Happiest Minds Technologies Limited ($HAPPSTMNDS)

Ladies and gentlemen, good day, and welcome to Happiest Minds Technologies Limited Q4 FY '26 Earnings Conference Call hosted by HDFC Security Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vinesh Vala, HDFC Securities Limited. Thank you, and over to you, Mr. Vala.

Good morning, ladies and gentlemen. Thank you for joining us today on the Q4 Earnings Call of Happiest Minds Technologies Limited. On behalf of HDFC Securities, I would like to thank the management of Happiest Minds for giving us the opportunity to host this call. Today, we have with us Mr. Joseph Anantharaju, Co-Chairman and CEO, Mr. Venkatraman Narayanan, Managing Director; Mr. Ram Mohan, CEO, Infrastructure Management and Securities Services business; Mr. Sridhar Mantha, CEO, Generative AI Business Services, Mr. Praveen Darshankar, Company Secretary and Compliance Officer; Mr. Anand Balakrishnan, CFO; Ms. Priyanka Sharma, Head, Investor Relations. I will now hand over to Priyanka Sharma for the safe harbor statement and to take the proceedings forward. Thank you, and over to you, Priyanka.

Good morning to all participants on the call. And welcome to the conference call to discuss the financial results of the fourth quarter and year ended March 31, 2026. I'm, Priyanka Sharma, Head of Investor Relations. We hope you all had an opportunity to review the earnings release issued yesterday. Now let me quickly walk you through the agenda for today's call. Joseph will begin by sharing perspective on the business environment, our strategic priorities and overall business performance. Sridhar, will take upon our Enterprise aI platform, AI-led transformation initiatives and progress around Gen-AI led engagements and capabilities. Thereafter, Mr. Venkat will walk you through the financial and operational performance for the quarter and full year, followed by our outlook for FY '27. Following the management's commentary, we'll open the floor for questions. Before we begin, let me read the safe harbor statement. During this call, we will make forward-looking statements. These statements reflect the environment we see as of today and involve risk and uncertaitis that could cause actual results to differ materially. We do not undertake any obligation to update these statements periods. With that, let me now hand it over to Joseph.

Thank you, Priyanka. Good morning, everyone, and thank you for joining us today. FY '26 was an important year for Happiest Minds Technologies from both a business and strategic standpoint. We delivered healthy growth, sustained strong profitability, improved utilization across 300 active customers. Took several platforms to market and further strengthened our positioning as an AFS digital engineering partner. FY '26 also marked 15 years since the founding of Happiest Minds, a proud milestone giving us an opportunity to reflect on the journey so far, and more importantly, the opportunities ahead. Let me start with a quick view on the market. We have continued to be shaped by a mixed macroeconomic environment. While discretionary spending remains selective in some of the traditional areas, we saw increasing momentum and budget allocation in AI led business transformation, modernization, automation of internal processes and productivity-focused programs. AI and GenAI are now central to most customer conversations, and this is translating into Happiest Minds being viewed as a strategic partner, strong customer engagement, robust pipeline growth and improving conversion visibility. It also has been increasing discussion around platform companies entering their services arena. Our view remains clear. We see this as a positive structural shift for the industry and for Happiest Minds. Historically, when platform companies such as SAP and Microsoft expanded into services it's per further demand and created significantly larger opportunities for the broader IT services ecosystem. Platform providers often generate demand through core innovation and partnership programs and have traditionally relied on partners for scale and execution. Turning to performance. FY '26 revenues crossed INR 2,315 crores, representing a year-on-year growth of 12.3% in INR terms, while the constant currency growth for the year came in at [ 9.27% ] which is among the highest growth rates in the industry. EBITDA margins remained within a guided range of 20% to 22% despite continued investments in AI capabities, platforms, sales expansion and future-ready talent. From a customer standpoint, we ended FY '26 with 306 active customers, including 51 additions during the year, reflecting the success of our tenant strategy. We also continue to deepen engagement across large enterprise accounts and today serve over $91 billion corporations globally. Importantly, during Q4, we saw a record pipeline growth of 27% which gives us increasing confidence in our FY '27 outlook. Based on this momentum, the Board has reconfirmed FY '27 growth guidance of 12.5%, while we continue to remain aspirational about a 15% growth trajectory. This is reflected in the planned headcount of [ 1,050 ] for FY '27 with the bulk of hiring taking place in the [indiscernible] business unit and the analytics and AI COE. Over the last quarters, we have spoken about our early investments around GenAI and our broader [ GS ] strategy, Sridhar will expand further on. During FY '26, we saw this translate more meaningfully into scale engagements customer adoption and stronger pipeline momentum. Enterprises today are increasingly looking for partners who can help them move AI initiatives from experimentation towards measurable business outcomes and that is where Happiest Minds is seeing strong relevance. Based on our internal innovation initiatives and experience implementing AI strategies for our customers, we recently announced the launch of our enterprise AI platform. The platform is designed to help enterprises accelerate their option in a secure, scalable and enterprise-ready banner while reducing execution complexity and implementation risks. The overall momentum buildup was also reflected in several strategic wins during the quarter, including engagements such as a U.S.-based insurance and financial service providers for product engineering services a global warehouse automation leader for engineering and security applications and a European health care software company for modernization of its hospital management platform. Sridhar will talk a little bit about some of our experiences in the AI space. From a vertical perspective, growth during the year was led by BFSI and Healthcare and Life Sciences both of us continue to see strong momentum driven by [ ALF ] transformation, digital engineering and modernization programs. Retail and travel, media retainment verticals also delivered steady growth during the year while industrial remained stable. We are additionally seeing signs of revival in the education sector, driven by Jane adoption, which we are capitalizing on with our UV platform repeatable solutions. Geographically, the U.S. remained the largest market with healthy momentum across AI lead transformation and managing programs. But India, Europe and the rest of the world, all showed good growth during the year. We also [indiscernible] our leadership team during the quarter with the addition of [indiscernible] Vice President to lead our BFSI, Healthcare and Life Sciences, at retail CPG verticals. We had [ Suresh Chertow ] joined us as the [indiscernible] Head; [ Stander Pani ] to spearhead our GCC business; and [ Samal Jutsing ] as Vice President of our newly launched SAP Center of Excellence. Overall, we are entering FY '27 with stronger strategic positioning, a strong pipeline, healthy order book and momentum across customers and markets. We believe the convergence of AI engineering, modernization and automation is expanding the digital transformation opportunity and Happiest Minds remains well positioned to participate meaning fully take advantage of the opportunities offered by this evolving landscape. With that, let me hand it over to Sridhar to share more details on our [ AFS ] strategy and the Enterprise AI platform. Sridhar, over to you.

