Good morning, ladies and gentlemen. Welcome to Happiest Minds Q4 FY 2022 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Aniket Pande from ICICI Securities. Thank you, and over to you, sir.
Thank you. Good morning, ladies and gentlemen. Thank you for joining us today for Q4 FY22 Earnings Call of Happiest Minds Technologies Limited. On behalf of ICICI Securities, I would like to thank the management of Happiest Minds for giving us the opportunity to host this earnings call. Today we have with us Mr. Ashok Soota, Executive Chairman. Mr. Joseph Anantharaju, Executive Vice Chairman and CEO, Product Engineering Services. Mr. Venkatraman Narayanan, Managing Director and Chief Financial Officer. Mr. Rajiv Shah, President and CEO, Digital Business Services. Mr. Ram Mohan, President and CEO, Infrastructure Management and Security Services. Mr. Aurobindo Nanda, President, Operations and Deputy CEO, PES. Mr. Sridhar Mantha, Chief Technology Officer. Mr. Sunil Gujjar, Head of Investor Relations, and Mr. Praveen Darshankar, Company Secretary and Head of Legal. I will hand over the call to Sunil for safe harbor statement and take the proceedings forward.
Thank you, and over to you, Sunil.
Thank you, Aniket. A very good morning to all. Welcome to this conference call to discuss the financial results for the fourth quarter and year ended March 31, 2022. We trust all of you are keeping well and staying safe. I'm Sunil, Head of Investor Relations. We regret the slight delay in start of this call. We apologize for that. Now Ashok will begin the call by sharing his perspectives on the business environment and our results. Venkat and Joseph will 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 are considering 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.
Thank you, Sunil. A very good morning and welcome to all. We at Happiest Minds are extremely pleased to talk to you once again and share with you what has been an excellent year for Happiest Minds. With for the FY 2022 growth of 40.9% in constant currency, we have delivered industry-leading growth with a superior margin profile. Clearly, the results are a validation of our strong positioning as a born-digital, born-agile company, delivering effective outcomes for our customers. The growth has been broad-based with all our business units, operating geos and centers of excellence delivering outstanding performance. While Venkat and Joseph will walk you through the details of the results, I want to share some significant milestones.
We completed a decade of our existence as a company in August 2021, and for the first time, we have articulated a ten-year vision to prepare Happiest Minds for the changes which lie ahead. Some of the features of the vision include designing Happiest Minds for perpetuity. This includes our approach for succession planning through continuous renewal of the executive board, which is functioning very effectively as the CEO of the company. The mechanism through which perpetuity will be achieved is covered by legal agreements which will ensure continuity. We aspire to achieve revenues of $1 billion in ten years with industry-leading profitability and capital return ratios. We also aspire to be in the top three of comparable companies on the index of EBITDA and growth through the whole decade.
We will continue to build on our mission of happiest people, happiest customers, which has already yielded outstanding results in terms of customer and people satisfaction. We will also continue to be early adopters of new technologies and build state-of-the-art solutions for our customers through these. Finally, we will drive sustainable practices and aim to be carbon neutral by 2030. I am happy to advise that the Great Place to Work Institute once again showered us with many recognitions. We've been continuously getting in the top 25 best places to work in IT and IT BPM for the fifth successive year. Recognitions for being in the top 50 best workplaces for women.
This year, for the very first time, they introduced a special recognition for workplaces in health and wellness, and we came into the top 15 across all industries. We also received a special recognition for our empathetic support for Happiest Minds and their families during the COVID-19 crisis. I would just like to summarize all of these by saying that there's no other company in the industry which has results which are as consistent and as frequent as Happiest Minds. We continue to strive for effective operational and effective governance, has always been our priority from day one. I am pleased that the Institute of Directors recognized us as winners under the category of Global Golden Peacock Business Excellence Awards 2021 for the IT industry.
We were also recognized by Asiamoney as the most outstanding company in India under the small and midcaps category, and the most outstanding IPO in India. As part of our CSR initiatives, Happiest Minds sponsored 1.28 million meals for school children under the Akshaya Patra program, and this brings our cumulative total of meals we've been sponsoring to over 4 million meals. To fight COVID-19 pandemic, we contributed towards a molecular testing lab and increasing ICU beds at the Sri Jayadeva Institute of Cardiovascular Sciences and Research. We are humbled by the continued trust of our clients, investors, analysts, and our Happiest Minds, without whose support these results would not have been possible. As we look at this new fiscal and beyond, we continue to see good growth momentum with demand for our services remaining buoyant.
