'Buy' Happiest Minds Shares Recommends Anand Rathi, Sees Upto 31.5% Upside — Here's Why

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Anand Rathi Report

Niche product engineering-focused IT services company with 6,600+ employees and diversified verticals spanning BFSI, healthcare, edutech, etc.

FY25 was transformational for Happiest Minds Technologies Ltd., as it leveraged on inorganic growth to significantly alter its business mix towards BFSI and healthcare:

• Deployed ~$90 million for acquisitions of PureSoftware (“Pure”), Aureus and Middle East business of GAVS Tech (“ME GAVS”), with $45 million to be deployed in earn-outs.

• Its FY25 revenue is ~$244m, EBITDA margin ~17.2%; Marketcapof ~$1.1bn.

• The stock currently trades at FY26e/27e price/adjusted earnings per shares of 31.2x/26.5x, respectively.

Investment thesis - 

• Inorganic growth driving improved business mix towards BFSI and healthcare (~42% of revenue in Q4 FY25 vs 27.5% in Q4 FY24).

• Verticalized organization structure to improve client mining and drive sales efficiency.

• Appointment of CGO to help in net new client opportunities and drive cross-sell across business units.

• The dedicated AI business unit reinforces the company’s commitment to leverage AI for winning deals.

Key risks

• US slowdown remains the biggest risk, as we assume discretionary spend revival in H2 FY26 to impact Hitech (~16% of revenues), mfg. and industrial (~10%) and BFSI (~25%) verticals.

• Edutech vertical (~17% of revenue) has been a drag and is expected to weigh down on revenue for a few quarters. However, we draw comfort from reduced edutech contribution (~700bps) in the last one year, on acquisitions focused on BFSI and healthcare segments.

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