Thank you very much, Joseph, and good morning, everyone. Over the last year, of course, as all of us are observing, enterprise have moved [indiscernible] from AI experimentation towards scale deployment. The challenge today is not access to the models or the quality of the AI models but integrating securely into the enterprise workflows and driving measurable operational outcomes. Just precisely where our enterprise platform is focused. The platform brings together intelligent agents out of the box and orchestration capabilities with all the agents that exist as well as get developed, governance framework for security and guardrails and reusable engineering components into a completely unified enterprise-ready architecture. We are leveraging our experience in building multiple solutions for customers and our repeatable solutions experience over the last several years to create a customizable platform for our clients across multiple verticals. We are seeing increasing traction across a assisted software engineering, AI led modernization, intelligent automation, infrastructure optimization, leveraging AI and AI workflows within cybersecurity operations and enterprise co pilots. We are also working on emerging hybrid coding paradigm, combining the coding agents with the human developers, creating a meaningful opportunity for enterprises to modernize complex legacy environments in a more efficient and lower-risk manner while driving productivity improvements. As shared last quarter through our [ AF ] strategy, we continue to add more generative AI and agent use cases that have moved beyond prototypes, as Joseph mentioned, into scale customer engagements with several demonstrating replicable sales potential across customer accounts and industry verticals. And today, we have 50 use cases identified and already implemented. We are also increasingly embed agentic AI are frameworks into enterprise workflows where autonomous and semi-autonomous systems can improve operational efficiency while maintaining governance and human oversight. You could view about 3 new wins we started working as well as delivered in some scenarios we had last quarter that illustrate the kind of projects that we are currently working in the AI space. We won a project from a bottling company in Africa where we had to also create necessary digital infrastructure so that we can actually leverage AI in terms of IoT enabling their coolers and then creating the agentic AI solution, addressing asset performance optimization. The solution basically analyzes the efficiency of all their coolers and makes the necessary recommendations like reallocation of some coolers, which in turn saves money through [indiscernible] utilization. So this is an example where customer wants to leverage AI, but we have to actually create the necessary digital infrastructure as IoT sensors, et cetera, for their hardware devices and coolers. The second example I would like to talk about is for a large automobile company in India, we're actually creating an agentic infrastructure because a lot of times before we actually start creating agent solutions, we need to actually rely upon the enterprise systems for data and information so that the agents on the top can actually leverage that information to create more intelligent applications. So we actually are creating [ MCPs ] was wrapping the 900 APIs so that new agentic AI solutions can be developed. So this is an example where created the necessary agentic infrastructure for new Agentic solutions to be further developed. The third and last example I want to talk about is for one of the largest CPG companies, and they want to create a marketing survey application for a new product that we're planning to launch and traditional software development methods require 6 months to build such an application, and they were under tremendous time pressure because the product has to be launched quickly so that in the mass people can actually test the products and all the survey information can be [indiscernible], et cetera. We leveraged our rely build, which is an agentic SDLC tool that can significantly accelerate the software development by using [ Clark ] agents and other technologies. So we won this project because we are able to actually complete the project in 3 months and deliver to the customer. These are 3 distinct examples of various kinds of AI projects in terms of agent infrastructure, digital infrastructure as well as complex solution. And also in line with our AI strategy, we'll continue to invest across a capabilities within the organization as well as platforms, accelerators. And of course, the most important one is the talent. And as part of this effort, we are in the progress of building a dedicated 1,000 AI and generative AI focus team by end of FY '27 to support growing customers' demand to build generated AI solutions. Of course, in terms of the AI productivity, we are targeting towards all of our workforce to be trained. And of course, we already started adopting various AI product tools with multiple client projects, and our goal is to reach 90% of all our engineered testers and all service delivery personnel will be trend and will start using effectively AI tools in the [indiscernible] space by 90% by the end of FY '27. So overall, our focus remains clear helping enterprises to deploy safely, responsibly and at scale while delivering measurable business outcomes. With that, I now hand it over to Venkat.