To address the robust demand, we are expanding our delivery capabilities more ambitiously than we've ever done before. This includes creation of new capacity at our existing centers in Bangalore, Pune, and Noida. We will also establish a new delivery center in Bhubaneswar, which we expect will be operational by October 2022. With this, let me pass it over to Venkat.
Thank you, Ashok. Good morning to everybody. I would just request everybody on the panel to mute their phones if possible, so that we can avoid the risk of any echo. Good morning, and I trust all of you are safe and well. We had an excellent year in the quarter from a financial and business standpoint. Happy to say that we have shown industry-leading growth and on almost all financial and related parameters, we are in the top of the pack with comparable IT service companies. The next few minutes I'll give you highlights of our results for the quarter, followed by our performance for the year. For the quarter ended March 2022, operating revenues in dollar terms was $39.8 million. A sequential growth of 5.5% and a year-over-year growth of 31.9%-32%.
In rupee terms, our total income was INR 310 crores, which is a sequential growth of 6.2% and a year-over-year growth of 38.8%. 39% is what I would like to call it out as. Our EBITDA for the quarter was INR 82 crores and 26.3% of the revenues, compared to INR 77 crores and a similar 26.3% in the previous quarter. EBITDA growth, the number that I would ideally like to focus on, was at a healthy 6.1%, shows that the expanding revenues is contributing to our expanding profits. This number is something that we should track going forward. Our PBT for the quarter was INR 70 crores versus INR 65 crores in the previous quarter, showing a growth again of 6.8%.
Coming to PAT, we were at INR 52 crores versus INR 49 crores in the previous, again showing a growth of 6.5%. If you'll notice, we have shown growth solid on all the numbers on a quarter-on-quarter and a year-on-year basis. PAT growth on a year-over-year basis was 44.5%. I would like to draw attention to that because last year we still had benefits of brought forward losses and certain tax benefits. From this year, we have become a full tax paying company. Many a time what ends up happening is, when you look at the PAT number, the growth number is not as solid as it is in all the other parameters, and we get called out for that. But now, as you see Q4 of last year, we have provision for full taxes.
On a quarter-on-quarter basis, we are showing a solid growth of 44.5%. Now coming to the performance for the year. We closed the year with operating revenues of $147 million, showing a growth of 40.2%. That's in dollar terms. Constant currency, that number was 40.9%, which Ashok alluded to. In rupee terms, we breached the 1,000 crore mark. We touched INR 1,031 crores of revenues this year, versus INR 798 crores in the previous year, showing a growth of INR 333 crores and 41.8% in percentage terms. EBITDA for the year was 26.1%. What is heartening is the revenue EBITDA growth of 36.9% or 37%. EBITDA for the year was INR 295 crores.
Almost 98%+, in fact, 99% of the EBITDA that we delivered dropped in as free cash flows to our balance sheet. That is almost INR 290 crores of free cash flow added that we have earned to our financials. Our capital return ratios continue to be very healthy and again leading among peers. Return on capital employed at about 40% and return on equity at about 27.3%. A good demand environment on which we could deliver helped us in putting up a strong growth that you saw in FY 2022. We do see continuation in the demand scenario, and we are preparing for the same. We are strengthening our talent acquisition strategy, both on-site and offshore, while also expanding our presence in India.
Again, as Ashok alluded to, we are adding capacity in our existing locations of Noida, Pune and Bangalore, while also opening up our presence in Bhubaneswar in the later part of this year. Coming to the margins, while we have delivered industry-leading EBITDA of 26.3%, given the people supply situation and many of the credits that we got on account of COVID, which I have talked about in almost all my previous calls. Which we expect to roll back, because we are now beginning to slowly return to office. While we tried our best to retain margin levels, I continue to hold that sustainable numbers are in the range of 22%-24%. I've been proved wrong on this count for the last 5+ quarters, and frankly only happy for that.
Some highlights for the quarter and the year are: we ended the quarter with about 206 customers, a net addition of 11 from the previous quarter and 33 from the previous year. Our average revenue per customer continues to be strong, and I would request you to look at the investor presentation. It's only been on a growth trajectory. Utilization continues to be high at 79.4% compared to the 81%. It's a reflection of the supply situation. Ideally, we would like it to be slightly lower so that we can make investments for new business. But it continues to be 79.4% compared to 81% in the previous quarter, and for the full year it was about 80.5%.
Voluntary attrition on a trailing twelve-month basis was 22.7%, which was 21.1% in the previous quarter. We draw solace from the fact that we compare very favorably to all peers, except for one large competitor, but attrition is attrition and the loss is a loss. We take it very seriously. We closed the year with cash and investments of about INR 647 crore on our books. Finally, basis our solid cash generation and review of our capital allocation strategies, happy to report that the board has recommended a final dividend of INR 2 per share. This would approximately lead to a cash outflow of about INR 29-30 crore. The total dividend for the year, including the final of INR 2, will be INR 3.75. INR 1.75 has already been paid as interim dividend.
