Happiest Minds Technologies Ltd (HAPPSTMNDS) Q4 FY23 Earnings Concall Transcript

Happiest Minds Technologies Ltd (NSE:HAPPSTMNDS) Q4 FY23 Earnings Concall dated May. 08, 2023.

Corporate Participants:

Sunil Gujjar — Head, Investor Relations

Ashok Soota — Executive Chairman

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services

Rajiv Shah — President and Chief Executive Officer, Digital Business Services

Ram Mohan — President and Chief Executive Officer, Infrastructure Management and Security Services

Aurobinda Nanda — Chief Operating Officer, Product Engineering Services

Analysts:

Mukul Garg — Motilal Oswal Financial Services Limited — Analyst

Vimal Gohil — Alchemy Capital — Analyst

Dipesh Mehta — Emkay Global — Analyst

Faisal Hawa — H.G. Hawa Company — Analyst

Dinesh Kudache — Technowell Web Solutions — Analyst

V.P. Rajesh — Banyan Capital Advisors — Analyst

Sumeet Jain — ICICI Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Happiest Minds Technologies Q4 FY ’23 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Mukul Garg from Motilal Oswal Financial Services Limited. Thank you, and over to you, Mr. Garg.

Mukul Garg — Motilal Oswal Financial Services Limited — Analyst

Thank you, Thanvi. Good evening, everyone, and thanks for Joining us today on the Q4 FY ’23 earnings call of Happiest Minds Technologies Limited. On behalf of Motilal Oswal, 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 Soota, Executive Chairman; Mr. Joseph Anantharaju, Executive Vice Chairman and CEO, PES; Mr. Venkatraman Narayanan, MD and CFO; Mr. Rajiv Shah, President and CEO, Digital Business Services; Mr. Ram Mohan, President and CEO, IMSS; Mr. Aurobinda Nanda, President, Operations and Deputy CEO, PES; Mr. Sridhar Mantha, CTO; and Mr. Sunil Gujjar, Head of Investor Relations.

I will now hand over the call to Sunil for Safe Harbor statement and to take the proceedings forward. Thank you, and over to you, Sunil.

Sunil Gujjar — Head, Investor Relations

Thank you, Mukul. Good evening to all participants in the call. Welcome to this conference call to discuss the financial results for the fourth quarter and year ended March 31, 2023. I’m Sunil, Head of Investor Relations. We have published our financial statements, quarterly fact sheet and press release on to our website. Please have a look at it.

The agenda for this call is as follows: Ashok will begin the call by sharing his perspectives on the demand environment and our results; Venkat and Joseph will then speak about our financial performance and operational highlights; after which we will have the floor open for Q&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.

Now, let me pass it on to Ashok.

Ashok Soota — Executive Chairman

Thank you, Sunil. Thank you also, Mukul, and Motilal Oswal for hosting this call. Good evening to all participants in this call.

I’m pleased to announce that Happiest Minds has delivered outstanding results for FY ’23 with 23.7% revenue growth and 26.2% EBITDA margin. We have missed our revenue growth target by 1.3%, mainly due to right-shifting of some Q4 revenues. This has been more than compensated by delivering EBITDA margin of 26.2%, exceeding the upper band of guidance of 22% to 24%. In view of our strong business pipeline, we are planning also a record addition of 1,300 people. Accordingly, we are retaining our FY ’24 revenue guidance growth of 25%.

While Joseph and Venkat will provide you details of our results, I want to provide you a perspective on our results in context of the Indian IT industry and where Happiest Minds is today. Many of the larger companies with whom we benchmark ourselves have reported sharply lower guidances for FY ’24 and also reported ramp-downs in accounts. We have been able to sustain our growth guidance on the basis of a very strong pipeline. The reason is also that — the challenge, of course, is of a different order.

If you look at a $10 billion company, to grow at just 5%, it has to create more than one Happiest Minds. At our size, of about $200 million, to grow at 25%, we need only $50 million revenue business, and this is something which we see well within our reach considering our pipelines. I should also highlight that we’ve been able to sustain our number one or number two position in comparison with all our peers on EBITDA percentage, growth percentage or on an index of EBITDA versus plus growth on a year-over-year basis.

This year, we have chosen the highest levels of corporate governance as our theme for our Integrated Annual Report. At Happiest Minds, we have established corporate governance practices well before the company was listed in 2020. Fundamentally, striving to function like an exemplary public entity since our inception, we have been able to achieve benchmarks. As part of our vision to be known for the best corporate governance standards, we have made continuous strides to deploy leading-edge technology for the dissemination of information and educating our stakeholders. Through this, we’ve been able to drive sustained growth and also build a reputation for transparency and disclosure, which is higher than anybody else in the industry.

I would like to highlight a few of the recognitions we’ve achieved for corporate governance and the awards which have been conferred on Happiest Minds: Golden Peacock Award for Excellence in Corporate Governance 2022; ICSI Best Governed Company in Listed segment for the Medium category; ICAI for Excellence in Financial Reporting. You can see we’ve made a virtually clean sweep of all of these, and Happiest Minds stands for excellent corporate governance, and this is a triple confirmation of our disclosure, transparency and governance practices.

Venkat was recognized by CII as a leading CFO for the year 2022 at the CFO Excellence Awards. I was humbled on being conferred ICSI’s Lifetime Achievement Award for Corporate Governance. I have accepted this on behalf of all the Happiest Minds who have helped me to create this great institution. In addition, the other area where we’re continuously recognized is in the area of Great Places to Work, which Joseph will tell you about.