Thank you, Sridhar. Good morning, everyone. What I do in the next few minutes is give you a highlight of our financial and operational performance for the quarter. The year that ended on March 31, 2026. Starting with our fourth quarter performance. Our revenues in constant currency grew 0.5% sequentially and 6.4% year-over-year. Operating revenues for the quarter was INR 604 crores, a sequential growth of 2.8% and approximately 11% year-over-year. Total income which is operating income plus other income was INR 621 crores, a sequential growth of 3.1% and 9% sequentially and year-over-year. It's pertinent to note here that we have grown every quarter since our IPO, and most importantly, on a profitable basis. As you will all be aware, the last quarter was one of fluctuations, be it currency, geopolitical situations or technology changes. However, I'm happy to say that we have managed to navigate these very and continue to grow. Here, I would be remiss if I did not say that our industry has also [indiscernible] of decently well. With the fourth quarter, behind us and almost 2 months into the new year, we are now looking forward to the new year with optimism and bigger. We are putting all our energy and focus into meeting our guided growth of 12.5% in constant currency for the next year. Operating margin for the quarter remained stable at INR 106 crores and 17.5% of revenue. Investments made in GBS, our AI-first strategy and our new sales engine have helped deepen our existing customer relationships while helping open many new doors. The GBS unit now contributes almost 3.3% of our revenues while improving on its profitability metrics. At the risk of repetition, I should mention that GBS is our AI innovation engine, while AI and AI-led services are now a dominant part of our overall business. To make this amply clear, in the coming months, we'll be reporting on a metric that is revenue from AI-led services. We will also, in the coming months, begin reporting on pricing models, which reflect our AI First approach and AI-led business as distinct from what we call out today under contract model, namely revenues split by time and materials or fixed price. This is a much needed clarification as markets tend to mix these 2 distinct terms. Turning to some of the operational metrics. We continue to maintain strong utilization numbers, and we are at about 81% compared to 77.4% in the previous year in the same quarter. PAT for the quarter at INR 61 crores has shown a significant improvement over the previous year and the previous quarter. However, to be consistent with what I have been talking about until now, our adjusted PAT, which is PAT adjusted for exceptional items and intangibles was INR 72 crores, and it stood at 11.5% of our total income showing growth both sequentially and year-over-year. On working capital, DSO increased marginally to 94 days from the 92 that we were earlier on and we should bring that back through accelerated post quarter collections. Coming to the full year performance, operating revenue was INR 2,315 crores representing a year-over-year growth of 12.3%. Growth in constant currency came in at 9.2%, slightly below our guidance that we had made for the year of 10%, primarily driven by a delay in the right shifting of a couple of our [ Arta ] license deals. This also impacted our fourth quarter growth. Efforts are underway to close these right-shifted deals in the first quarter of the current year. Total income for the year stood at INR 2,400 crores, which I must say has a nice ring to it as a number. Growth on discount was 11%. Operating margin was 17.4% versus 17.3% in the previous year and at INR 401 crores, it has grown 12.3%. So the 17.4% and thereabouts has been largely in line with previous year. While I spoke about our growth guidance for FY '27 our expectations on operating margin, though we are not calling it as a guidance is to improve the same by about 100 basis points. That means about 17.5% to 18.5% on operating margin is what we are seeking to achieve. We will be driving this on the back of improved utilization, execution discipline and efficiencies that come from integrating acquired entities while continuing to make investments in our AI initiatives. Utilization for the year remained about 81% compared to the 77% in the previous year. PAT for the year at INR 213 crores has shown a growth of 15% over the previous year. I'm not comparing it with the previous quarter because we had certain exceptional items. Adjusted PAT came in at INR 279 crores or 11.61% showing a growth of 9.4% of the previous year. From a customer perspective, we ended the year with 306 active customers, that is 51 additions during the year. I would like to draw attention to our $1 billion clients, which has grown from 82 to 91. Very interesting to know that this cohort continues to contribute almost 58% of our revenue, giving you a good insight into our quality of earnings. We ended the year with about 6,500 Happiest Minds, a slight drop -- slight drop from the previous year. While attrition has been high at 17% it is not unmanageable. It is within the region that we have been seeing a trend over the past couple of quarters. From a balance sheet standpoint, we continue to maintain a healthy financial position with robust cash flows, generation, generating sufficient liquidity and flexibility to continue investing in our strategic growth initiatives. Our return on capital employed has improved to 22% compared to the 21% in the last year. As I look ahead into FY '27, our focus remains on sustaining growth momentum through AI-led transformation opportunities and enterprise modernization programs while continuing disciplined execution and strategic investments in AI capabilities, platforms, sales capacity and future-ready talent. Our growth guidance for FY '27 is supported by healthy and improving pipeline, traction and AI-led opportunities and customer engagements. Overall, I believe we are entering FY '27 on a strong footing. Before I conclude, I'm happy to share that our Board has announced a final dividend of [ INR 3.65 ] per share which when approved by the shareholders will take the total dividend for the year to [ INR 6.40 ] per share. Thank you for listening to us patiently. I will now request the moderator to open the call for questions.