The above final dividend, as you all know, is subject to shareholders' approval at the AGM scheduled to be held on June thirtieth, later this year. I request all of you to go through our investor relations page and look at our investor relations PPT. Give us feedback on how we can improve what other additional disclosures we could give so that we could give you a lot more information about the company. With this, I conclude my brief commentary, and I'll hand it over to Joseph for his remarks. Over to you, Joseph.
Thank you, Venkat. Good morning to all of you all. It indeed was an excellent quarter and year for Happiest Minds. Guided by our mission of happiest people, happiest customers, we have nurtured an open culture, putting our people front and center of everything we do and focusing on their learning and development. Happiest Minds continue to attract quality talent, as reflected in our strong headcount growth of 940 Happiest Minds in FY 2022, which took our headcount up to 4,168 as of March 31. Our clients trust us for the significant value and digital depth we bring to the table, which is reflected in our strong new customer addition of 33 logos during the year and a quarter-on-quarter increase in the average revenue per customer, which Venkat referred to.
It grew by 22% over FY 2021 to $774,000. The success of our land and expand strategy resulted in an increased count of large customers. We have increased $5-$10 million clients by one to a total of four. $3-$4 million clients increased by two to a total count of eight. One to $3 million clients increased by a sizable number of clients to a total count of 25. During the quarter, some of the key wins that we were able to get, there are quite a few, and I thought I'll mention a few out here. A leading U.S. supply chain company chose us to be their digital partner for their product development work.
In another instance, we were the preferred partners for data center automation for a Fortune 100 American multinational technology conglomerate. In the Nordics region, a leading player in the digital housing services space chose Happiest Minds as their partner for building a cloud-native customer journey platform. As can be inferred from these wins, it reflects our ability to shape the digital journey of our clients and add value to their strategic initiatives. A strong brand recall of Born Digital, Born Agile, sound account management practices, delivery excellence, and thought leadership is helping us to make inroads into new customers and increase wallet share among existing ones.
Our delivery engine is geared towards providing high quality outcomes for our customers, and we intend to strengthen and expand the delivery centers, as Ashok alluded, to allow us to continue scaling and growing rapidly. Enterprises across industries continue to strengthen their digital capital, increasing their investments in cloud-native applications, analytics AI, Industry 4.0, IoT low code, no code applications. Which we feel will continue to fuel demand and provide Happiest Minds with multiple avenues for growth. With a view on the future, we are investing in emerging technologies such as Metaverse, Web 3.0, advanced analytics, et cetera, to ensure we are ready when our customers need to adopt or would want to adopt these technologies. We at Happiest Minds are excited about the future that awaits and the role we can play in shaping it.
With this, I conclude my update, and we can now open the floor for Q&A.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Ashish Rachmale from BOI. Please go ahead.
Hello. First of all, congratulations to all for such good results. My question is regarding inorganic growth. Can you please throw some light on what our midterm and long-term plans are for regarding acquisitions?
Sure. Maybe I'll just take this, Venkat.
Sure.
I'm getting an echo on the line just now. I hope that is okay. Ashish, thank you for that question. The results in this year are really, I think, almost completely organic. There's been no large acquisition done by us. We've always stated that, acquisition will be a significant part of our 10-year strategy where we want to reach $1 billion. At the moment, we can't say that we're going to make anything or won't, because obviously that will become a forward-looking statement. There continue to be opportunities in the pipeline, and when we get something which is a really good fit, we will certainly proceed to ensure that we bring it into the Happiest Minds portfolio.
Mr. Ashish, are you done with your question?
Yes. Thank you, Mr. Ashish.
Thank you. We'll move on to the question. That is on the line of Vimal G. from Union AMC. Please go ahead.
Yeah. Thank you for the opportunity, and, congratulations to team Happiest Minds for a splendid 2022. My first question was just a data point. Could you just highlight what were the subcontracting cost as a percentage of sales this quarter?
Venkat.
If I look at the three quarters, it was 12.2% Q4 FY 2022, 12% Q3 FY 2022, and 12.1% Q4 FY 2021. That gives you a percentage number across the quarters.
12.1% this quarter?
Yes. No, 12.2% this quarter.
Got it. Sir, just wanted to understand your margin performance a little bit in more detail. Your on-site offshore mix has sort of revenue mix that has been relatively stable quarter-on-quarter. Your utilization has actually dropped. It is understandable that from the 81% levels, it has dropped to more normalized level, but yes, there is a drop on a quarter-on-quarter basis. So just wanted to understand, you know, could you just explain how have you managed to sort of improve your margins on a quarter-on-quarter basis.