To conclude, Happiest Minds growth was broad-based with all our business units, operating geos and centers of excellence delivering excellent results. These results were enabled by the contribution of our delivery teams, technology and domain groups and the support of all of our corporate functions under the leadership of our Executive Board.

With this, I conclude my commentary and pass it on to Venkat.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Thank you. Ashok. Thanks, Mukul and Motilal Oswal team, for hosting us on this call. A very good evening to all. And in the next few minutes, I’ll take all of you through some of our financial, operating and business highlights.

For the year, our operating revenues have grown about 24% in constant currency. This was slightly lower than 25% guidance we had provided at the beginning of the year. The surge in vacations in Q3 and right-shift in revenues in Q4 were the primary causes for this. Coming to profitability, this is the 12th successive quarter where we have delivered EBITDA of more than 25%, and at 26% for the quarter and 26.2% for the year, we have beaten our guidance of 22% to 24% handsomely. Looking ahead, for FY ’24, as mentioned by Ashok, we are guiding on a revenue growth of 25% and EBITDA continues to be in the range of 22% to 24%. We are looking at a good Q1 based on our deal closures and healthy pipeline.

Coming to the specifics on the quarter and the year. For the quarter, we reported revenues in dollar terms of $45.9 million. In constant currency revenues, that was a growth of 1.3% and a year-over-year growth of 17.6%. In rupees, total revenues were INR386 crores, a growth of 3% sequentially and 24.5% year-over-year. EBITDA stood at INR101 crores and that was 26% of revenues, while showing a year-over-year growth of 23.4%. We’ve been able to maintain a strong EBITDA profile while taking in increases on people costs and absorbing campus joiners and trainees into our fold. Our EBITDA numbers continue to place us amongst the top league of comparable companies.

PBT was INR79 crores, that was 20.4% of revenues, while PAT was INR57.6 crores and 14.9% of our revenues. Our cash conversion ratio continues to be strong as in the earlier quarters. We generated free cash flows of INR99 crores, which is about 99% of EBITDA. During the quarter, we raised debt through issue of non-convertible debentures to the extent of INR45 crores and we have a pipeline totaling another INR80 crores, which should be done before the end of this quarter. On our QIP, our Board and shareholder approvals are valid till October 2023 and efforts on that front continues and we’ll keep you updated on that progress.

Finally, our results for the quarter include that of SMI, the company we acquired in January 2023. For the year, operating revenues were INR178 million, showing a growth of 24% in constant currency, operating revenues in rupees showed a growth of 31%, total income was INR1,450 crores, showing a growth of 28.3%. We closed the year with an EBITDA of INR380 crores, which was 26.2% of total revenues, showing a growth of 29%. As mentioned earlier, we continue to be the top league of comparable companies on this metric when taken on a yearly basis as well.

PBT for the year was INR310 crores. This was 21.4% of total revenues, showing a growth of 26%. Finally, on PAT, for the year, we closed with INR231 crores and 15.9% of revenues, showing a growth of 27.5%. So, suffice to say, revenue growth, EBITDA growth, PBT growth and PAT growth. EPS for the year was at INR16, showing a growth of 27.5%.

Coming to our capital return ratios, they are comparable with the best in the industry. Return on capital employed and return on equity were 33% and 28% respectively. We ended the year with cash and cash equivalents of INR790 crores and our DSO was at a very healthy 55 days, that’s a billed DSO.

As briefly mentioned earlier, during the quarter, we acquired 100% equity interest in Sri Mookambika Infosolutions, Madurai. SMI brings in deep domain capabilities in and around our healthcare vertical and aligns very well with our PES, the Product Engineering business. And not only that, it also takes us into Tier 2 locations of Madurai and Coimbatore. During the year, we increased our capacity across our offshore delivery centers in Bangalore, Noida, Bhubaneswar and Madurai.

In US, we added two new officers in New Jersey and Seattle. We ended the year with 237 customers, that was a net addition of 31 for the year. Our average revenue per customer for the year was at $803,000, which has been consistently moving up, and it was, if you recall, about $630,000 a couple of years back. This is a steady increase and is a testament to our land and expand strategy. Our total headcount at the end of the year was 4,917 and net additions for the year was 750. Our utilization for the quarter was at about 74.6% compared to the 80.1% in Q3.

As we had mentioned, we had onboarded 250 campus joiners. They have become part of our billable workforce and that was the main reason for this drop on a Q-o-Q basis. For the year, our utilization is at about 78%. As we had mentioned in earlier calls, we were running at high 80%, and we would like to typically be in the range of about 77% to 78%. We are seeing easing in supply side constraints and attrition on a trailing 12-month basis has dropped to 19.8% compared to the 22.7% in the previous year. We expect this number to further trend downwards.

Happy to state that keeping in line with our progressive dividend policy and capital allocation discussions, our Board of Directors of the company at their meeting held today have recommended a final dividend of INR3.40 per share subject to shareholder approval. This would take our total dividend for the year to INR5.40 per share. Looking ahead, we’ll continue to make investments in our people and capabilities, we’ll be adding about 450 campus graduates this year, we’ll be expanding — continuing to expand our delivery centers in India with an immediate focus on Pune and Noida.

Thank you for all your continued support, and we look forward to the same during the year. Over to you, Joseph.

Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services

Thanks, Venkat. Thanks, Mukul and Motilal Oswal, for hosting this call. Good evening to all of you. As can be seen from the numbers, overall, we had an excellent year as reflected in our broad-based growth across our business units, centers of excellence and focus markets. The numbers reflect our continued ability to operate on our strengths and to position Happiest Minds as a trusted partner for our customers’ strategic initiatives.