[Operator Instructions] The first question comes from the line of Aditi Patil at ICIC Securities. Please go ahead.

My first question is on the Q4 revenue growth. When you mentioned that there was a dike shifting of [ Arta ] licenses in Q4. Was there any other reason for a softer growth like in high-tech vertical, we see sharp Q-o-Q decline in both Q3 and Q4. So if you can help me on this.

Yes, I'm sorry. Yes, go ahead, Joseph.

Yes. So if you look at the Q4 growth, we did 0.5% quarter-on-quarter at constant currency and our growth was 2.8%. And for the year, constant currency was 9.2%, slightly short, maybe that the short of the 10% that we had projected at the beginning of the year, and at INR was 12.3% year-on-year. So if you just get down to a couple of verticals that did well and a couple were where we saw a little bit of a drop, BFSI companies to do well where they look at quarter-on-quarter growth or year-on-year growth, the impacts that we made on pure software and [ ARS ] staying off and so that's one. Second is, if you look at tech from a Q4 perspective, there was a good growth of 8.4% quarter-on-quarter. And we are seeing in a couple of accounts where we have had challenging traction back in those accounts. We're also seeing our [ DB ] platform getting traction. We have a couple of customers already for this platform, and there are quite a few prospects. As far as [ Hitech ] is concerned. There was a big reason was for one of our customers who's based out of Canada and operations in China, we are developing a completely new product for them, a mixture of an automated cooking system. And on the hardware and backed up by low-code, no-code platform that was driven. And this got completed. The customer is trying to take it to market and there's a pause in the engagement and the drop in that revenue was a pretty sizable account for us. That's what's resulted in the drop in high-tech, I can almost link it back to one customer. Now Healthcare grew 12.8% year-on-year. But for the quarter, there was a dip of 5%, and that's because one of the customers in the pharma space, there was an engagement that also included some license revenue that got completed in Q3. And therefore, in Q4, we had that thing. But overall, I would say, BFSI and Healthcare continue to show good resilience as I pointed out in my talking points. We also see retail [ CPG ] having good traction. Edtech already talked about. We see butting shoots and we should lead to growth in AI is driving sit of interest in this segment.

[Operator Instructions]

Yes, operator, Vinesh here. So I will go ahead with the questions. Yes. So sir, on our AI First initiatives, how does the AI first initiative fundamentally defers from the company's previous digital engineering approach. And what specific changes in the operating model or service delivery or client engagement we implemented since its launch?

Let me take the first question -- first part of the question. Let's talk about some of the initiatives and some of the work we're doing in the AI space. So we started the company as a digital native company, Vinesh. And I would say a lot of the work we did was around data, cloud customer user experience. But one thing that was common was data all along. And even in our initial years, we did quite a bit of AI work with the customers, but it was more of the traditional legacy AI, right? And 3, 4 years back, that GenAI announcement of co-pilot, and seeing the prospects for this technology or the strength we started generative business unit, and we've seen very good traction in generative AI business unit. And what we are seeing is that any -- and what we are also financialized to customers and guiding them is there any initiatives they take up now, any platform that they build, they should look at how does AI become a central part of this. And it could -- a lot of it would be digitization or digital aspiration. And for those who not really fully realized the benefits of digital transformation. The advantage is now they can do it with AI at the central part of it. So that is the overall thought process behind the AI First strategy, which has multiple elements. I'll let Sridhar talk about some of the things that you're doing on multiple fronts from an ad perspective and also a little bit about how the legacy [indiscernible] and generative AI, how we view that. Sridhar, over to you.

