Dear Stakeholder: This letter comes to you in the background of a year and period which has seen significant changes in your Company, business, and the overall environment.Since the beginning of the pandemic, one of the key focus areas for the Executive Board was to drive sustainable operations with minimal disruption. Our mission of ‘Happiest People . Happiest Customers’ ensured that we balanced both these constituencies. We transitioned to a remote working environment smoothly, successfully and effectively, by ensuring superior quality of delivery with no disruption to customer projects and commitments. We constantly monitored potential impact and proactively increased the bandwidth of our teams, especially where we saw risk because of COVID exigencies.
During the pandemic, your Company provided logistic, financial, and emotional support to Happiest Minds and their families. The MITHRA Team, your Company’s Good Samaritan Program for emotional wellbeing reached out to more than 1,000 Happiest Minds during the year. Your Company runs the Internal First Responder program for people who are directly or indirectly impacted by the pandemic, a COVID-19 Microsite to publish useful information, and has developed an in-house Vaccination Tracking System. These initiatives have tremendously helped our Happiest Minds to cope with and adapt to uncertainties related to the pandemic. The Executive Board conveys its deep appreciation to our Happiest Minds who did everything possible to support each other as a family in these adverse times. To summarize, in spite of disruptions in the environment, the fact that we as a team rallied together has been the story of the year.The pandemic has not only caused significant damage in terms of life and livelihood; it has also taken its toll on your Company. We lost young and bright Happiest Minds and family members and many went through a cycle of infection and prolonged recovery. Our condolences to the near and dear of those who lost their battle with the virus.As you may recall from our letter of the earlier year, we had filed our draft Red Herring prospectus for a possible Initial Public Offering (IPO) in June of 2020. All work on the document, financial statement and many other activities associated with the IPO and taking the Company public were done by Happiest Minds and our partners, working remotely across many locations. The filing was followed by multiple Investor presentations, roadshows, with the issue finally opening for subscription on September 7 and closing on September 9.Your Company’s issue saw an overwhelming response from Institutional, High Net-worth and Retail investors and the issue was oversubscribed 151 times. Equity shares of Happiest Minds listed on the BSE and NSE on September 17 and opening at a high of ₹ 351 per share versus an issue price of ₹ 166. Reportedly, your Company’s IPO was one the best in the decade and seen by many as that which opened the floodgates to many others waiting hesitantly to venture into the public market, given the pandemic situation. Your Company’s successful IPO was a culmination of our vision of establishing a successful business, with Happiest People and Happiest Customers, with highest levels of corporate governance, in line with our strong value systems while returning good returns to our stakeholders. We now look forward to the decade ahead of us with new goals and challenges which will be articulated in our Vision 2021-2031.
Coming to our people, business, and financial results, our industry saw disruptions in the first and the second quarter. Our muted revenue growth in the early quarters is testimony to this. Taken aback by the pandemic, our customers paused and took a cautious approach toward technology spends. However, as they say, you cannot keep a good thing capped for too long. The demand for digital technology solutions came back strongly from the third quarter and as we write this letter, demand - both pent up and new - are at new highs. The challenges are around hiring and retaining our talent.We are seeing increased demand for delivering solutions around Cloud Infrastructure, real-time Business Intelligence using Analytics, IoT, AI / ML, Automation, Remote Collaboration, eCommerce, Security Services, Robotics, Blockchain, Customer / User Experience, Augmented Reality (AR), Virtual Reality (VR) across our chosen verticals. Just as much as the idea of ‘Offshoring’ needs no further selling, enterprises now do not need convincing on the need to adopt and adapt to digital and agile technologies to stay relevant in a competitive environment.
We believe enterprises in a post pandemic world will align themselves along three technology themes: 1. People Centricity People will be at the center of all businesses which involves capturing human behavior (aka Internet of Behavior) globally through technologies like IoT & wearable devices to garner sophisticated data and make informed decisions. This will entail a shift from multi-experience to a total experience strategy that links people and customers in a connected ecosystem. Connected experience will be crafted by context, data, design, innovation, technology, and behavior 2. Location Independence The pandemic may have shut international borders and hampered physical movement of people. However, the technology ecosystem pivoted itself to a location independence model which blurred the computing boundaries for teams, customers, suppliers, and organizational ecosystems. Location Independence will be achieved through: • Distributed Cloud Infrastructure Single Cloud providers are making their cloud services available at different physical locations while managing operations, governance, updates, and evolution by themselves. This has enabled computer storage, networking, and processing closer to the end user resulting in network scalability, low latency, and compliance with local data regulations. • Anywhere Operations The pandemic caused accelerated adoption of many technology innovations such as Hybrid Cloud, EDGE Computing, and Automated Digital Operations. The Anywhere Operations lays down the infrastructure to support teams and customers everywhere. • Cybersecurity Mesh The shift to a distributed cloud and anywhere operations is making a strong case for ring fencing security around data privacy and safety. This is enforced through a cybersecurity mesh which shifts the security requirements from a single security parameter to multiple nodes of computing. 