You scrutinise the hard numbers every quarter, and listen to every word the management utters. But what really makes the leadership of companies you invest in tick? Venkatraman Narayanan, MD of Happiest Minds, tells Moneycontrol’s Anuradha SenGupta what makes him happy.
He also spoke about how Happiest Minds is helping the Indian government in the DigitalSky platform, where there is going to be a unified platform to track and trace all drones in this country.
In the interview, he also shared his thoughts on attrition, new-age technologies, life after listing, the role social media influencers play, and why revenue forecasting is getting complicated now.
Any conversation with somebody… and that too a person leading Happiest Minds has to start with what makes you happy?
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The answer to that has been consistent. A job well done -- it’s what makes me really happy.
You said you start your day very early. The fact that you have to work across time zones, post-COVID, the work-from-home culture has seeped into almost 24 hours of human days, isn’t it? What is the impact that has had on you?
Two years back, when COVID broke out, we were kind of proud to say that we could start working from home within 24 hours of the lockdown or even before the lockdown.
At that point in time, it looked difficult. But now, in the last two years, it has intermingled so nicely – work, and work from home. Now, the challenge is to get people back to work.
We are trying to make the workplace a lot more interesting, because in the long term, you have to work from office. We believe people would like to now take a lot more time off from office, setting and work from home. But what we have seen as productivity…
Has been impacted?
I wouldn't say it has been impacted drastically, but it is likely to get impacted because we work in teams. When you work in teams, it's all about the interpersonal aspects of meeting people, having meetings in the office, talking about problems, issues and projects in the office.
All of that really makes a difference. But we could build some bit of flexibility within that, given that people are now used to it. That's what we are now trying to do.
For IT companies, there seems to be this very, very big challenge of, maybe, people working, moonlighting, working across projects… is that a big problem?
It is a problem that did come up during the early period of the work-from-home days. But most of the companies have figured ways and means to work around that and figure out if there is some bit of moonlighting and it has been kept under wraps.
I don't want to call it a well-kept secret within the industry. But people have managed to work around that. And we have checks and balances to stop that. Even we had our own slight small run-ins, but we have been able to fix it.
It's also a generational thing, isn't it? More young people coming into the business, the mindset to work... Venkat is very different from when you started, right? Given the talent crunch and the huge competition for good talent, are these youngsters calling the shots?
I wouldn't want to say they're calling the shots. It's more collaborative. Right now, when we get into hiring, we set out the standards. And we say that this is what we would like in the medium- to long-term. It's a collaborative exercise.
Hiring has become a collaborative exercise. And also the generation, like you said. This is a social media generation and people are used to 140 characters to voice out their opinions. Yes, so, to that extent, I think we have to change our hiring patterns. Our hiring practices are according to the needs of the day, and this is what I think our teams are doing today.
Do a little bit of flashback and talk about two years ago when you all took Happiest Minds public. What was that pivot like to go from being a private company to a public one? And what have the last two years been like?
When Ashok (Ashok Soota, Executive Chairman) set up the company, his vision always was to go public. And we had set a timeline for that as well. We did it within that timeline.
So, having set up a company with the intention to go public, from day one, we had designed all processes and systems internally, and were preparing to be a public company. For Ashok, this is the third public company. For me, this is the second, and most of the other people in the management have been part of public companies. People say that life changes once you become public.
Largely, with respect to governance controls, we have taken money from investors from day one. Employees have been our investors. We call them Happiest Minds, we don't call them employees, they have put in their hard-earned money into our company. So for me, a lot of money is green, it's the same wherever it comes from. And my fiduciary responsibility doesn't change, whether it's a private company or a public company.
But Venkat, when you become public, and big and retail investors get on board, their knowledge and understanding of the company and perhaps even the sector would not be the same. I think today, the retail investor is very knowledgeable...
They are very, very knowledgeable. In fact, we are happy to have close to 7 lakh retail investors. This number was a lakh and 50 when we went public.
In two years?
In two years, the depth of retail interest has been quite mind-boggling. The second thing is I did refer to social media. Today, there are influencers who really make it so easy for the investors to understand. So I put out all these quarterly numbers in tabular forms. But let me tell you, I myself, in the evening, check out these social media influencers, and what they have to say about our company and the performance.
You are on hold right now. People are holding Happiest Minds, right? And the target is plus Rs 1,200-1,300.
Yes, Rs 1,200 or something. While not commenting on the price, you have the analysts who really cater to the suave, the institutional investors. And for the retail investor, you have these influencers, who really break down the financials. In fact, I take a few messages from these influencers on communication, how to make sure that my results reach out to the public and the retail investors. The other aspect of being public is to communicate, communicate and communicate.
Have you got used to living quarter to quarter, which is what going public makes you?
We don't get too carried away by the quarter. We make sure we deliver good results. We have done our job well, we communicate and that's about it. Never lose sight of the medium to the long term. So if you've seen that we have not given guidance. We have not been talking about what will be my growth for the next year, or how is my next quarter looking like.
We talk about the depth of the markets, and the demand, explain the current results, and then leave it there. Here, I would like to just give you a little bit of an aside. We had a vision statement for the first 10 years. Then, we had one for the next 10 years.