We had our first $20 million customer created in this current quarter. Our total clients in the $5 million to $10 million group have increased by two to a total of six and, in the $1 million to $3 million category, we have an increase of five to take the number to 13. These matrices validate our effective land and expand strategy. Our internal customer satisfaction survey showed a net promoter score of 60 and an overall satisfaction level of 7.86 on a scale of 9. We believe these numbers to be in the top tier among comparable companies. The results of this survey indicate our efficient and quality delivery, engineering excellence and prudent account management practices.

On the people front, we are also delighted to be recognized by Great Place to Work Institute. For the second time in a row, Happiest Minds was recognized among the top 10 India’s Best Workplaces in Health and Wellness 2022. We continue to receive recognition from GPW as one of the most attractive employers. We were named among the top 25 India’s Best Workplaces in IT and IT BPM 2022, and top 50 India’s Best Workplaces for Women 2022. This recognition, along with the Excellent Customer Survey result reflects the commitment of each and every Happiest Minds to our vision of happiest people, happiest customers.

I will now talk a little bit about some of our wins during the reported quarter. For a large edutech company which supports learners and institutions, we were chosen as a strategic partner to provide a broad range of Digital Engineering Services. In the reported quarter, a large our loyalty program provider in the ANZ region chose us to provide consulting, support, and implementation services to enhance security and privacy environments around the data and cloud.

We have been chosen to provide Engineering Services leveraging 5G for the Connected Card program of an Indian-headquartered global automotive company. We continue to make investments in technologies, which are either becoming mainstream or will become mainstream in the next two to three years. These include generative AI and ChatGPT, Metaverse and Web 3.0, analytics and AI, low-code no-code applications, and quantum computing.

We believe the ChatGPT and generative AI will be transformative and offers huge potential and opportunity for technology services companies like us and to our customers. We have initiated a task force under our CTO to look at building solutions on ChatGPT and develop use cases for different verticals and are already in discussion with multiple customers to help them leverage this technology.

On the environmental, societal and healthcare commitment front, Happiest Minds sponsored 1.9 million meals for school children under the Akshaya Patra program during the year. Since our inception, we have contributed 6 million meals. We also partnered with an environmental agency to plant 163,003 saplings. Happiest Minds also partnered with an NGO to extend medical support to underprivileged young children between one to 15 years of age battling type 1 diabetes.

Now, I’ll talk a little bit about the current demand environment. During the quarter, we saw an improvement in business sentiment as customers digested various macroeconomic and geopolitical factors into their plans and budgets. Decision-making that typically would have happened in December around budgets got pushed out into Jan, Feb resulting in revenues getting right-shifted as pointed out by Ashok.

Our pipeline exiting Q4 is very strong with several large opportunities in an advanced stage of the sales lifecycle. We have already seen a couple of large deal closures in the first half of April, leading to a good start to the fiscal. The areas where we have seized [Phonetic] are all strengths of our Happiest Minds, migration to cloud, modernization of legacy applications and platforms, monetizing data by building customer data platforms and applying analytics, AI to turbocharge, analytics initiatives, automation of various processes to extract cost savings and leveraging IoT to increase connectivity and data collection.

With this, I conclude my commentary and open up the floor to Q&A.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Vimal Gohil from Alchemy Capital. Please go ahead.

Vimal Gohil — Alchemy Capital — Analyst

Yeah. Thank you for the opportunity sir, and congratulations on an excellent quarter and very heartening to see the guidance. The first question is on guidance itself, if you could just highlight how much of this 25%, how much of that will come from inorganic initiatives, if at all, because if I were to look at the ask rate that comes very close to 8% every quarter. So, just wanted to get a sense on any inorganic acquisitions that have been built in. I have one more question after that. Thank you.

Ashok Soota — Executive Chairman

Sure, Vimal. So, Vimal, thanks for your question. One thing I should clarify that even if you see the year which has just gone by, actually 98% of our growth has been all organic. So, when we give guidance, we actually, really in a way, stick out our neck and say, whether we do an acquisition or don’t do an acquisition, we’ll achieve that. So the current guidance is based on the fact that we’ve got a good pipeline and, therefore, we expect we will achieve the number. Does it mean there’ll be no acquisition which will happen? Maybe, but we can’t factor that in, because acquisitions are uncertain. We are very lumpy. And you don’t know when you do a deal. We haven’t done much, as you know, in the last three years. In one sense, we can congratulate ourselves because valuations have come down and we’ll get cheaper opportunities, but we are very selective. And therefore, in that process, when we get the acquisition, we will achieve it. If we do or we don’t do, our guidance remains 25%.

Vimal Gohil — Alchemy Capital — Analyst

Right. Understood, sir. Thank you so much for that. Sir, one question on this whole debate around — and one of your closest peers EPAM on Friday highlighted the discretionary spend is almost drying up with some of their clients and the industry. How do you look at that environment? Because your guidance clearly indicates that there is no dearth of work. So there are two very, very opposing views and the market for cost takeout projects seems to be heating up. How are we positioned over there? Thank you.

Ashok Soota — Executive Chairman

Sure. I’ll pass this to my colleagues to answer, but I think the essence of this is this; one, we are not seeing any decline or something in the growth available to us, that’s one. Two, we are in a digital business. It’s not that we don’t do cost takeouts for customers, but we are transforming their businesses at all times. So — and the third is, of course, to be a little humbler about it, is to say that, look, the challenge of a $10 billion company to grow at even 10% or 5% for that matter means virtually growing another Happiest Minds. We got to get only $50 million of business. With our organization, with our field force, with our leaders, with our CoEs, with all of them, I see that we have no difficulty in getting to that capability and level.