Quarter-over-quarter basis, we remain constant at about 26.3%. There is no improvement. You know, we had a favorable exchange rate this quarter, so that's one reason. Second is, there is some lead and lag in revenue recognition in terms of fixed price contracts. Which you see if you look at our own fixed price T&M profile, we are slowly increasing the fixed price profile. So to that extent, there is some bit of revenue recognition that's happening. There has been rate increase that we have been able to get in conjunction with, in discussion with our customers. Like I've said, I'm not saying that we are an inelastic business that we can keep going asking for rates.
What's happening is we are in discussion, constant discussion with our new customers. 85% of our business is existing business, but 15% is new business. New business is coming at new rates. Existing customers are in discussion with us for increase in rates. These are the various factors which have helped us in holding margins. There is also our automation percentage of business which is
Sorry to interrupt, sir. Your voice is breaking up. Sir, your voice is breaking up.
Can you hear me now?
Sir, little better.
Hello.
Can you hear me?
Automation as a whole part for our revenue factors and things. Distribution from our CoEs, which is now the four CoEs security, IoT, automation and analytics. These are also increasing substantially. We have crossed 52% of our total businesses coming from these four CoEs. As is typical of the business, your rates and your recovery is higher in this rather than the general services. To that extent, rates are getting better. There are a lot of moving parts to this margin improvement. On the cost side, yes, there has been cost pressures of people supply, which is for everybody to see.
If you take all the puts and takes, we were fortunate to maintain it at 26.3%, which is why I also in my talking while I gave you a highlight of the results said that sustainable margins could be in the range of 22%-24%. I've been proved wrong. I would love to be continually proved wrong. We are watching our costs. We are watching all the moving parts very carefully. The attempt is to make sure that we will retain our margins.
Perfect. Thank you so much. Sir, just one more related question would be, just how should we understand the reduction in the onsite headcount, this quarter, versus the last quarter? So there has been a reduction in headcount, but the mix of revenue for onsite has been stable. Should we then understand that the price increases that you are talking about has been largely onsite? How should we read this? Plus, if you could just give your overall hiring strategy for FY 2023. What's the outlook there? How much are you planning to hire going up there?
Yeah. Hiring strategy, I will pass it over to Joseph.
Yeah. Very clear. Venka, you can.
Yes.
Yeah, Joseph and Venka.
Yeah.
Can come to that.
Yeah, yeah.
You can go ahead.
While on the onsite part there is a slight reduction because we have been traditionally heavily skewed towards offshore. Not by design, but that's how work started, and the COVID last two years of COVID also made sure that we stayed offshore. Now the onsite presence is also getting strengthened. There was a slight drop in onsite revenue as a percentage on a quarter-on-quarter basis or, if you look at it year-over-year basis. I'm sure my colleagues will give you the efforts being done to move that up. The rate increases that I talked about is across. When we take a contract for a rate negotiation, you have the same supply demand situation, whether it's onsite or offshore. We are talking.
When I said of rate increase, it's both onsite and offshore.
Right.
You know, I'll just address the numbers part of it, you know, that you mentioned. While there's a drop from Q3 to Q4, some of the drop happened in March, and therefore, you know, the numbers, the impact on revenue was not as much. You'll see there's a drop from 4.6%- 4.1% of the onsite revenue. In terms of our strategy for onsite, we made a couple of changes, and there's a focus from a sales perspective to look at how do we increase our onsite revenues for two reasons. One is, I think there is an opportunity out there. This is lower than, you know, some of the other comparable companies.
The other factor is that if we can have some of our people sitting close with the customer, it will help us in getting a better understanding and help us in our land and expand strategy that I referred to earlier. To that extent, we're looking at, you know, how do we get some of our people to move over and continue on their engagement that they're working on with customers. On our onsite hiring, I will defer to Nanda to give a little bit of view on how we are planning to grow our team. Nanda.
Yeah. Thanks, Joseph. I'll just address this in two parts, the onsite hiring and the offshore hiring and the strategies that we are kind of acting upon at this point of time. On the onsite, there are two ways we are looking at it. One is to hire a lot more people locally. With the situation improving also on the traveling side and more traveling opening up, we will also see a movement from people from India to US also. Together with these two approaches, we'll be able to fulfill almost all our US needs, US and other geographies needs also. Coming to India, we have gone to campuses this year and offered close to 500 people from the campuses, and we'll be bringing them on board this year.
