue. Industry was slowing down, but we were growing in this vertical. So is there any concern?
Joseph Anantharaju
No, actually I think there are two, three reasons that have resulted in this drop. There’s a very small element of furloughs actually maybe around. See the drop was 500k from Q3 to Q2 to Q3 and maybe around 70k of that would be furloughs. One of our large customers, they don’t do a 12 month billing cycle. They use a four week billing cycle. So we get 13 billing cycles in a year and in Q2 we got an extra billing cycle which resulted around 250k of extra revenues which got normalized in Q3 and that contributed a fair bit for again one of large beverage manufacturer customers.
We completed the automation project that we had taken up for them. It completed in end of Q2, early Q3 and we’re just starting work follow up work in Q4. So my belief is that in Q4 you’ll see an uptick in revenues moving up in ASEAN. But overall the pipeline and the customers that we are signing up in this space is quite encouraging. And I don’t see any RAM down out here or a drop actually. Dinesh.
Vines Vala
Okay, okay. Yes sir. Next thing was on the edutech vertical. So edutech vertical also it is declining. So do we expect expect that vertical to be stabilizing in FY27 or still some rationalization of clients and everything is there in this vertical.
Joseph Anantharaju
So Vinesh, I know as you rightly observed, this is a vertical that has shown a decline in the last few quarters. It used to be a largest vertical and now it’s our third largest vertical. And one of the reasons is we know we’ve had a heavy exposure to the higher ed space in this vertical and that whole space, whether it’s in us or across the globe, is going through a very challenging period. The higher ed tech space, right. And in US especially universities are having a challenge. But however, having, and I believe the customers that we have right now, we’re reaching a point where probably, you know, the, the various risks that were there, they are mostly played out is what I believe and I think FY7 we should see things stabilizing.
Having said that, there’s a new area that we have identified in the education space, pursuing institutions and universities. Based on some of the work that we are doing with a couple of universities as we speak, one in Southeast Asia and another one in India, both very well known leading institutions. And the underlying opportunity out here is some of the internal challenges these universities and institutions are facing because of data silos and more importantly student retention. Student attraction is a huge need out here and AI is enabling them to do this in a more cost effective manner.
And I believe that our AI and first strategy overlaid on our educational domain depth and the engagements that we are currently pursuing, including COUPLE in North America, gives us the opportunity to take some repeatable solutions and maybe even a platform based approach to these customers. And I believe that in FY27 we should see a reversal of the downward trend that we saw in the edtech space.
Vines Vala
Okay, thank you. Thanks. My next Question was on the deal pipeline. So as you highlighted that there is a pricing pressure, but do we foresee any change in tenor in the deal, whether deals are becoming shorter or something like that? Now, is the pipeline overall pipeline?
Joseph Anantharaju
As I mentioned in my commentary, Vines I and the rest of the leadership team very encouraged by the increase in the pipeline. There was a significant increase in the pipeline and the increase has been more in some of the larger deals. So contrary to the point you made, we are actually seeing quite a few deals that are three to four years tenure and typically we work more as an extended engineering team to our customers. So we get one year visibility. But we are now taking on programs. Whether it’s providing support for some of your platforms or setting up QA testing center of excellence for a large bank in Muscat, we’re looking at more longer term engagements of higher value and that is what is driving the increase in pipeline.
Vines Vala
Okay, thank you. Thanks. That’s all from my side.
operator
Thank you. We take the next question from the line of Sukrit D. Patil from Eyesight Fintrade Private Limited. Please go ahead.
Sukrit D.Patil
Good morning to the team. I have two questions. My first question to Mr. Joseph is looking ahead, how do you see Happy Xminds balancing between scaling digital transformation services, accelerating AI generated investments and protecting the profitability as client demand and competition evolves? What will guide your decisions on which of these areas should get the strongest focus in the coming quarters? That’s my first question. I’ll ask my second question after this. Thank you.