So — but I can get both Joseph and maybe Rajiv to add to that.

Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services

Just a couple of additional points, Vimal. The first point is, what we are seeing is that the areas that we are working on the digital initiatives of our customers, they’re not discretionary anymore. They are a core part of the technology that they use to deliver services to their customers to engage with their customers or to provide services to their employees. And therefore, they need to sustain these platforms, these applications, the analytics that they’ve already built, and it’s not discretionary in nature.

And the second is, as I highlighted in my commentary a little earlier, we’ve seen good buildup in pipeline in Q4. And as we speak, in the first half of April, we had a couple of closures, which are already contributing significantly to the Q1 growth. And we see the pipeline moving faster than it did maybe in Q3 or the earlier part of Q4, which is giving us the confidence to provide this guidance. Rajiv?

Rajiv Shah — President and Chief Executive Officer, Digital Business Services

So, Vimal, I think that if you look at from the industry perspective, the customers are looking for two ways of managing their business, right? One is their revenue growth and the second one is becoming more profitable. And within that context, I think that we do implement digital-ready platforms to help them become operationally efficient, to take out the cost and give you an example that we have invested significantly in the low-code no-code environment and we have grown quite a bit over the last year.

Now, that helps them with getting their platform bit faster, at the same time has reduced their long-term maintenance cost as well. So, from that perspective, there is a cost takeout play that you can talk about, but it’s becoming more and more efficient. At the same time, the spending itself is also getting reprioritized and going back to — related to BFSI sector, while there was more focus on risk and compliance, it’s moving more into risk and control. So, there is more and more operational risk, there is credit risk, etc, the spends are going up in that segment as well. So overall, we continue to see growth, as Ashok, Joseph, Venkat highlighted, the pipeline is strong and we continue to make impact in the customer environment for them to really become — both help to grow the revenue, at the same time become more efficient.

Vimal Gohil — Alchemy Capital — Analyst

Understood sir. Thank you so much. All the very best. I’ll come in the queue. Thanks.

Operator

Thank you. The next question is from the line of Mukul Garg from Motilal Oswal. Please go ahead.

Mukul Garg — Motilal Oswal Financial Services Limited — Analyst

Thank you. Just a follow-up to Vimal’s question. When we are talking about the demand environment, you mentioned that there was a bit of a right-shifting, which happened this quarter. Any sense whether that is something, which is more industry-specific and also in terms of the pipeline, which you are seeing, are you seeing different, kind of, client behavior across industries? It was a bit surprising to see your growth in hi-tech this quarter, because that’s one area where a lot of companies are highlighting concerns. So, if you could just give some sense on how we should think about different industries moving forward?

Ashok Soota — Executive Chairman

Sure. I’ll again begin this and pass it on to my colleagues. The first thing, Mukul, is that after all what is the right-shifting we are talking about, it is really 1%. After all, we’re that close to our guidance for the year and that’s literally because as the year began a few entities have not cleared their budgets or frozen their budgets and therefore not released new orders. It’s nothing dramatic in terms of saying, hey, there was a downturn or some segment is slowing down, it has nothing to do with any of that. So — and that we’re saying you will see reflected in the fact that we are sustaining our guidance for FY ’25. We don’t give quarter-wise guidance, but again hopefully you’ll see numbers, which might reflect a little bit of that right-shifting also there.

Now, with these more details, I think I’ll again positive over to Joseph and Rajiv.

Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services

Sure, sir. Just reflecting as you asked the question about if there’s anything specific industry-wise and some of the revenues or opportunities that got moved out or delayed, they cut across industries. So, really wasn’t able to draw any correlation to a specific industry, Mukul and I think it was more of customers waiting till the last minute to make sure that they factor in all the factors that are out there and develop that into the budgetary decisions. I think that’s what was driving this.

Rajiv Shah — President and Chief Executive Officer, Digital Business Services

Yeah. Like Joseph said, I think that we haven’t seen any specific incident of any industry segment that has shifted. I think, a couple of examples that I can provide, is that one of our customers had a delay in launching their own platform and which affected us really going after and implementing in some of the customer environment, and that has nothing to do with budgetary or whatever, but at the same time they wanted to include some of the newer technology tools in their newer platforms and that just delayed some of the revenue recognition that we were planning to get as well. So overall, there is no shift.

Ram, if you want to add?

Ram Mohan — President and Chief Executive Officer, Infrastructure Management and Security Services

Yeah. Even in the case of infra and security, that’s what we have seen. We have seen a couple of right-shifts, but that has got nothing to do with any business environment or market situation. It is more — on the timing of the RFP, there was some delay in the RFP. There was some delay in terms of the meetings, which our customers had in terms of deciding on the RFP. So, those were the reasons what we are seeing a right-shift and it has got nothing to do with the market condition at least in the infra and security side.

Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services

And just talking about Hi-Tech, most of that, as Venkat pointed out, SMI is aligned with Product Engineering Services and most of the revenue is in the Hi-Tech segment, which has contributed to the increase in the Hi-Tech segment. As least you would have found the numbers to be consistent with the other verticals.

Mukul Garg — Motilal Oswal Financial Services Limited — Analyst

Sure. And just a follow-up to this. Is it fair to imply given your excellent guidance that the visibility on the demand side continues to remain as strong as what you guys had been seeing for last two years. Again, the associated addition and the plan seems to indicate that the visibility is quite good, but would love to hear some thoughts on how demand visibility is out there.