We will see that is going to fulfill quite a lot of our attrition and other needs at this point of time. Along with that, we'll also continue our approach that we have been following all these many years. That is hiring off-campus people, going to finishing schools and hiring. That will fulfill a quite large number of our fresher hiring that will be taken care of. Lateral hiring will continue to happen the way it has been happening all these many years.
Perfect. Okay.
That addresses the question.
Yes. Yeah, absolutely. Sir, one question from Ashok Soota. Sir, just I mean, you spoke about, you know, improving your delivery capability, adding more delivery capability you know, over the longer run. At this point in time, how would you compare yourself in terms of delivery, especially versus some of your high growth comparable peers internationally, like EPAM and Globant? Where do you think Happiest Minds needs to sort of add more muscle? Or where do you think Happiest Minds is actually ahead of them?
Sure. I think one basic thing is that, you know, we've been largely in terms of offshore delivery, been focused in Bangalore. A very large proportion is in Bangalore. As we go ahead, and I think the pandemic has shown this, that people do want to be closer to their homes, which is why you suddenly see that we are going to get into Bhubaneswar. I'm not sure that we could compare this with the EPAM and other situation. Clearly, the one other plus for us vis-a-vis those entities is that we are not affected at all by the, you know, the whole issue of this war against Ukraine, and which has impacted them very severely. We will probably see the results in the next quarter, which comes a little later. That impact.
I've got a plane going overhead, so if you're hearing it, I'll just give it a pause and continue.
No, sir, your voice is pretty clear. Not a problem.
Yeah, it's gradually disappearing. What you will see is that we will expand within India. I would imagine we'll probably add another second major location in another year or two. We are really favorably placed with respect to the East European and the other companies that we talked about.
Sir, point taken. My question was more towards, you know, service capabilities.
Oh.
Where are you looking to add more muscle in terms of analytics or IoT or maybe?
Sure.
Once the cloud migration, you know, wave is over, how do you sort of capitalize on the, you know, on opportunities after the cloud migration, sort of is over for the industry?
Sure.
You know, yeah.
You know, we have a basic philosophy that we'll be among the earliest entrants in any new technology which comes in, because the technologies lead to the solutions, and that's inevitable and happens all the time. Joseph actually alluded to all of that when he gave his response. We are already, for example, investing in and getting customers for low-code, no-code applications. We are very much into getting our first set of customers on Metaverse. We've got work going on in the area of virtual and augmented reality. These are areas which are going to drive future growth because they lead into new solutions and opportunities for our customers. In line with our philosophy, we will continue to do those. That doesn't mean that we don't equally focus on all the others.
All the technologies you mentioned are very much a part of our story of being 100% digital. Whether it's IoT or artificial intelligence, these are the ones which are the core of, and they form what Venkat said is our centers of excellence, focusing on the new areas, the CoEs, which have already become this time for the first time, they've crossed over 50% of our sales. In summary, focus on new areas, focus on the CoEs, and there I would say we are as well placed as anybody else in the industry.
Perfect, sir. Thank you so much. All the very best to you.
Thank you.
FY 2023 and beyond.
Thank you.
Thank you. The next question is from the line of Sanjay Avatramani from Envision Capital. Please go ahead.
Yeah. Good morning, and thank you for giving me this opportunity. I just wanted to confirm that.
Sorry to interrupt, Mr. Sanjay. We are not able to hear you clearly. Can you speak a bit louder?
Okay. Are you able to hear me now?
Much better.
Yeah, yeah. It's quite clear.
Yeah. Just wanted a clarity that, sustainable EBITDA margins, you said will be in the range of 22%-24%. Is that understanding right?
That's right.
Okay. Any guidance for,
Sanjay, I just want to caution you. This is not based on any guidance. What happens is when you do your modeling for the future, there are so many elements of cost and revenues that come in. You know, the last one or two years have been quite unpredictable in terms of the way the costs have panned out or for that matter revenue. We are always happy to get as much of it. But on the cost front, you know, there has been some ups and downs. The supply situation also is today everybody talks about it, so I don't think I need to elaborate more on that.
With all of that, keeping some of those constants, some of these variables in play, come to a number of 22%-24%. And mind you, we also have to make investments because we are in a cutting-edge digital business. New CoEs, the requirements of whether it's Web 3.0 or whatever, we make investments and all of that, none of it is carried to the balance sheet. We write it off into the P&L. To that extent, taking all of that, I came up with that number of 22%-24%. But what's happening is we've been able to manage the levers very well until now, which is why you see the 26.3%.
That's what I was trying to talk about when I gave you sustainable margin numbers. Go ahead, please.
This is very clear, sir. Thank you so much. My next question is that you mentioned that you are planning for augmented reality Metaverse. I mean, will you move ahead with some acquisitions or we'll do it all, I mean, all these internally?