Joseph Anantharaju
Sure. So Ashok and Sridhar mentioned our largest focus area will be the AIFR Strategy and the 11 programs that Sridhar talked about, making sure that we implement them. Ashok will be driving this with support from all of us, this initiative. And I believe that if we can execute on this initiative, it will ensure that our growth picks up from the current 10% that we’ve given and that we’ll be able to accelerate it further. Now, some of the areas that we will be looking at actively is the AI delivery platform. That will be an area that we will be making investment.
I think there’s a huge opportunity around tech debt and modernization. As I mentioned in my, we’re seeing quite a few customers expressing interest in the space to address some of issues that they had put off for quite some time. And I think that can be again a huge opportunity. And making sure that we build repeatable solutions with AI at the core will allow us to take some of these use cases. We have around 32 use cases in the Genai Space, it will allow us to take these use cases to a larger set of customers in a more repeatable manner.
I think these will be the focus areas for FY27 related areas. How do we make sure that all of this happens in the context of more, you know, increased domain, increasing the involvement of domain and domain understanding into these AI solutions.
Sukrit D.Patil
Thank you. My second question to.
Joseph Anantharaju
Mr. Sorry, sorry. Yeah, please, please go ahead. I just wanted to add additional point. I think you, since you called out the digital transformation, want to highlight one point that when we talk about the AI first you visualize it more like the tip of the iceberg. What we don’t see under the water is the complete set of the digital technologies in the sense that cyber security, cloud and all those technologies where we have done investments and we have been the leader in the digital space, that continues to be the foundation on the top of which we will be building the AI for strategy.
And we started seeing similar kind of results in the marketplace in the sense that large multimillion dollars in the Azure tech space, which we talked earlier, that has a larger component on the digital and then close to a million dollar on the AI and generative AI to be added on the top. So they go hand in hand is what I want to call out.
Sukrit D.Patil
Thank you very much. Can I proceed to my second question? Yes, thank you. Thank you. Thank you. My question to Mr. Balakrishnan is as happy as mines plans over the next few quarters, what financial signals or metrics will be most important in your mind for guiding decisions on cost control, cash flow management and capital allocation for specifically AI and digital investments? How do you see these levers shaping the company’s ability to protect the margins and boost the profits as IT services business scales? Thank you.
Joseph Anantharaju
So one is. Yeah, this is Venkat. Yeah, this is Anand here. So yeah, thank you for this question. Yeah, the margin pressures will continue to be there. But what we have, if you’ve seen from a gross margin perspective, we are kind of from the last quarter and we continue to work on those utilizations have improved from about 80 to 80% and we kind of trying to push that as well. Liquidity is also kind of gone up to about 1500 crores. So that is something that is there. So the only thing that we are focused on is the.
Which is currently kind of gone up, but I think it’s kind of stabilized in the month of January. So I think we will continue to do that. We seem to be doing well in what we are doing in the last couple of quarters from A margin from a liquidity standpoint. And we will continue to do that in the coming quarters too. Does that answer your question? And Sukheet, just to add, one of the areas that all of us will be looking at very closely is we made some investments in terms of NN Sales, building vertical capabilities.
And I think we need to keep those investments at the current level. Unless if you need to make investments that will lead to long term growth, we will do that. But I think what we need to do is to ensure that we get more out of these investments. And as we speak, even in the last quarter in our commentary we had mentioned that we had 30 new logos for the first half of the year, which is the highest that we’ve had. And this is all based on the investments we made in the NN sales team.
So I believe that in FY27, some of the investments we made, whether in the generative AI business unit, whether it’s in NN sales or building vertical capabilities, we will see some of those investments paying off and contributing to our margins. And that will be something that all of us, the leadership will be closely looking at.
Sukrit D.Patil
Thank you and best wishes.
Joseph Anantharaju
Thank you. Thank you.
Priyanka Sharma
Thank you. We can take the next question.
operator
Sure. We take the next question from the line of Dhanashree Jadav from Choice Institutional Equities. Please go ahead.