Ashok Soota — Executive Chairman

Sure. I’ll take a first shot at and then that my colleagues jump in. So, if you look at the demand environment, as I said, it continues to be promising and strong. And what is giving us the confidence to provide the guidance is that many of the deals that we have closed or are in the pipeline are quite large in size and spanning across quarters which ensures that we have visibility of revenues into the entire year. And if we continue converting some of the opportunities that we have, it will contribute to this growth that we have — that we have been talking about.

So, again on the demand side, we haven’t seen much of a drop. If you look at how we approach the customer, it is about helping them put together a proof of concept. Start with the consultative engagement, help them really drive the outcome, and everybody in the customer environment that we have today continues to look at what business outcomes are we driving. And from that perspective, I think that we haven’t seen much of an impact from the demand market, and that’s why we are quite optimistic about the guidance that we have provided as well.

Mukul Garg — Motilal Oswal Financial Services Limited — Analyst

Sure. And my second question was on the sales investment side, there was a slight moderation this quarter. How should we think about investment into SG&A for FY ’24, especially given the aim to deliver a 25% growth in a tough year?. Are you still kind of penciling in a 22% to 24% operating margin kind of easing off from this year more because of the growth aspirations or is it something, which will stay around current levels?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

No. The 22% to 24% has been the guidance that we’ve given over the last two years and you’re holding onto it, like I have been mentioning the year before last, it was COVID and we had credits and that came in as a good surprise. Last year, we had a benevolent exchange rate scenario between US dollar to rupee, which helped us. Right now, we have considered those, both of them have kind of played out to its full. We have taken into account those factors and also the investments that like you said that need to be made in technology competence and sales, as required — domain heads as required and that’s why we are still maintaining the 22% to 24% guidance. While obviously, the intent is to continue to do better.

Joseph Anantharaju — Executive Vice Chairman and Chief Executive Offier, Product Engineering Services

Just add one more point. I think that if you look at over the last six months, we have added quite a bit of sales capacity and capability in the US market. So, hiring quite a few hunters, I mean, significant number of hunters in the US market. We continue to add more and more capabilities on our business analyst community as well and we continue to enhance our technology architecture pool as well. So, we continue to look at all aspects of how do we really approach the customer and how do we really put together a value proposition for us to convert the deal.

Mukul Garg — Motilal Oswal Financial Services Limited — Analyst

Sure. Thank you so much. I’ll get back into the queue.

Operator

Thank you. The next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead.

Dipesh Mehta — Emkay Global — Analyst

Thanks for the opportunity. Just two questions, data related. How much SMI acquisition has contributed during — in Q4? And related is about how many employees get added because of the transaction?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

About $2.4 million is what it has come in from the SMI acquisition for the quarter. Like Ashok mentioned, 98% of our business is organic and it’s less than 2%, which has come from SMI for the quarter. On the people side, I think, we have added 381 people, including the non-billable people, into our headcount from the acquisition.

Dipesh Mehta — Emkay Global — Analyst

So, if one adjusts SMI acquisition in this quarter, organic number appears to be weak. Even on y-o-y basis, your revenue growth is likely to be slipping to closer to double digits around 10-odd percentage. So, just want to understand now, if one look organic performance seems to be slowing down, now you’re guiding for excellence in inorganic revenue growth. Can you provide what is changing compared to, let’s say, last couple of quarters?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

So, if you look at how Q3 went, we had clarified that we had vacation impact which had come in. So, that was one impact. And then when it came to Q4, it was that right-shifting, which has happened, which is what Ram, Rajiv and Joseph talked about. So, we made up a part of that through the numbers that have come from the acquisition of SMI. So, it was not that we had mentioned that 25% growth guidance for the current year was fully completely organic, we had said that we didn’t have anything in the earlier quarters, we didn’t have any on our radar on acquisitions, so we hold it as growth from either way, we will do the growth. And at the end of the quarter, there came this nice acquisition which fitted very well into our business and that’s how we went ahead and closed that. So it — that’s the same reason why I talked about how our Q1 pipeline looks like, the confidence that Q1 numbers that we have ahead of us as we stand in May, that gives us the confidence to give us an outlook based on Q1, Q2 and for the year.

Ashok Soota — Executive Chairman

Also, the key thing to remember is that we are saying our guidance is there quite irrespective of whether we do an acquisition or we don’t do, because we can’t predict that. And we’ve taken the confidence of saying, but we’ll do the 25%. That’s why we’re giving that guidance. When we get the guidance where acquisition changes the numbers, that’s also well and good, if we don’t get it, then we should still target to get 25% results there. [Speech Overlap]

Dipesh Mehta — Emkay Global — Analyst

Understood. Thank you.

Operator

Thank you. The next question is from the line of Faisal Hawa from H.G. Hawa Company. Please go ahead.

Faisal Hawa — H.G. Hawa Company — Analyst

Right now, I just went for namas [Phonetic]. I will come back within 5 to 10 minutes now.

Operator

[Operator Instructions] The next question is from the line of Dinesh Kudache from Technowell Web Solutions. Please go ahead. Dinesh your line has been unmuted, please proceed with your question.

Dinesh Kudache — Technowell Web Solutions — Analyst

Congratulations Happiest Minds team on achieving greater Q4 results, your hard work and dedication had clearly paid off.

Operator

Dinesh, your voice is not clearly audible. If you can speak with the handset?

Ashok Soota — Executive Chairman

It’s okay though, we could make out.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yeah, go ahead, Dinesh.

Dinesh Kudache — Technowell Web Solutions — Analyst

Hello, am I audible now?

Operator

Yes.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yeah, go ahead.

Operator

Yes. Please go ahead.

Dinesh Kudache — Technowell Web Solutions — Analyst

Hello, am I audible now?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yes.

