Happiest Minds acquires Madurai-based SMI for ₹111 crore

Bengaluru-based midcap information technology (IT) services firm Happiest Minds on Wednesday announced the acquisition of Madurai-based IT services company, Sri Mookambika Infosolutions (SMI). The acquisition was done through combined upfront and deferred equity payment, totalling ₹111 crore.

As part of the deal, Happiest Minds will also accommodate over 400 SMI employees based in offshore locations. The former, according to its quarterly financial report, had a total employee strength of 4,611 as of the December quarter.

In a regulatory filing with Bombay Stock Exchange (BSE), Happiest Minds said that SMI is a ‘profitable’ company, and had an annual revenue run rate of $9 million as of FY22.

“SMI brings deep domain capabilities, which add to our healthcare vertical strength — and align well with our ‘Product Engineering Services business unit,” said Joseph Anantharaju, executive vice-chairman and chief executive of Product Engineering Services at Happiest Minds.

Venkatraman Narayanan, managing director and chief financial officer of Happiest Minds, said in a statement that SMI will add “expertise in healthcare, and a vibrant talent pool in the burgeoning tier-II locations of Madurai and Coimbatore,” to Happiest Minds’ portfolio.

SMI’s client base is largely centric to US-based companies, Happiest Minds’ regulatory filing added.

The acquisition was announced shortly ahead of the closing of markets on Wednesday. Shares of Happiest Minds closed 1.67% down at ₹861.80 apiece. The BSE 500 index, on which Happiest Minds is listed, closed 1.39% down at ₹24,164.16 on Wednesday.

Happiest Minds announced its third quarter financial reports on January 19. The company’s rupee revenue rose 3.2% sequentially to ₹366.88 crore in the December quarter. Net profit declined 3.1% sequentially to ₹57.58 crore, while operating margin declined by 110 basis points to 15.4%. The company also reported attrition at 20.9%, while net employee utilisation declined by 50 basis points sequentially to 80.1%. The company also added nine deals in the December quarter.

Anantharaju said in a statement during its financial report that the company expected to continue to grow, since clients “are investing heavily in cloud, experience and analytics as part of their strategic digital initiatives.”

“Our technology depth has resulted in a strong pipeline of large deals, many of them with Fortune 500 companies,” he added.

The reports came amid a period of consistent deal signing for the IT services sector, in a quarter that has been traditionally weak. In a note on IT services deal signings shared with Mint by brokerage firm BNP Paribas, digital services, including cloud and automation sectors, remained the key driver of deal signings for the entire sectors.

“Deal signings improved in North America, and were decent in Europe and the rest of the world as well,” said Kumar Rakesh, vice-president of equity research at BNP Paribas.