You know, these things. See, our approach always is that you must develop capabilities internally. Then you may want to augment that with acquisitions if the right one comes along. Because you've got to realize there's so many developing areas, and it's fortuitous at times on which acquisition you'll get, which fits in everywhere. You don't want something to drag your profitability down. It has to be in one of these new or high-growth areas. It's fantastic. There's no substitute for having your own internal capabilities as the core of being able to get started in new areas.
Okay. That's all from my side. Thank you so much.
Thank you. The next question is in the line of Abhimanyu Kasliwal from Choice International. Please go ahead.
Hello, sir. Am I audible?
Yes, yes.
Okay. Thank you so much. Firstly, a warm greetings to you, Mr. Ashok Soota, Mr. Joseph Anantharaju, Mr. Venkatraman Narayanan, Sunil Gujjar, everyone on the team. I would like to congratulate the company on its industry-beating performance in terms of revenue growth and very competitive margins. I had a few questions, sir, and whereas it could be taken as some aspect of forward-looking. If you could just provide me some kind of way forward, path ahead in how to look at things. Firstly, I understood your tax rate inching up slightly. My question was regarding deal traction, sir. See, I believe this year we roughly had a top line growth of around 6% this quarter. Whereas this year we had 40% industry-beating. However, we were.
Can we expect growth on better lines or maybe the same lines going forward from the deal traction that we have seen in this quarter? The reason I'm asking, sir, is because right now our company is at peak valuations. Hence we would like our investors are hoping to see industry leading plus two or industry leading plus plus growth. If you could just provide us some kind of light on are we looking at any mega deals?
Sure. Sure.
Some expansion, some investments paying off, sir. I also have additional questions, sir. Our other income also rose a little bit. If you could just guide us, enlighten us on that. These are my questions, sir. Thank you.
Sure. Actually, your whole focus is on deal traction. In that context, maybe it's best if we get Joseph and Rajiv and Ram to speak to you about their respective business units.
Sir, that'll be great.
Sure.
Thanks, Ashok. You know, I'll give a quick view from overall market and PES perspective. I think, if you look at the overall demand side of the equation, customers continue to invest in digital technologies. As I mentioned, there are multiple technologies that customers are looking at investing, which has got accelerated by some of the outcomes of pandemic remote working, e-commerce, some of the pent-up demand, and that we are seeing at a secular level. If you look at some of the verticals, high tech continues to see fair bit of growth because the platforms and technologies that are needed to fuel the digital innovation is the high tech segment.
EdTech also, since there's so many nuances to remote education, to bringing in, adaptive learning, to bring more analytics into learning, we're seeing fair bit of investment. Manufacturing has realized that they need to really digitize their overall operations, to make it a little bit more fail-safe. There's fair bit of investment happening, there as well. Overall, we are seeing industry trends leading to continued demand and investment in digital technologies. Rajiv, over to you.
Thanks, Joseph, and thanks, Abhimanyu, for the question itself. If you look at us as an organization, that we are part of a customer's large digital transformation journey, and our approach to the customer is to really land and expand. From their perspective, the pipeline from the existing customer continues to grow as reflected on how we are able to grow the number of customers from $5 million to $10 million, $3 million to $5 million. Overall, it's a pretty healthy pipeline across all verticals, and not only that, across all geos as well. All geographies, Europe, Middle East, Asia to the U.S., we continue to see growth in all the geographies as well.
The third is really that I think that customers had quite a bit of time to think about revisiting their business model itself because the disruption of pandemic.
That has also driven quite a bit of rethinking about their digital investments and expediting their approach to the market as well. Overall, from geo perspective, overall from a digital transformation journey perspective, we see a very healthy pipeline, and we continue to see the same level of momentum that we have as an organization.
On the infrastructure and security services, just like the way the other two business units, this also continues to grow, and we have seen a significant increase in our growth as well. If you really look at it, we have grown 46% in the infra and the security area from last year to this year. From the security CoE perspective, we have increased our share within the organizational revenue from 8.7%-12%, so that shows how significantly the security services have grown. Obviously, when the organizations enter into digital space, the need for security holistically increases, as well as the need to move to cloud environment, using multi-cloud environment and hybrid cloud environment also increases.
That's the reason why we are seeing the increased demand both in the infra side as well as the security sides. Apart from this, the automation side also there is a significant increase because now, organizations are looking in terms of improving the productivity, efficiency and also, reducing the human error, and that's the reason, as you see, the automation part of it has also grown significantly. Overall, as an organization, we have 25.4% coming from the automation revenue. Holistically, we are seeing growth in all the BUs, all the geos and all the verticals, and we believe that, you know, it will continue.