Dinesh Kudache — Technowell Web Solutions — Analyst

Congratulations Happiest Minds team on achieving greater Q4 results. This success is well-deserved, keep the excellent work going on. I have one little question about Happiest Minds utilization percentage. In Q3 ’23, it was 80.1%, whereas in Q4 ’23, it is now 74.6%. Can you please put some light on it? Thank you so much, sir.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Nanda — you want to take that question, Nanda?

Aurobinda Nanda — Chief Operating Officer, Product Engineering Services

Yeah, sure. All right. So, we had hired around roughly 300 trainees. Last year they came in and joined us in the month of August and September. As they were tagged as trainees and their training got over in the month of December, so that was — they were not counted under utilization — billable utilization because of that. And they moved into billed people for Q4 and that’s where there was a drop in the utilization number.

Dinesh Kudache — Technowell Web Solutions — Analyst

Okay, sir. Thank you.

Operator

Thank you. The next question is from the line of V.P. Rajesh from Banyan Capital Advisors. Please go ahead.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Thanks for the opportunity. My first question is more of a clarification. So when you are guiding for 25% revenue growth in fiscal year ’24, should we just assume that that’s going to be all organic and anything that comes on top from an acquisition or more of those that will be on top of that.

Ashok Soota — Executive Chairman

No, no, we are actually being silent acquisition, which means we are saying we want to make a commitment to the market. We don’t know whether we’ll do an acquisition or we won’t do an acquisition, but we’ll commit the 25%. So I think that is the exact statement.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Okay. And then, given the confidence you have around this guidance, are there any lumpy deals in your pipeline that is driving this guidance?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

So, as I’ve mentioned earlier, Abhishek [Phonetic], the pipeline is — we’ve seen a buildup in the pipeline as the quarter progressed, Q4, and this has continued into Q1. We had several closures as pointed out in our press release as well as — as I mentioned earlier, all in areas that customers will need to sustain for a long period of time, we’re helping them with some of the core digital platforms, and it gives us a long-term visibility and again as I mentioned, we’ve already had a couple of closures from the pipeline that we had in the first half of April that have provided significant — that will provide significant revenues in Q1 itself. And we have visibility, all the way into the year on these projects and initiatives, and this has given us the confidence, the conversations we’ve been having with our customers, the kind of opportunities or needs that they have been discussing with us. This is what is giving us the confidence to commit to a 25% guidance.

V.P. Rajesh — Banyan Capital Advisors — Analyst

That’s helpful. But my question was slightly different. What I was trying to understand is that, if there are a few large deals, which are driving this growth guidance or this is like business as usual, a lot of small and medium-sized deals in the pipeline, which is giving you the confidence. That’s what I was trying to ask?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Sure. Maybe I didn’t answer properly. We do have several large deals. Some of them closed in Q4, a couple of them have closed in the first half of April, right and we’re in the process of ramping up all of these opportunities and that’s what is giving us the visibility to provide this guidance along with the business as usual kind of deals that we’re getting.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Got it. And last question is on the margin. Now that the cost pressures are seen to be coming down in the industry. So, your guidance of 22% to 24%.Are you sort of doing any investment, that’s why you’re being conservative on the guidance, because if you’re going to grow at 25%, one would expect that your margins will also expand?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yeah. While there is an overall improvement in the attrition and people and supply scenario, we work on specialized technologies and there is a demand for those people, maybe earlier gentlemen or Mr. X would have had five offers, today he is having two offers. That’s the way I would look at it. So, for good people, there is I think a good demand and the other thing is when things get a little murky in the market, people also tend to stick on and not move. So then, you need to do that much more work to get them to move and these are the reasons that really play when you are discussing compensation and similar with prospective candidates and employees of Happiest Minds. So that continues from similar to last quarter. This year, we are also adding 450 campus joinees, it was 250 last year.

Now that number including trainees was 300 last year, this time it will be 450-plus, another 50 trainees, that will be about 500 people. So, we have not — we are going to stick to those commitments and we continue to — we will continue to honor them. So if you look at it, really there is a good pipeline, which also means that we’ll have to look for those people who can help us deliver on our commitments to our customers and that will mean that the cost pressures may not be as bad as it was maybe a couple of quarters back, but it is going to be there, but you should also consider that I’m not going to get that headroom — the tailwinds that I had from the dollar versus rupee, there was a depreciation of almost 8.4% last year. So that’s not going to come through this year, right. So, we’ll have to plan for that as well.

V.P. Rajesh — Banyan Capital Advisors — Analyst

Understood. Thank you. That was helpful. That’s all.

Operator

Thank you. The next question is from the line of Sumeet Jain from ICICI Securities. Please go ahead.

Sumeet Jain — ICICI Securities — Analyst

Yeah, hi. Thanks for taking my question. I hope I am audible.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yes. Very well.

Sumeet Jain — ICICI Securities — Analyst

Okay. So, actually first question is on your guidance. Can you quantify the size and the nature of the deals, what you have won which is giving you the confidence of a strong growth in 1Q. Because typically whichever companies I’ve supported till now, all of them have been guiding for a significantly weak Q1 because of the banking crisis and various other reasons we are seeing at a macro level. So, can you quantify the nature of the deals what you have won, in which areas it is and how it will impact, which industry, which [Indecipherable]?

Ashok Soota — Executive Chairman

I think the way to answer this one is that maybe some of them who’ve been dealing with the banking industry — traditional banking industry in particular, they are the ones who got most impacted because the whole environment there has slowed down and there’s a lot of cautiousness. Now, we’re lucky that none of them are our customers. Another type of environment, which got affected are some tech companies, but our tech growth is very strong and has always been, for that matter. We didn’t have, for example, Twitter as an account.