So you started in 2011...
Yes, 2011, and that was there till 2021. And it nicely coincided with our going public. We came up with a vision for the next 10 years. One of the key vision statements is designing the company for perpetuity.
What does that mean?That means the company has to stay, it has to go on forever. In legal terms, the company is a persona. It has its own life, it's bound when it's incorporated, and it has its life. It has to live beyond its promoters. It has to live beyond its management. And it has to continue to create value for its shareholders, investors, and all of them. So, which is why it's very important to create and design a company to last in perpetuity.
How do you do that?
You have to create a value system. So that's the fundamental, the value system, the basic theme of the company. And that's something we have. I believe we have done well, and it has to continue. Second is the ownership pattern. Ashok owns 50 plus percent, and from his own learnings from running listed companies, the last one being Mindtree… and you know, where it has gone right now.
He has also designed the legal structure in a manner which makes sure that his holdings do not get diluted beyond the point, such that there is any threat to the company.
So, will it stay on the path and the vision you are outlining today?
That's the whole idea.
You mentioned Mindtree. We know that Mindtree and L&T Infotech have just merged. Do you see that as a sort of trend in this business? And how does that impact the competitive environment for jobs, deals, contracts, more clients?
Consolidation is a part of the growth cycle of a company. If the owners or the promoters or the larger shareholders decide the time has come, they merge. It's driven by commercial considerations at some level. That's what we want to stay away from. We have created a brand. We have created a persona which will stand on its own merits and grow. Along with it, we take our investors and shareholders and create value for them.
You must have heard stories about Wipro and HUL shareholders who have held on and got their children married. They've sent their kids overseas for education. That's the kind of value those companies created over the last 20-30 years. We would also like to be a part of that story.
That's the peer group you want to belong to?
At least from the standpoint of creating value.
Do you see more consolidation in the sector? What's your sense? Because there are such strong tailwinds, right for the IT sector, demand is on a massive high and the next 10 years looks like it's going to be wonderful tailwinds. So, in that sense, do you see consolidation? What are some of the big things you see playing out in the sector in a macro sense?
Consolidation will happen. There will be people who want to sell out and move away. I'm not differentiating between listed companies and unlisted companies. But players and industry participants will look at consolidation and that's par for the course.
Now, if you look at a recent McKinsey report, they talk about the industry going from $200 billion to $350 billion in five years, give or take another two years. So it's still rapid growth, driven by digital and the whole move to digital.
So you have the traditional IT and the digital IT. Everybody is moving to digital IT. This whole transition of moving to digital will require a lot more supply, investments and capabilities. So, there is that market demand, like you referred to earlier.
There is a place, I think, for all players. For people like us who have started about 10 years back and have created a strong franchise, I see a good road ahead -- at least from the growth perspective and from the ability to deliver and make money.
I was reading some NASSCOM report which said that there's a 21 percent gap between demand and supply as far as talent is concerned. Is that the biggest challenge or are there other things that we are not able to see?
The challenge right now, here and now, is talent crunch. You're seeing it and that's because of this sudden cutover. Whenever there is such a transition, especially when accelerated by a COVID-like scenario, you run into trouble. But people talk about India's demographic dividend. I'm just going to refer to India right now, because we are largely delivering services from India.
So, I believe the demographic dividend will come into play. And there will be a huge amount of talent that will get pushed into where the demand is. Demand is obviously digital. So, you now hear finishing schools, and you hear final-year students taking on courses to get themselves more digital-friendly.
They're learning a lot more than last year about their campuses. So it's only time before this talent will get backfilled, but it will take time. So within that, I would say, in one or two years, you will have this talent crunch. Overall, the industry, if it cools off, I'm not just talking about the digital IT industry but the IT industry. It has got other constituents as well. If all that cools off, I'm sure people will slowly gravitate towards the digital part of IT, they will get retrained.
So there is a huge amount of backfill that's going to happen. I may be proved wrong, but I see this attrition problem picking up for maybe a quarter, and then plateauing. And then like everything else, it will dip down.
Are the new things you need to do to get more talent into the system faster, quicker, and perhaps more able to get started?
Here the answer would depend on the industry, or the kind of work we do. For the kind of work we do, we need digitally capable people. Traditionally, it's engineering-plus, but there are areas where you can get a person who's a pure science graduate.
You can train him. If there are people with both attitude and aptitude, obviously, they can get trained. I'm not saying they have to be necessarily engineers. But the need of the hour is to get that finishing school, that finishing training to get into newer digital capabilities.
Give a sense of how a company like yours anticipates the future? Companies are talking about Metaverse, Web 3.0, cryptocurrencies, and the government and regulators having to be ready to protect people from all these new innovations, disruptions and technological advances. How does a company like yours anticipate change? And what are you doing on these fronts?
So, we have a very strong CTO organisation. That is a Chief Technology Officer. And he has his arms in all the new technologies we are talking about. The second aspect is we have something called centres of excellence (COE). So we currently have four of them -- security, analytics, process automation, and IoT.
