While clients’ tech spending is returning in new-age technologies like cloud, automation and analytics, a second COVID-19 wave could have an adverse impact, said top executives from Happiest Minds technologies.
Happiest Minds Executive Vice Chairman Joseph Anantharaju said in an interaction with Moneycontrol, “Verticals like edutech, industrial, and retail are where the spends are beginning to come back.” Most of these customers are spending on automation, digitisation and e-commerce.
In addition, the company continues to see investments in cloud, which is an area of focus, IoT and analytics.
But this optimism, Anantharaju pointed out should be looked at from the US elections and second wave perspective as well as it might impact investments. Another wave of the pandemic has started in the US and Europe, countries that account for about 77.3 percent and 9.6 percent of the company’s revenue in the September quarter.
While the US election has not impacted client business decisions so far, the second wave of COVID-19 is something companies need to watch out for. “It might impact customer mid-November. So far we have not seen broad lockdowns, which will impact economic activity and then have a cascading effect,” he added.
“Election could have an impact but this (second wave) I think is a concern area. We are also in winter, so this is something we have to watch out for,” he added.
For the quarter ended September 2020, the company’s revenue stood at Rs 187.91 crore in Q2 FY21, up 0.5 percent, sequentially. The revenue grew from Rs 180.68 crore, a Y-o-Y growth of 3.4 percent. Close to 97 percent of this growth comes from digital.
Most of the verticals and service offerings saw flat growth or marginal increase/decrease in the Q2.
Edutech accounts for about 27 percent of the overall revenues for firms and saw flat growth in Q2. Cloud, where major IT firms have seen significant growth, declined from 43.7 percent in Q1 to 41.1 percent in Q2.
According to Venkatraman Narayanan, Managing Director & CFO, the marginal growth came on the back of client behaviour due to the pandemic. “Across the industry, business got affected because of how customers behaved in the first quarter. It did not matter whether you are digital or legacy. People just pulled out.”
“What we lose out in revenues, we will lose out like anybody else; because we are also a part of the same industry. We will make up through margin expansion, which is what we are seeing in more than a fair share,” he added.
The company’s operating margins increased to 26.3 percent in Q2 from 25.6 percent in Q1 as a result of factors such as better utilisation, work from home and reduction in travel cost.
In addition, Anantharaju noted that the company's cloud revenues are not purely cloud and have overlapped with other offerings such as IoT and analytics, and hence the decline.
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