The MD of multibagger Happiest Minds says he is looking for clients in Europe, Middle East and Australia

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The MD of multibagger Happiest Minds says he is looking for clients in Europe, Middle East and Australia
Happiest Minds investors must be a happy lot as the stock has quadrupled in value since its listing.BCCL
  • Most of the top midcap IT companies including Mphasis, L&T Infotech and Happiest Minds have more than 70% revenue coming from the US market.
  • Meanwhile, leading technology companies like TCS, Infosys, HCL Technology are not very behind with 50-60% sales from the US.
  • “Geography risk is something that is there and we have to take it on our chin,'' said Venkatraman Narayanan, MD and CFO at Happiest Minds Technologies in an interview with Business Insider.
If tech stocks have been the street’s favourite last year, the latest entrant in that pack, Happiest Minds ⁠— the stock has quadrupled in value since its listing in September 2020 ⁠— is among the hottest.

It’s not a big surprise because the software exporter has clocked a 11% growth in revenue for the year ending March 2021. The momentum has continued into the new year as well. However, in an interview with Business Insider, Venkatraman Narayanan, managing director (MD) and chief financial officer (CFO) at Happiest Minds Technologies said that he would like to reduce one key risk element.

Most of India’s information technology service providers ⁠— from the biggest such as TCS and Infosys to the smaller ones like Mphasis and Mindtree ⁠— have a big chunk of revenue coming in from the US market. Revenue from the US is more than 70% for the top five mid-sized IT companies. Happiest Minds is no different.

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IT companiesFY21 revenue from US
Happiest Minds Technologies73.40%
Tata Consultancy Services51.30%
Infosys (North America)61.30%
Wipro58%
HCL Technology56.40%
Tech Mahindra47.50%
Happiest Minds Technologies has one of the highest revenue concentrations in the US in comparison to top five midcap IT companies. Mindtree is almost close to getting 80% sales from the US market.

“Geography risk is something that is there and we have to take it on our chin,'' said Venkatraman Narayanan, MD and CFO at Happiest Minds Technologies in an interview with Business Insider.

Mid cap IT companiesFY21 revenue from US
Mindtree77%
Mphasis76.70%
Happiest Minds73.40%
L&T Infotech (North America)68.30%
L&T Technology (North America)61%
Oracle Financial Services34%
Aware of this fact, companies have been trying to direct their focus towards other regions like Europe.

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“Lot of activity (is) going on -- service offerings that are targeted towards the UK, Europe, Middle East and Australia. And our goal is while we continue growing on an absolute basis in the US, if we grow much faster in Europe, Middle East, Australia so that as a percentage of revenue we will see some diversification,” said Narayanan.

Happiest Minds Technologies is the newest mid cap IT services company founded in 2011 which got listed in September 2020. The stock has seen an uptrend since its listing and has gained 298% since then.

Its peer Mindtree is also working on increasing its investment in other regions to reduce dependence on American clients alone.

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To increase the revenue from other parts of the world, Happiest Minds is looking to acquire companies where it wants to expand its business. “We are constantly looking for [acquisitions]...active discussions are ongoing with more than a few [companies],” said Narayanan.

In the last one year, Happiest Minds has acquired one company in the US. The $10 million buyout of the Houston, Texas-based Pimcore Global Services in January 2021 has helped the company in the open source and retail vertical, Narayanan added.

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