What happens is that the new-age technologies get incubated within this. And then you take these proof of concepts to the customers, and then you make it into productionised offerings to customers.
So the CTO office and the COEs work hand-in-hand to figure out what is the new-age technology and how can you take it to customers to make it available to them as a service. Here lies a small risk as well.
You will see that there are a lot of new technologies that people are talking about, like AR and VR. Being in the media industry, you must have heard a lot about them. But you really need use cases that you can take to the customers.
Let's talk about cryptocurrency. People are talking about cryptocurrency, Bitcoin, all of this. But the use case has not really gone beyond Bitcoin. You need to get the use cases which you can take to enterprises, which they can then roll into their own business to make sense.
So that's really the gap that the COEs and the CTO organisations are really working in close association with the verticals of customers.
Metaverse, Web 3.0… where are you on these fronts? And how do you gauge what potential this has for your customers?
We start with making ahead of time investments. Today, you see the press agog with news items saying this company is investing X million dollars in Web 3.0, etc.We are making investments in Web 3.0. A new area is low-code, that's something we are investing in. Then there are process automation, robotic process automation and artificial intelligence-based solutions.
One area which we really picked up ahead of time was drones. So you must have read about how we are helping the Indian government in DigitalSky platform, where there is going to be a unified platform to track and trace all drones in this country.
We are playing a very significant role in building that platform. That way, it is a technology we have adopted earlier and could quickly take to the market. Also, now the proof is in the delivery that we have done on DigitalSky, and, from there, a few other projects.
These are similar to AR and VR we have been talking about. We have taken a couple of them to our customers and we are working closely with them. Web 3.0 is in its early stage. Right now, we call it the investment stage. We're making investments.
I'm guessing a large part of your role is to add, anticipate and be ready for the future. COVID was such a massive disruption. And it was not a technological disruptor, it was a virus that brought the globe to a halt. So how are you preparing yourself for disruption?
Disruption is on two fronts -- on the technology front and on business, finance and related aspects. On the technology front, we just spend time talking about what is Web 3.0. Do you miss the bus, you have to make sure that you pick the right technology, because there is no dearth for new technologies that are on offer.
Today, predicting profitability plus the question that I get during these quarterly calls is, Venkat, what's the sustainable margins? I used to give a number. For the past 5-6 quarters, we’ve beaten those numbers. I went back and I realised that the mechanism to predict profitability or growth right now is a lot more complex than what it was earlier.
What was it earlier? What is it now?
Earlier, you had signed large million-dollar contracts. So you knew that, for the next five years, people used to talk about predictability, predictability, and predictability. I'm just voicing what somebody else said in the industry. You knew that. In the digital environment also, predictability is there.
But the components of that are changing. For example, if I sign a $5 million, or $10 million contract, say a long-term contract, I only know what I can deliver in the next 6-12 months. After that, there is so much technological disruption. Do you want to lock yourself in for such a long term? So these are the questions that are now beginning to surface.
On top of that, you've got exchange fluctuation. You're seeing how the rupee is moving. Attrition is moving. Today, it's in the high double digits. Here we have got the war, COVID. So it's becoming as complicated as weather forecasting. That's what I like to call it right now, profitability and revenue forecasting is becoming very complex. Despite that, given all our understanding of the business, we are still able to make some guidance and help the markets. So that's the real change I'm seeing.
After taking Happiest Minds public, are there any lessons you've learned on any front?
Plenty, actually. We were the first IPO in the digital world. When I said digital world, I meant working from home. That’s when we delivered this IPO.
Yes, September 2020, right?
That's right. It was the peak of COVID. All of us were working from home. The naysayers saying the timing is not good were far more than those who said this is the right time.
So if you look at it, we just pushed on. And we said we will be the first IPO. Let's just focus on the task because the IPO is only the start to the journey. And there is a long way to go for a company. Let's just get over this and do it, irrespective of the environment. Here I think Ashok’s guidance was really handy because as an iconic person, he told me that Venkat, let's just focus on the task.
We are building a great company. We are building a great place to work. Our financials are good. And this is a story that will resonate with investors. And there are long-term investors who will see value in what we're doing. Let's just go forward. So I asked him what about COVID? He says, today it's COVID, tomorrow, you don't know what, let's just push along.
And that was the – I would say, the sanest advice I got. And I said, all hands on deck, let's just go forward. In fact, we were the first IPO, and it’s after that the floodgates opened.
But today we know people, having to push IPOs, hold back, and resize what they offer. If you were to go to the markets today, would you do it immediately? Would you hold on or what would you do? What if you take the same advice Soota gave you?
Again, I would go with the same advice. Go back to the drawing desk. I'm sure even today a good IPO with a good story will sail through.
I'm going to end this interview by asking you to share some thoughts you have for the retail investors.
Looking into my own seven quarters, post listing, we have had a great tailwind. But I'm sure, in the long term, we would also have blips, and you have to go through this. And that's the phase every equity investor has to go through. You have to make sure that you see value created all along.
And is there anything you want to tell the short-term investors?I don't have much to tell the short-term investors. For them, our quarterly results matter the most. We are doing our best to make sure we deliver to our best potential.