Hi, Abhimanyu. I think you had two more questions.
Yes, sir.
One was on tax and the other was other income, right?
Yes, sir.
I thought I'd just cover those two. Yeah. On the tax front, like I said, the early days we had losses, business losses, so we were carrying it forward till we could set it off against profits. All of the set off of depreciation brought forward losses finished in the last year. Which is why the average ETR, as we call it, is lower last year compared to the current year. You can see it. It is about 3% of our revenues. Coming to this year, we are now in a straightforward, simple tax era in India.
Most of the tax, almost 99% of the tax that we pay is in India, and that's now at the full rate of 25.5% and which is why you see the increase in tax rate. There is no other benefit or nothing that we are not taking. The second thing is on other income. Here, we have disclosed this in the past calls as well. Our EBITDA is including other income. We believe that when we are looking at capital allocation and utilization of capital, we have to look at the entire capital availability holistically. You cannot keep that out because that's part of your business income.
You allocate it to buying a real asset, or you put it into new technology, and you have to evaluate it from the basis of the IRR that the other income generates versus the business generates. If you look at it, my other income is at about 5% or 6% compared to the ROE and ROCE of 30% and 27% that I talked about. In my own interest and in all our own interest, we should make sure that this is deployed into business. At the same time, while it is not, we are not keeping it idle as well.
Okay, sir. Thank you. That was very helpful. One last follow-up question. Actually two. One is, sir, the digital business. What does, I mean, you referred to it right now when you were speaking, but it had the most muted growth out of the three segments, 2.9%. Going forward, can we expect some kind of pickup? Or can we hope for some kind of pickup?
I don't think I really got the question. Are you saying?
Question.
Maybe, Venkat, if you
Sure, I can.
Yeah, or repeat it if you like.
Mm-hmm.
Sir, I meant that the Digital Business Services vertical had a slightly low, relatively low growth compared to the other two this quarter.
Oh, you're talking about DBS. Okay. Okay.
Yes, sir. DBS.
Thank you.
Sure. Sure.
Thank you, Abhimanyu. I think that, if you look at the digital business over the year, it has grown 53.3% year-on-year.
Mm-hmm.
I think there are. It has one of the highest growth among all the BUs for the year-on-year perspective. We did have a certain seasonality as well as some of the digital transformation projects carrying over and redefining getting done in the last quarter. I think you'll see that momentum once we have reinitiated the discussions on the next level of journey, you will see that picking up as well. Overall, Digital Business Services has 53% growth year-on-year.
Okay. Sir, thank you so much. This has been very enlightening. Thank you all.
Thank you.
Thank you. The next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead. Dipesh, your line is in the talk mode. Please go ahead. Dipesh Mehta, your line is in the talk mode. Please go ahead. As there's no response from the current participant, we'll move on to the next. That is on the line of Devendra from Invest Yadnya . Please go ahead.
Hello, am I audible?
Yeah. Yes, yes.
Thank you.
Yes.
Thank you for providing the opportunity to ask the question, and congratulations on a very good set of numbers. I wanted to ask a question to Mr. Soota. Historically we have seen that small caps and even mid caps, they are not graduating to become large caps in the IT space. Right now, Happiest Minds being a small tech company, so small cap company. How do you see your vision for the company to take it to the larger level?
Sure. You know, I would just correct, as far as I know, Venkat, we are no longer called small-cap, but mid-cap. Hello? Yeah.
From an AMFI standpoint, I read that we are being categorized as a mid-cap, so that-
That's right. Fair enough.
We need to get formal notification from. Yeah.
Yeah. I think in fairness, you could say straightaway, that we've graduated from being small cap to mid cap, and your question is a little more generic on how you would move from mid cap to large cap. You know, again, I'm getting a huge echo suddenly on my own call. Are you all able to hear me?
Yes, sir. Yes, sir.
Okay. I'll just continue and ignore my own echo. Basically, if you look at it, if you thought of the process of saying, "Hey, can we ever catch up with those larger top three or four in size?" That's going to be obviously a very long-term journey. We've indicated for ourselves that we will. You might say that's at least one forward-looking statement that we make, and it's in the public domain, that we want to be $1 billion by in the end of the decade, which ends at 2031. Assuming it continues at, which is again our target, at industry-leading profitability, you can visualize where we would be. Now, whether that classifies as being large cap really depends on how the definition of large cap would continue to move.