Vinesh, there are 2 sites, of course, is an integral part of -- classically, it has been an integral part of our digital positioning as well as the capabilities historically as Joseph shared. However, as you could see from the examples that we are illustrating, customers to take the advantage of the AI, there's a lot that happens behind the scenes that could be even sometimes create more digital infrastructure, I did talk about even creating the IoT sensors kind of infrastructure before leveraging AI. And sometimes it could be you need to have the data or infrastructure have taken the automobile example, right? So think about it more like the tip of the iceberg when it comes to the AI solutions. However, the reason for us to actually go heavily on the AI First as a strategy is not what we build for the customers, but also how we build for the customers. That's where the AI productivity tools. For the entire service delivery come into the picture, be it engineering, testing, infrastructure management or cybersecurity, all the services that we are delivering historically, we continue to deliver is being significantly impacted by the AI. So that way, from the talent as well as our offerings right, be it the centric offerings or leverage in the AI for other kinds of work that the customer requires. All those pieces already are various programs that we have in the organization. I already shared some kind of the 3 goals I mentioned, right? Which is 90% of -- when we started the digital initiative, we had the goal of doing the digital work only and eventually we reached approximately [indiscernible] 96% as a company. Very similarly, when it comes to liberate in the AI product tools at varying levels, be it agentic or AI augmented. We want to hit 90% plus by end of the year. So fundamentally, it's changing every service offering that we are having. That's the reason why we wanted to take it as an AI First [indiscernible] that has an impact on our lending function, right, project managers and how we price our customers, more focus on the outcome-based models. And then, of course, our offerings are also integrated with the AI. And that allows us also to start looking at certain tools I mentioned reliability. And of course, the most important flagship solution is Enterprise AI platform.

Yes, sir. Got it. later.So one more thing right now all the companies are single partnership. So how are we looking at partnership with some of the players in order to scale this AI capability?

Actually, I missed that part as part of telling. There were 2 new -- of course, historically, we do have strong partnership with Microsoft as well as with AWS. However, in the last quarter itself, we did establish with 2 interesting companies, of course, one is Anthropic. When they started a formal partnership program. We became one of the early partners for them. So we closed a partnership with Anthropic in the last quarter. The second one, which is much more interesting is an startup called Unify apps, they actually are -- they have a product, which actually can connect the data side of the enterprise engine all the way up to the AI. We created a strategic partnership with them. And we work very collaboratively with them in terms of taking out-of-the-box AI-based solution with low-code, no-code developing agents on the top of it. So that way we are looking at the industry gains, historically, Microsoft AWS, we already did have Anthropic we established already in the last quarter. And in emerging start-ups that are transforming the enterprises like [ Uniper ] apps, we established partnership also in the last quarter. So 2 new partnerships in the last quarter. Anthropic and [indiscernible].

Thank you. Next question comes from the line of Aditi Patil with ICICI Securities.

So I wanted to I had 2 questions on the GBS business unit. While the revenue growth this quarter like it has grown sequentially, but there is a drop in the segmental margins. Can you share the reason for this drop? And also in terms of the AI platform, what kind of -- I mean, apart from [indiscernible], what other platforms are already being adopted by customer? And if you can share some metrics of the platform adoption.

So Aditi, let me take the first one on the margins, and then I'll hand it over to Sridhar and also for the second. For us, as far as GBS business unit is concerned, it contributes about 3.3% of our total company's revenues. It's actually, nothing but an AI center of innovation if you really look at it because if you look at this concept of AI-led services or AI-induced services, that number is much, much larger. But what we do in GBS is the AI -- it's an AI center of innovation. We started it to take a lead in all that thing we do in AI created it as a BU. And like I've been saying in the past, we have dedicated people to with about 200 people. But the large part of AI is now becoming -- it's going into various other parts of the business. So while there is this concept of BU and BU profitability, the intent that GBS is to make sure that we create solutions and tools, which are ahead of time focused on customer needs and that kind of thing. So it's not profitability, the profitability tends to get captured in the larger PDs and the IMS area work. So just to give you a case of mind, conversion of [ Artha ] banking or inducing it with AI is something that's happening. The entire revenue of [ Atabak ] sits inside BFSI and it gets attributed to PBS. Something that we do in [ Elara ] or ELLIPSE our platforms on the security and the customer support standpoint, that gets counted as part of IMS, which is another view. But without GBS giving you the tech direction and the direction on the innovation and where the markets are headed, we are not going to be able to do that. So what we are trying to do is, over a period of time, GBS becomes a horizontal their supply, and they will serve the entire company with the AI capabilities that are built. So as a BU, the first order of preference is to make sure that the people deployed in that unit. They are completely used across the company. But at the same time, they stand for a certain element of revenue. And let me not say profitability, but at least to make sure that it makes economic sense for having that team. Does that make sense Aditi?

Okay. Yes. It makes sense. I understand.

Over to you, Sridhar.