Dhanashree Jadav
Yeah, congrats to the team from this set of numbers. So my question is with regards to like we have given our full year guidance remains 10% plus. So for that the Q4 revenue guidance should be stronger. So what are, what would be the verticals and strength supporting this strong growth in Q4? And my second question is on if can you call out on the subscription revenues in terms of the top as percent of top line and the gross margins we are having there and any guys, any cues and pipeline in the GBS which we are seeing of strong quarter on quarter road source like ACV also if we can get.
So that would be helpful. Thank you.
Priyanka Sharma
First is color on the anchor verticals in Q4.
Joseph Anantharaju
Yeah.
Priyanka Sharma
Then she’s asking for deal pipeline.
Joseph Anantharaju
Yes. Okay. For GBS. Okay. So you know for Q4 I think we are looking at couple of verticals to actually drive growth and couple of verticals to stabilize. I think DFSI will continue to be a vertical that will drive our growth because we are expecting an uptick in AATA license revenues. Typically Q4R Q4 and Q1 calendar year is the biggest quarter just because customers have completed their planning, they opened up their budget and we have a good pipeline for Arta and we have another two months to close this. At the same time we also have a couple of BFSI customers where we’ve got additional requirements based on the planning for the new year and we need to make sure that we are able to staff and start these.
So BFSI is one vertical that we are expecting will give us hept in Q4. The other one is again healthcare and I think it’s a continuation of trend. For one of our large customers that talked about where we are helping build a platform for their diagnostic and health clinics. We are getting into ramp up phase in Q4 and the couple of new use cases that have been identified which leverage AI and gen. So those contributing to growth in Q4 and I did to talk about RCL and high tech stabilizing I expect high tech, you know one of the large deals that we are working on should get close.
We are in a very advanced stage. We may get some revenues in Q4 to definitely contribute to growth in Q1. So overall, you know as I mentioned while addressing your question earlier, we are seeing a strong pipeline and the opportunities that are large are in a very advanced stage in the funnel and as they close they will start yielding revenues some of it in Q4 and in Q1 and Q2 as well. And GBS, this is Sridhar and regarding GBS, of course Joseph shared the quarter quarter growth and we want to continue the momentum for the next quarter as well as the next financial year so that as GBS was aimed to as part of our 10 strategic programs earlier will contribute more towards the growth of happiest minds.
However, when it comes specifically to the pipeline side of the things and some of the deals that we very recently closed, the example is for example Joseph talked about startup in agentic AI platform space which we very recently closed, there’s a huge side in terms of how much more we can add we can add to such accounts. And then of course as we are actually adding the generative AI as part of our AI led strategy and a for strategy across the organization, for example AI plus generative AI and of course we already have digital process automation as our center of excellence combining the process automation with AI and generative AI as intelligent automation.
So we have a huge set of larger pipeline deals with a combination of gbs, generate AI with various other components in the organization and the last one is of course on the AI platforms that we talked about as part of our AI service delivery platform. There is a very healthy pipeline in terms of building that with One of high tech, another health tech companies. So we do see healthy pipeline and we are optimistic about maintaining similar or better growth in the coming quarters and the next year.
Dhanashree Jadav
Yeah, just one question, am I audible?
Joseph Anantharaju
Yeah, yeah.
Dhanashree Jadav
So I just asked on subscription led revenues, if you can call out that number.
Joseph Anantharaju
We only have Artha as a line of business which is subscription or SaaS based, but we are looking at a couple of more additional offerings like insurance in a box, university in a box, kind of multi omics platforms. And those, those are at a much higher gross margins if that’s the question that you’re asking compared to the normal services. Yeah, it’s. All of this is covered in the IP LED sales which is at about 10.4% as of end of quarter.
Dhanashree Jadav
Okay. Okay. Yeah. Thank you.
operator
Thank you. Ladies and gentlemen, in the interest of time, we take the last question from the line of Rakesh, who is an individual investor. Please go ahead.