Now when you look at it, I would say due to the absence of negatives, because other than that we are not projecting anything different from the past. We’re saying we grew 24%, still we will go 25% this year and the overall pipeline is stronger. It is really continuing to grow in the segments where we are strong, increasing our presence in segments, in which we were not relatively strong, in the sense, we had not taken off, but we are now expanding, healthcare is one such area. So it will suddenly appear on the radar as a specific industry, which we will start reporting on. It is things like this, which are adding to the momentum and giving us the confidence to say that, yes, we can sustain these numbers on a larger base.

Sumeet Jain — ICICI Securities — Analyst

[Indecipherable]

Venkatraman Narayanan — Managing Director and Chief Financial Officer

If I can add just one more thing, I think the whole strategy has been land and expand, so 92% of our business comes from repeat customers. And based on where our customers are and where their spend desire as well as the initiatives they have, I think that gives us good visibility going forward as well.

Sumeet Jain — ICICI Securities — Analyst

Got it. And what risk do you see to the guidance if the macro situation deteriorated in US or Europe, particularly, do you think there will be any risk to this guidance going forward or Probably in the second half? And also, how are you factoring in the growth during the quarter, are you seeing a ramp-up in the second half of the year because, at least, all your competitors who are more banking-focused or maybe hi-tech-focused clearly guiding for a ramp-up in the second half after a slowdown in the first half. So, are you also factoring in any pickup in the second half? Or is it going to be a steady growth every quarter?

Ashok Soota — Executive Chairman

You have to answer.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Sumeet, the way to look at it is, repeat business at 92% continues to be strong. So, like Ashok mentioned, a 25% growth — we exited with about $177 million, $178 million would be about $42 million to $43 million in terms of additional business that needs to come. So, you’re are looking at new business of about $10 million balance coming from existing business. This is the overall structure, $10 million to $12 million coming from new business and about $30 million coming in from your existing customers and pipeline. So, if you ask me about risk, it will be with respect to our existing customers and something not going south with them, because that especially will not give you time to quickly book, build and bill, and also recognize.

So, that’s the risk that we see, because what’s happening is, we are looking at our Q1, we have looked at our Q2. We know where our current pipeline is going to take us and where our customers will take us in the next two quarters, and that’s the confidence on which this 25% number has been given out. So, if you ask me what’s the risk, it is customer-specific, because you got $43 million customers and $120 million customer, X number of $5 million plus customers kind of a thing and we are in discussion with them and constantly building up our supply to meet their requirements. Like Ashok mentioned, in Hi-Tech, one large company if they had Twitter as an account — as a customer, if that goes down south, it’s going to impact you.

And there is an element of luck that we have had until now. So, just to — I was talking about this when COVID hit, our exposure to travel and tourism was 0.5%. We thanked our lucky stars, but anyway, after that came, the next question of why aren’t you Ukraine, why aren’t you in Eastern Europe? So frankly, we were looking at Europe and then suddenly Ukraine war happened, we weren’t there. So, again, thanked our lucky stars. Now, last year, BFSI — the banking and the traditional BFSI got hit, we at about 10% and our business in BFSI was — it’s not a traditional banking, it’s about mid-sized banks or large-sized banks, but they are looking to change the way they do banking and the way they digitize themselves to do better banking, especially security kind of work and all of that. So this is not discretionary, it has absolutely required amount of work that needs to be done. So we didn’t get hit.

So third time lucky — these are things, which we have to keep looking out in our IPO document. Number one risk is obviously customer risk our geography risk or currency risk. Those are the risks that we have to obviously keep in the back of my mind but guidance typically does not take into account something, which has not happened as of today.

Ashok Soota — Executive Chairman

So, something really untoward. Well, there is always a high probability of one risk or the other coming and hitting you in this world, that’s a fact. Though, you can’t say that I can pinpoint that this and this will go wrong. For example, nobody anticipated COVID, nobody anticipated Ukraine, nobody anticipated that all these banks will suddenly fail and yet the probability of something happening is high, that is true. So, we better always be aware and be nimble to act when such an event happens.

Rajiv Shah — President and Chief Executive Officer, Digital Business Services

Just adding a couple of additional points to what Ashok and Venkat mentioned. One is, you talked about many of them had the growth in the second half. So we made sure that we have not backloaded our growth and that has been fairly uniformly distributed with a little bit maybe front-loaded actually, because we wanted to make sure that we don’t put too much pressure in the second half of year.

The other point is, if you look at our percentage of India revenue is at 16%, among the highest of all Indian IT services companies and we are doing this business at a good margin and at the rates that we want to do business at — that I would like to do business at. And this market is growing and there’s quite a bit of demand out here as we see cutting across the industry verticals, whether it’s banking, whether it’s industrial, manufacturing, pharma, there’s fair bit of auto, there’s fair bit of demand out here, all of them are embarking on digital initiatives and we will focus more on India, that will act as a de-risk to anything that happens in, let’s say, Europe or in US.

Sumeet Jain — ICICI Securities — Analyst

Got it. Thanks for addressing my question. My second question is around your M&A strategy. So, can you elaborate on your M&A strategy, will be it driven by scale or around capabilities or entering into a new geography? Can you please elaborate on that?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

So, we sat together with the Executive Board and come up with several criteria for our acquisition and we want, as we’ve said, we want to acquire a company that is mostly, if not purely digital, that’s profitable. We don’t want to get into a turnaround kind of story and along with that, you want to make sure that we get a strategic differentiator. We would like to get a company that would give us depth or capabilities in certain vertical, in a technology where we are light currently, or give us entry into a few large accounts in specific areas that we are targeting. And that’s what we’re looking to do, each and every M&A candidate we were against these characteristics, look at the profitability profile, the growth that they’ve had, and then take a decision because we want to make sure that we get this right, and you don’t have it as a drag on our performance.