Yes. So Aditi, in terms of the -- of course, the platforms that we are building, I'll put them into 3 buckets, Aditi. One is the a, productivity. I mentioned something called [indiscernible], right? We have something called Agent Hub. So the idea is like when the engineering teams are like looking at the requirements, how can we generate near 100% core, right? From the specifications directly, that's what the reliability addresses. And today, we are -- I already did talk about one customer right, which is a large CPG and also within our internal projects and [indiscernible], we are using it. The other one is Agent Hub where enterprise quality [indiscernible] can be put on this coding agents because we are seeing a lot of these new articles on coding agents, removing the production database [indiscernible], et cetera, right? So take imbalances, cadre, et cetera. So that at least are controlled. So those are more on the [indiscernible] side. And on the service delivery side, of course, one example, [ Elara ] was mentioned by Venkat and that is predominantly on the customer support side, completely ad-based solution that we have, which is a little bit skewed towards the pharma industry, but is applicable to other verticals true? And another one on the cybersecurity space, again falls broadly under missionary [indiscernible], which is actually on the cybersecurity side. So a lot of the issues are text-based and complete solution that can analyze and identify what kind of security that can be there. And the last category is the vertical solutions. Joseph did talk about [indiscernible] which is actually a collection of multiple year use cases for the education institutions along with the digital infrastructure so that any economic institution can leverage. One example out of all AI use cases we have is student engagement. So leveraging the video analytics, image analytics and everything, how well the students are engaged in the platforms to multilayer use cases in the education, and we have insurance in a box right? Again, a lot of use cases, along with the complete insurance workflows as part of it, [indiscernible] anyhow on the banking side we have. And all these experience is what made us to come up with the Enterprise AI platform that can be highly customizable for each of the vertical for us to start rapidly creating vehicle-oriented solution. So these are some examples of the various AI solutions. Apart from that, we do have bioinformatics solution, [ multiomic ] solution, et cetera, which are, again, very focused AI and a little bit narrower than the solutions I mentioned.

Okay. Got it. Do you -- can you share some adoption metrics for these platforms or they are still in the initial stage?

So in terms of the adoption, like the AI productivity, of course, naturally, you can assume as well as I understand that the reaction is extremely much higher because these are not [indiscernible] solutions, pretty much every software development project we can use, right? So that way, the rely build, which is on the AI product side, at this point, we already have 40% adoption within our internal projects and the customer projects in everywhere. And from there, like, of course, they'll keep adopting more. And [ Elara ], for example, right, is actually companion solution for our well-established ELLIPSE platform, right, which actually can allow complete intra AIOps kind of solution. So that way, like we have ELLIPSE very well adopted with a lot of our projects and [indiscernible] is being adopted in those places for the customer support.

Okay. Okay. Got it. I had a couple of more questions on the guidance. So revenue guidance of 12.5% is very assuring. Can you help me understand how much of it is due to the deals we have already won? And how much is contingent on the high probability or pipeline conversion?

So a mixture of both the approach we took is to do a grounds-up revenue plan in Match had each of the industry groups and the [ MSS ] and generative ad business unit to come up with their plans. And we also had the centers of excellence comes with independent plans to make sure that it's all aligned. And just before this Board meeting last week and they are very big before last, we did a stress test of the Q1 and Q2 guidance because if you can meet the first half yearly numbers, it gives a much higher level of confidence that we'll be able to meet the annual plan. And we've built the plan for 15%, whereas we've kind of the revenue plan, but the P&L has been built on 12.5%. So that a little bit of cushion. And as we've said, our pipeline has grown by 27% quarter-on-quarter. This is a mixture of -- and opportunities in our existing business. As you know, our repeat business is 92%, not where it's between 92% to 94%, depending on the quarter. That gives quite a bit of [indiscernible], having that stability. And the good thing about the pipeline ounces there are several large deals that are cutting across quarters and across years, which gives a little bit more of stability and cushion the overall projection I already talked about vertical outlook that we had. So based on all -- we've talked about how we're getting a lot of traction and successfully the strategy. So all of these factors have contributed to giving us the confidence for the 12.5% guidance that we provided.

Okay. Got it. And on the margin side, what would be the planned headwind in terms of like investments on sales and marketing or AI capability building and the annual wage agreement, if you can call out?

Yes. So Aditi, we have called that out in the press release yesterday. So we did have tailwinds and had last year thanks to the way the foreign currency moved in our favor. We have also had currency losses because of the forwards that we have taken. So quite a few moving parts, but despite that, focus will be to maintain, protect the [indiscernible].

Okay. So I was asking from FY '27 point of view, would we be -- would our sales and marketing investments and AI investments will be higher in FY '27 versus FY '26?

I think [indiscernible] has dropped off. So let me take that Aditi. I think there would be a little bit of increase in the sales headcount and cost because there are some open positions that took time to fill up last year that are seeing people come on board right now. We also have to do a little bit of a shift because when we moved from hybrid BDMs to client partners or account managers for existing accounts and hired a new set of tenant BDMs. We also found that some of the people that we had we're not fitting into that pure client partner profile that can grow accounts into large customers. So those ships are taking place. On AI, we'll continue investing, whether it's on the platform. Street, I talked about many platforms that we are building. All of them have well-detailed GTM and positioning behind them and even capability building because we feel quite confident that the business will come because as we speak from Ai and generative AI perspective GBS, we do have money sitting on the table. So we don't look at this as really being headwinds. It could be transitory. And that's why what Venkat said, that we will make sure that we operate in the guided EBITDA margin and operating margin of between 17.5% to 18.5% is what we are targeting in FY '27.