It will certainly make it very attractive. Yet, at the same time, there's a big journey ahead if you compare with the giants who've been working in the market for 50 years. What is more important is that we should be able to sustain industry-leading growth, industry-leading profitability, industry-leading presence in newer and technology markets, and then continue to expand in the way that we are going. I would say that it's a broad answer. I'm only able to speak for myself and not your general comment on how the other guys are going to function as they go ahead. There are obviously three or four mid caps which are doing well, but there are also three or four mid caps which are faltering already.
Yes. Yes, sir. Thank you for answering my question. One more question I have was, see, you have also classified your business offerings in terms of SaaS offerings. What exactly do you offer in that?
What are those offerings?
SaaS offerings.
SaaS. Oh, SaaS. Okay. Do you want to take this up, Joseph, or do you want to even get Sridhar Mantha to take a bash at it since he's here?
Sridhar could do that, I think, Ashok.
Sure. Sure.
Sridhar, you want to take that up, Sridhar?
Yeah.
Thank you. As part of the high-tech vertical, right, we work with many of the enterprise solution providers who actually create the SaaS applications. Very few are having licensed kind of solutions. There we actually move them to the cloud and create a complete SaaS wrappers and SaaSify their solutions. That way, the reasonable portion of the work we do is actually to help the companies that are creating the SaaS solutions.
Okay. What is the others in the customer industrial group? What exactly is it in?
Yeah, well, while the others look up the number, I think one of the others is clearly healthcare, which we will classify as a separate group in the next quarter. It's growing at a very healthy rate.
That, that's my prediction.
Okay. Thank you, sir, for answering my question. Best of luck to you too.
Thank you. The next question is on the line of Ritwik Ram, a freelance investor.
Yes.
Please go ahead.
Hello, sir.
Yeah, go ahead.
Sir, congratulations on the stellar performance of Happiest Minds, sir. Sir, I read a newspaper article on bot as a service, sir. Can you throw some light on the role of Happiest Minds in the bot as a service?
Again, Sridhar wants to take it up or, Joseph, you want to take it up?
UiPath, the one renowned player in bot as a service in the BFSI sector, especially with Axis Bank. What is the Happiest Minds role in that?
Yeah. Yeah. Sure. Just as a definition, right? I just wanna make sure that all of us are on the same page. Generally, when people talk about bots, right? They're always talking about the automation, right? In the industry. When somebody positions bot as a service, invariably it moves more into the SaaS model and running the automation, right? Again, a certain business process. As part of our centers of excellence, we shared already that digital process automation that heavily looks into RPA along with other kinds of automation in the context of business process automation. That's one of our core expertise or an area. That way we work with quite a few customers who are trying to create bots as part of their enterprise environment.
Also, few that are trying to actually create a generic solution in SaaS model that automates various business processes.
Oh.
That way the expertise of using various RPA leaders at this point in time, be it UiPath or Blue Prism or Microsoft Power Automate, all those capabilities are as part of our DPA Center of Excellence.
Got it. I have a question to Mr. Venkatraman Narayanan. In one of the Happiest Minds reports I've read that you're aiming to become a billion-dollar company by revenue from 2026 onwards. Is that the target? Because Mr. Ashok mentioned that you'll touch a billion-dollar revenue in 2030. I'm not clear on that front.
Yeah.
I'm not clear on that front.
Yeah. Ashok's statement was the correct one. It is in line with our mission, the vision statement that we have put out for 2030. We have put out a 10-year vision for the next 10 years of the company and the revenue metric that we have taken up there of the aspiration is to be a billion-dollar corporation by 2030.
Oh, okay. Are you trying to become a billion-dollar company before that?
You know, we can't make any statement other than what is written and put out in the public domain.
That's right.
Oh, okay. Because now the software industry is catching up at huge speed with its emphasis and, Mindtree, hitting new platforms of growth. That's why.
Sure.
I have no other questions. I'm very happy with the response.
Thank you.
Last point is that in the BFSI sector.
Thank you.
Does Happiest Minds have a place? In the BFSI sector. That's just the last point.
Sure. Sure.
Does Happiest Minds have a clientele in the BFSI sector like other software companies?
Yes, we have 13.4%.
Sir Venkat, this is Rajiv Shah. Yes, BFSI, we have a place. More than 13% of our revenue comes from BFSI sector. Within that, we are very focused on working with digital-ready applications and platforms to implement some for a variety of customers, the banks, to lending companies, to loan originations, et cetera. It is a significant piece of our business at the company level.
I'm happy with the responses, sir. I have nothing else to ask.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was our last question. I now hand the conference over to Mr. Sunil Gujjar for his closing comments.
Thank you all for joining us today. We thank ICICI Securities for hosting this call on our behalf. We look forward to interacting with you. You can reach out to us on IR@happiestminds.com. Stay safe and bye.