The credit ratings agency said that it continues to take a consolidated view of Happiest Minds Technologies Limited's (HMTL) and its subsidiary, Happiest Minds Technologies LLC, to arrive at the ratings, as both the companies are engaged in the same line of business and have a common management. However, HMTL liquidated Happiest Minds Technologies LLC in May 2020 as the entire revenue has been booked in HMTL since FY20.

The upgrade reflects a substantial increase in HMTL's operating EBITDA margins in 9MFY21, coupled with a healthy cash flow from operations and initial public offering (IPO) proceeds, leading to a significant improvement in the credit metrics and liquidity position.

The positive outlook reflects India Ratings' expectation of a continued improvement in financial performance in in FY22; however, the EBITDA margins would marginally decline but would remain strong.

The ratings agency further said that a significant improvement in the revenue, while maintaining the margins will lead to a positive rating action. However, a decline in the revenue, EBITDA margins or elongation of the net working capital cycle and/or significant debt-led acquisitions, leading to the net adjusted leverage exceeding 2x, on a sustained basis, would be negative for the ratings.

Bengaluru-based Happiest Mind Technologies is an IT services provider. It leverages a spectrum of technologies such as: Big Data Analytics, AI & Cognitive Computing, Internet of Things, Cloud, Security, SDN-NFV, Blockchain, Automation including RPA, etc.

The IT company's consolidated net profit rose 23.7% to Rs 42.15 crore on 5.47% increase in revenue to Rs 192.84 crore in Q3 December 2020 over Q2 September 2020.

The scrip rose 0.52% to currently trade at Rs 538.65 on the BSE.