Sorry, did I get cut off somewhere in between.

I've address that question.

Yes. And we have covered this in our press release, 17.5% to 18.5% is what we are trying to maintain while balancing out all the headwinds and tailwinds on the expenditure and the revenue front. But investments continue, and we will obviously prioritize that if it comes to a question of where to deploy money.

Thank you. The next question comes from the line of [ Dipesh Mehta ] from [ Emkay ] Global.

Yes. [indiscernible] I just want to understand the guidance part. We expect our revenue growth to accelerate into FY '27. What gives us confidence in [indiscernible] some sense about, let's say, the [ CVC-related ] anything pipeline I have to say the pipeline obviously need to get converted and then revenue ramp up net. So if you can give some more detail and which vertical you expect the growth?

Depends -- so I'll quickly cover the TCV, ACV question and then hand it over to Joseph. See, we have traditionally not been giving ACV because there is no one standard formula adopted by the industry. I'm not making a statement that it's not something that is possible, not possible, but we have stayed away from giving you that. But that said, we are pulling that together, and we'll hopefully in time be able to share that. But the larger thing is you should see the way we build our business numbers. One is based on repeatable business, the extent of new business that is expected to come in from the pipeline. When we're talking about pipeline of this new business, existing new and new-new and that you have the existing business, which is growing at a certain clip forming part of a large percentage, 93%, 94% of the total business. you put that together, that's how we build up our business plan. So we -- it was on the same basis that we have been reporting over the last 4, 5 years. While we are getting numbers together, the TCV large deal value. These are all something that makes possibly sense in the large kind of an environment, large company environment, but at our size of $300 million, it's all about focused execution on the current pipeline and the opportunities we face.

So just to add to that, [indiscernible]. I'll break it up into 3 sections, right? Some of the deals that we've closed, I'll just give you a high-level view, right, with one of a preowned company that's in the warehouse and logistics solution space. We've just signed a deal to take over all of your applications and infrastructure. So a 3-year deal that's around $12 million to $15 million, right? And we are in discussion to sign up for taking over their technology -- the technology as well, right, the engineering. And that will -- is a very active conversation. Again, over 3 years, it will be $8 million to $10 million, right? Now for a large insurance provider in Southeast Asia, we -- during the year, we won a couple of new contracts or deals, it's an existing customer where we have been able to grow the account. It's a $10 million-plus account, right? We've been able to grow 40% year-on-year. And we got 2 large programs from them, and we're in discussion for a couple of more such programs. Again, with a large CPG company, we've won a 5-year deal to help them with some of their marketing experience with a company in the -- that provides agentic care platform. We've done a 360-degree partnership where their implementation arm and it's already a multimillion dollar engagement. So that's on what we've won. But in terms of pipeline as well, right, we have several large deals both and , as I mentioned earlier, that are quite large and cutting across multiple years. That's the pipeline part of it. And if you look at some of the initiatives that we had right? We have talked about e-initiative. And as we speak, we are the preferred partner for [ PE ] firms. And I did give you some of the wins that I talked about our pipeline. I talked about is coming from these companies. We have talked about GCC strategy, and we brought on board, as I mentioned in my talking points. You brought a board -- head for that was putting a strategy that we will be implementing, and we should get traction over there. The large account strategy, we've created 2 business units, 1 under [ Roth Mato ], which has high-tech industrial manufacturing and edtech, and the other one with [indiscernible], who came on board 4 months, 5 months back that has retail CPG, BFSI and Healthcare, both very seasoned leaders who've grown large accounts. So they will be leading the industry groups and the client partners to make sure that the foundation we laid for a large account strategy last year, we'd be able to take it to the next level, and the goal is to create multiple large accounts. And this year, maybe create [ $1 million or $20 million ] account, but at least lay foundation for multiple of these accounts. And another area that we thought where we're leaving money was on the SAP front, and we'll take up very specific areas or they were not going to boil the ocean. So we brought a very seasoned leader on board not to lead that practice. So if you just look at all of this, there's so much -- and we have all of our platforms that Sridhar talked about where they're getting good traction. So this is what has given us the confidence that we'll be able to hit this revenue growth that we've guided.

Next question comes from the line of [ Gabe ] with [ Axis ] Securities.

Quick questions from my end. So I would like to know about your acquisitions. I mean historically, we have in a lot of acquisitions, right? So how these acquisitions are going to get benefited to us in the future when we talk about 12.3% of top line growth could be a mix of -- if you can share some mix of inorganic as well as organic growth? And the second question is on [indiscernible]. So everyone is talking about AI and uplifting their platforms as well how different are we from those players, if you can just share some thoughts on that.

I'll just address the question on organic and organic. Whatever we have put out there, 12.5% is organic first. There's no question of inorganic because there's nothing in the pipeline as of now. Whatever acquisitions we had done in the past have been integrated 1.5 years back, I too cover that. So it's completely part of our company. So we are, in fact, our plan for next year considers some of the efficiencies that are coming on account of the integration that we are talking about. So we have progressed far deep into integration and even if you're looking from a regulatory standpoint, the company should not be in existence post a couple of months. So the number of 12.5% is completely organic. Joseph?