Rakesh
Yeah, great, thanks. Thanks for taking my call to the leadership. I have two questions there perhaps. I see. I’m a retail investor and the point is that since Hipis mind has been positioned itself as AI driven company, you know, what specific project or initiative are being prepared for the, you know, Behavior India AI Summit in the next week? That’s the one question. And the second question is that I see a lot of depth, you know.
Joseph Anantharaju
Summit, what are we doing?
Ashok Soota
Yeah, actually that’s a enormous initiative and we’re really delighted that this has been kicked, you know, under the guidance of the Prime Minister himself we will be participating. And I’m also happy to share with you that one of the leading state governments, I can’t name this at the moment, has been written to us saying that we’d like to meet you there. We are really impressed with the work that you’re doing in AI and we’d like to have a memorandum of understanding with you with a view to building a long term relationship. So clearly our focus on AI is paying off in many ways because the world has got around in a very brief period and we’ll be building on it and we’ll be very much present at the AI summit.
Rakesh
Sounds good to me. Thank you for that, sir. And the second point question is that I see, you know, I see, you know what in order, the projected repayment timeline for the current debt. I see a lot of debt being taken because of your new project and new companies hiring taken up. So you know, what are the, you know, what are any plans for capitalizing? I see a lot, yeah, I see a lot of interest being Paid almost.
Joseph Anantharaju
Almost all our debt is working capital debt, Mr. Rakesh. And if you look at our current ratio, that’s quite healthy. And we have a significant amount of cash on our balance sheet. So it’s a little bit of a treasury that’s being done. Liquidity management that’s being done. Receivables are funded through preferential rate borrowings from banks because banks support export oriented industries by giving us 4.6% to 4.7% rate capital, working capital lines. So it would be unwise not to use that. And so we are doing that. So we follow, we look at the effective cost of borrowings versus the effective cost that we make effective returns we make on investments.
And currently we are 1% plus on the income side.
Rakesh
Okay, thank you. And just a point of note, you know, as a retail investors, we have been investing on this company trusting you guys from a couple of years, three to three and a half years. And we see a lot of, you know, we are not happy indeed. So please do sometimes, you know, have a, you know, improve. I request you to improve your balance sheet. Thank you.
Ashok Soota
What are you saying about investors?
Joseph Anantharaju
Yeah. So.
operator
Thank you ladies and gentlemen with that. Sorry, go ahead sir.
Ashok Soota
Yeah, I’d like to just answer that. And you know, like many companies we go through certain cycles and if you really see the last time we made a strategic announcement and said we’re going to, there was a period of 2, 3 years when growth was low and then we’re committing to a 10% growth which we’re on. This is the third year at which we’re going to be at 10% growth. Having said that, it is at this time that as we began to improve the whole IT industry took a major hit. I mean if you look at it, at least half a dozen of those companies have been at their 52 week lows.
Now we do believe that we have a secret weapon which has been announced and that is we believe it’s going to take us into accelerated growth rates. And those numbers I think should be visible as you go ahead and be prepared to put numbers to the qualitative statements that we’ve been making. So do look out for announcements at the end of Q4 and I think you will see a new trajectory from. The company going ahead.
Rakesh
Thank you so much. Positive inputs.
operator
Thank you ladies and gentlemen. With that we conclude the question and answer session. I now hand the conference over to Ms. Priyanka Sharma for her closing comments.
Priyanka Sharma
Thank you for joining us today. We sincerely thank Anand Rati for hosting this call on our behalf. We look forward to continued engagement with all our investors and analysts. For any follow up queries, please feel free to reach out to investor relations team. You can reach out to us on irappiestminds.com thank you once again and have a great day. Bye bye.
operator
Thank you on behalf of Anand Bharti share and Stockbrokers Ltd. That concludes this conference call. Thank you for joining us and you may now disconnect your lines.