The rating agency has maintained "stable' outlook on the same.

Care Ratings said that the long-term rating assigned to the proposed debenture issue and bank facilities of Happiest Minds Technologies (HMTL) takes into account the increasing scale of operations over the past three years with healthy profitability margins.

Experience of the management in scaling up the business provides strong support to the rating, which is aided by consistent high-value customer addition, services offered in the futuristic domain like internet of things (IOT), digital services and information security along with strong liquidity position.

Uncertain global environment in key markets like USA and Europe, rising human capital cost and higher attrition continues to strain the performance of information technology (IT) industry in India.

The rating strengths are further constrained by the presence of being in a highly competitive industry and the impact of the forex movement on the revenues and profitability of the company, being majorly present into the exports markets.

HMTL's plans to raise funds for inorganic growth, and the ability to consolidate the same with its existing operations will be a key rating monitorable going forward.

The agency further stated that increased scale of operations with consistent total operating income (TOI) of Rs 2,000 crore or above, supported by stable PBILDT margins of more than 20%; and sustained improvement in the overall gearing below 0.15x. could be positive for HMTL's ratings.

However, the company's ratings would be adversely impacted by deterioration in the capital structure of the company owing to acquisition leading to overall gearing above 0.50x; uncertain macro-economic environment leading to declined operating income to less than Rs 1,000 crore; and any large-sized acquisition (more than 30% of the net worth size), leading to depletion of cash and/or lesser than envisaged cash flow generation from the acquired assets.

Happiest Minds Technologies is involved in providing services across digital business, infrastructure management & security and product engineering domains. In addition, the company is an authorised partner with global information technology players to deploy their services to the end customers and create custom solutions as per the business requirements.

The company's net profit decreased 3.8% to Rs 57.58 crore despite of 3.2% in revenues to Rs 366.88 crore in Q3 FY23 over Q2 FY23.

The scrip shed 0.56% to Rs 843.55 on the BSE.