So just -- thanks, Venkat. Just adding to that -- if you look at it last 1.5 years, whether it's me, Sridhar, Ram Mohan, [indiscernible], we've been meeting all of these customers is from pure software areas had the earlier acquisitions as well. And the planning and the cross-selling, all of that is being carried out by us out here. And we are also, at the same time, we raising some of the capabilities that the people in pure software and as brought to the table in some of the other customers that we have, whether it's on the insurance space or in the banking space or even in the health care space. It's a totally integrated unit now. And as Venkat pointed out, the 12.5% is purely organic battery project, if you do an acquisition that will be on top of it. We are quite clear internally. In terms of I'll give my point of view, and then let Sridhar also jump in. So if you really look at it [indiscernible], I think Happiest Minds is the only company that has a separate business unit for generative AI what that allows us to do is to just focus on the space either Pravin, RP and the team to focus on the space, develop depth in AI and generative AI work closely with analytics and the DPS, which have become kind of overlapping or extensions of the generative AI business unit because there's so much of -- if you look at automation, right, business process automation, there's a lot of agentic AI coming in there. If you look at analytics, data is the underlying need for doing anything on -- and so we are able to put this integrated story with GBS leading the way with the depth to bring to the table. The second thing I would talk about is the repeatable solutions that we are looking at and the platforms. I think the number of repeatable solutions that we have and Sridhar talked about quite a few of that brings a lot of value to the table. On the SDLC plant, we've created a separate set of excellence for making sure that we keep -- now we saw that the change -- the pace of change was just too fast and very often for us to advise the customer or to make pivots internally in terms of what to use, what not to use. We felt that having a separate center of excellence that could focus on these productivity tools, whether it's plot code, CoPilot, Gemini, all of the other cursor. And just keep track of the changes our customers are adopting it so we can we can distill all of these learnings go back to customers as well as to implement it internally. That, again, I think, is something that I don't think too many companies have done. So given our size, I think we are putting quite a bit of investment. We're making a lot of progress on multiple fronts, our whole AI First strategy has been -- has got multiple elements to it, including internal adoption of AI tools, which we can then be leveraged to advise customers. And I think that's what we are bringing to the table as a value proposition to our customers. Anything you want to add, Sridhar? [indiscernible]

Sure. The only point I want to add that cover is, of course, there is always an excitement by multiple IT services companies to keep coming with the platforms, right? And that's how we differentiate and why clients actually like what we are coming up with this. One of the strategic decisions we have taken is we didn't want to build a broader Enterprise AI platform 2 years back because thing is in total flux, right? At that point I'm saying any platform, clients are not in a position to [indiscernible] just don't know what this technology is. So what we did is we want to wait so that we gain sufficient experience, some of the examples you also shared right? In terms of our repeatable solutions and all the knowledge and experience that we gained is what prompted us to start thinking about as just start developing and creating enterprise their platform. The rest you were actually using our existing experience with AI, for example, in its understanding and experience be enhanced and moved into [indiscernible] kind of solution. So that's how we created multiple point solutions and now is the time for us to create a broader enterprise platform after 2 to 3 years of experience generator.

The next question comes from the line of [ Aidan Sarafian ], and individual investor.

So my question is [indiscernible] from a long-term one perspective could management provide some color on succession planning and development of the next line of leadership considering substantial promoter holding of around [ 42% ].

Yes. So from one of the things that some of us in the founding team found a surprising is that in 2012, just a year after we had started the company, Ashok had initiated a succession planning discussion. And we said you just started the company. So it's become, I would say, annual exercise that we have not missed a single year where we take all the senior and next level of roles, and we look at the people playing those roles, what are they going to be ready for next and have discussion on who could be a potential success. What was the areas that can be considered for development? And then what are the programs that are available or that we can avail of. And this gets discussed with the Board as well. Last year, we also included [ Hogan ] assessments to get a different view of these leaders and had that reviewed by the Board again. And one out of this have been multiple development programs, including having some of our leaders attend Iron Bangalore, ISB for specific trading programs. We've started some training programs -- development programs it's not training development programs internally. And we feel very confident in the kind of succession planning that we've done. At the same time, as I mentioned, we've got a few leaders externally because we also believe that getting some leaders from outside brings in fresh ideas and challenge some of the ways of doing things. So this is the approach we've taken to succession planning, and it's all being done with the involvement -- active involvement and input from the board.

Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question-and-answer session. I now hand the [indiscernible] over to Priyanka Sharma for closing comments.

Welcome, everyone, for joining us today. We would also like to thank [indiscernible] HDFC Security for hosting this call on our behalf. We appreciate your continued engagement and support. Should you have any further queries, please feel free to reach out to the Investor Relations team at [email protected]. Thank you once again, and have a great day ahead.

Thank you. On behalf of HDFC Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.