3. Resilient Delivery Enterprises having seen and experienced an unprecedented event like the COVID-19 pandemic are now recalibrating themselves to exist and prosper in a world of continued uncertainty. This shift requires businesses to build resilient infrastructure with the use of: • Intelligent Composable Business Model This is a composable enterprise application (architecture) building strategy to define the organization’s packaged business capability (PBCs) which necessitates developing business applications that are modular, composable, easily adapted and ready for change. • AI Engineering The use of Artificial Intelligence (AI) is only set to increase to find solutions for business problems across any industry. The advent of novel software development life cycles like – DataOps, ModelOps, and DevOps has helped deploy AI at scale to modular and complex business problems alike. The new world will see AI adoption with much more focus on trust, transparency, ethics, risk mitigation, fairness, safety, and compliance. • Hyper Automation This deal with the application of advanced technologies, including Artificial Intelligence (AI) and Machine Learning (ML), to increasingly automate processes and augment human capability. Hyper automation takes an integrated approach to rapidly identify, vet, and automate business and IT processes to enable an organization become an intelligent enterprise. Your Company with 97% of revenues from Digital and 94% through Agile engagements has been deeply ingrained in its client’s digital adoption, transformation, and initiatives. The pandemic accelerated the pace of these engagements, and your Company was trusted by enterprises across the spectrum with their most critical digital initiatives. It is heartening to see that we were able to successfully deliver these projects with superior customer satisfaction reflecting in improvement of Net Promoter Score (NPS) to 57 from 51 in the previous fiscal. Your Company’s financial results for FY21 have been gratifying. Operating revenues for the year in US$ was $104.6 Mn showing a growth of 6.3% over the previous year. Total Income for the year was ₹ 798 crores showing an above industry growth of 11.7%. Since FY18, your Company has delivereda Compounded Annual Growth Rate (CAGR) in revenues of 18%. Our revenue growth was broad-based, and all three Business Units (BU) have shown growth, profitability, driven by demand and growth across all our geographies and our chosen verticals.
Product Engineering Services led the growth by registering a 7.9% growth, followed by Digital Business Services and Infrastructure Management & Security Services at 6.4% and 2.7% respectively. The three BU structure which covers the full gamut of an enterprise’s digital journey was adopted and has been in place at the Company from inception. This was to address appropriate demand generators and touch points within our prospects and customers. During the year, the Product Engineering Services and Digital Business Services have started aligning themselves by verticals. The Infrastructure Management & Security Services is evolving to be a horizontal, rendering services across the spectrum. To enhance our positioning, we will strengthen our focus on building consulting capabilities and adding depth to our domains. Your Company’s three Centers of Excellence (CoE) – Analytics / Artificial Intelligence (AI), Internet of Things (IoT) and Digital Process Automation (DPA) have been providing strong support to the three BUs with their ideation, co-creation, and consulting engagements. During the year, your Company added nine new billion-dollar corporations as customers and three customers in its US$5 Mn – US$10 Mn group. This is a clear reflection of our focus and ability of adding new logos while expanding our existing relationships. Your Company ended the year with 3,228 (Addition of 562 during the fiscal) Happiest Minds across seven geographies. During the year, we significantly ramped up our presence in Europe and Middle East.On PAT, we closed the year with ₹ 162.4 crores, a growth of 127% over the previous fiscal. Our Return on Capital Employed (RoCE) was 31%; Return on Equity (RoE), 30%; Free Cash flows for the year was strong at ₹ 215 crores which is 99% of EBIDTA. The Board of Directors, based on your Company’s good performance, strong cash generation, and a review of capital allocation strategy has recommended a maiden dividend of ₹ 3/- per share subject to approval of shareholders.On gender diversity, we ended the fiscal with 24.5% of workforce being women which is a marginal increase from last year. We will continue to focus on improving this ratio in the coming fiscal. Our people engagement practices have led to great scores under both Great Place to Work® (GPTW) and Glassdoor. 92% under a GPTW survey say Happiest Minds is a great place to work. Your Company’s Glassdoor rating has improved to 4.3 from 4.2 in the previous period. This has also resulted in a significant drop in our attrition ratios to 12.4% in the fiscal compared to 18.7% in the prior period. Your Company’s learning and development program provides a holistic framework for Happiest Minds to discover, strengthen and adapt to an ever-dynamic technology landscape by providing various learning opportunities. During the year, on an average every Happiest Mind spent 30 hours on learning. We also had 66% of Happiest Minds covered as part of various upskilling/multiskilling initiatives. We have highlighted in detail our various learning and development initiatives in the ESG section.In the fiscal, we completed acquisition of Pimcore Global Services (PGS). The PGS acquisition complements your Company’s overall Digital Commerce strategy and has made Happiest Minds the largest Pimcore services provider in the world with deep expertise in providing consulting and implementation services to our customers. We have successfully completed the integration activities
and seeing early success with cross selling our offerings to some of the PGS customers. We will continue to look at inorganic growth opportunities in strategic areas which can help us scale up faster, take us to a new geo or enhance the length and breadth of our offerings. This August as we complete a decade of existence as a company, we would like to thank all the stakeholders for their support and encouragement. As we embark on the next phase of growth, we hope to take the learnings from the past decade and build a more resilient enterprise in the years to come. Thank You. The Executive Board Joseph Anantharaju, Rajiv Shah, Ram Mohan C, Venkatraman Narayanan