Sumeet Jain — ICICI Securities — Analyst

Got it. Thanks a lot for addressing my questions and all the best for future quarters.

Ashok Soota — Executive Chairman

Thank you.

Operator

Thank you. The next question is from the line of Faisal Hawa from H.G. Hawa and Company. Please go ahead.

Faisal Hawa — H.G. Hawa Company — Analyst

Yeah. So, sir, we are giving a guidance of 25% in rupee terms, but last two to three years we are almost doing like 35% to 40% revenue growth. So, are we being a little more conservative than necessary? That’s one.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yeah. Faisal, we are giving our guidance in constant currency in dollars.

Faisal Hawa — H.G. Hawa Company — Analyst

Okay, dollar? 25% dollars, okay.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Yeah, whereas it is the rupee, which has been growing at 30%, and that’s also thanks to the way it has moved towards versus the dollar.

Faisal Hawa — H.G. Hawa Company — Analyst

Yeah. But even rupee we are growing almost like 38%, 39%?

Ashok Soota — Executive Chairman

Yes, yes. That’s true.

Faisal Hawa — H.G. Hawa Company — Analyst

So, you feel that the rupee-dollar equation being in our favor, we could actually continue with that kind of a thing?

Ashok Soota — Executive Chairman

But that won’t happen this [Speech Overlap] as we are not budgeting for it.

Venkatraman Narayanan — Managing Director and Chief Financial Officer

We are not budgeting for it, Faisal.

Faisal Hawa — H.G. Hawa Company — Analyst

Sir, our capacity utilization of people is falling. So, any trend that could be read into it? It has fallen…

Venkatraman Narayanan — Managing Director and Chief Financial Officer

It has just fallen for this quarter.

Faisal Hawa — H.G. Hawa Company — Analyst

Okay. So, it’s something which is a little…

Venkatraman Narayanan — Managing Director and Chief Financial Officer

So, as Nanda has pointed out earlier, we inducted around 320 Happiest Minds from campus in August and they were undergoing training till Jan. So, they were not included in the billable headcount which we base our utilization on. These folks came into the billable headcount numbers in February and that’s why you see the drop in utilization. On the other hand, what you see is over the next few months, as we get these people billed, they will all contribute to revenue, while the cost would remain the same, which will give us a little bit of advantage or leverage from a margin perspective.

Ashok Soota — Executive Chairman

And also improve the utilization.

Faisal Hawa — H.G. Hawa Company — Analyst

And sir, how do we see the opportunity of EduTech playing out, because a lot of these players may not be now having the funds from VC or PE funds to really fund their further projects. So, will that still continue, because that’s a fair — a fairly big segment of our revenues, that’s one. And secondly, sir, I mean we are getting projects from across the board, I mean it’s so many verticals. So I mean, where do you see the big traction coming from?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

Sure. So, if you look at EduTech, Faisal, we don’t work with any of the startups and most of our customers except one, and that also is a large B2B education provider who is based out of India and so therefore they’re pretty stable from a financial perspective. We don’t have any other customers in India and even in US, we don’t have any start-ups in the education space, they are all companies that are either public or owned by PEs and so the cash and other things, they are well funded. So cash is not an issue.

Many of them have been running strategic initiatives and I did mention a couple of them in my commentary about the wins that we’ve had, they are pretty large wins actually. They are all significant wins and we continue to see a decent pipeline in this space, because there’s a lot happening actually, you know, the way students — the expectation of students, what professors want out of their systems and technology they have, all of that is changing and so education technology providers have to keep adapting themselves as well.

Faisal Hawa — H.G. Hawa Company — Analyst

So, since we are one of the fastest adapters to new technologies, how fast do you feel that we can adapt to ChatGPT to actually automize most of our software solutions, then let go off a large part of our workforce or retain them?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

That is not a feasibility right now. If you look at ChatGPT, there are maybe some industries where you could have them replacing people, but in the technology space, it’s more of an enabler and the product productivity enhancer, it will help make the life of a developer a little easier and help them look at some of the more complex challenges that they have, look at how to add more value to customers, and ensure that the quality of whatever technology, code, or platform they built is better and that’s the advantage that you’ll get from a technology perspective.

Faisal Hawa — H.G. Hawa Company — Analyst

So, are we already looking at retaining people to use ChatGPT as an answer and really cut down on the hours that we take to complete any kind of a project?

Venkatraman Narayanan — Managing Director and Chief Financial Officer

As we speak, we have couple of task forces. One is, looking at more from a customer perspective, how we can adopt this technology, we have a few POCs and solutions that we have built, we have identified use cases specific to each domain and we are in discussion with a few customers to help them adopt this technology and leverage it. From an internal perspective, we’ve been looking at Codepilot and Codex, which are more oriented towards the development environment to see how we can leverage these internally and maybe even for some of our customers to enhance productivity of developers, all this is work that’s underway.

Faisal Hawa — H.G. Hawa Company — Analyst

Thank you very much sir for such reassuring answers. I really appreciate it.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Sunil Gujjar for closing comments.

Sunil Gujjar — Head, Investor Relations

Thank you for joining us today. We thank Motilal Oswal Financial Services for hosting this call on our behalf. We look forward to interacting with you. You can reach out to us on ir@happiestminds.com. Have a good evening. Thank you.

Operator

[Operator Closing Remarks]