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Happy Square Outsourcing Services Ltd — Q4 FY26 earnings call

Call held 11 Jun 2026

Management summary

Happy Square Outsourcing Services Limited reported robust H2 FY26 performance with turnover up 35.92% YoY and PAT up 27.20% YoY, driven by strong order inflows and client growth. Full-year FY26 turnover reached INR109.88 crores, a 12.49% YoY increase. The company is heavily investing in AI and technology, including its Veera AI chatbot, which temporarily impacted EBITDA margins but is expected to drive future profitability and efficiency. Management targets 80% revenue growth for FY27 and aims to become a tech-driven solution provider rather than just a staffing company.

Highlights

  • FY26 total turnover reached INR109.88 crores, registering a growth of 12.49% year-on-year.

  • H2 FY26 total turnover stood at INR66.51 crores, reflecting a strong growth of 35.92% year-on-year.

  • H2 FY26 Profit After Tax (PAT) grew by 27.20% year-on-year to INR4.21 crores.

  • Secured INR24.13 crores in H2 FY26 order inflow, including 7 new tenders aggregating INR12.09 crores.

  • Successfully launched Veera AI chatbot and completed 35% of AI product, with pilot projects already successful.

Concerns

  • FY26 EBITDA margin declined due to significant investments in AI and technology, as well as IPO-related expenses.

Key financials

2 periods

H2

  • FY26 Total Turnover
    ₹66.51 Cr
    YoY +35.9%
  • FY26 EBITDA
    ₹5.1 Cr
  • FY26 PAT
    ₹4.21 Cr
    YoY +27.2%

FY26

  • Total Turnover
    ₹109.88 Cr
    YoY +12.5%
  • EBITDA
    ₹7.86 Cr
  • PAT
    ₹5.98 Cr

What they filed

₹ Cr · quarterly
Line itemQ2 FY25Q4 FY25Q2 FY26Q4 FY26
Revenue49 49 43 66
EBITDA4 5 3 4
Net profit3 3 2 4
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Capex ₹2.5 Cr
    • AI process and technology investment, cloud deployment ₹2.5 Cr
    As of now, to be honest, we are planning to add on INR2 crores to INR2.5 crores. But because this costing of online -- there is cloud as well as the process of online deployment -- it depends on how much data we have settled down on the cloud.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY27 · Medium confidence 80%
    For FY27, we are targeting, I would say, maybe an 80% growth from the present situation.

    — Shailesh Rajpal

  • Total Turnover Revenue · FY28 · Medium confidence INR200 crores plus
    We are targeting that this year, FY28, we will almost cross INR200 crores plus and definitely we will cross INR300 crores plus.

    — Shailesh Rajpal

  • Total Turnover Revenue · FY28 · Medium confidence INR300 crores plus

    — Shailesh Rajpal

Profitability

  • Sustainable EBITDA Margin Profitability · FY27 and FY28 · Medium confidence 7% plus
    Maybe on this 7% plus.

    — Shailesh Rajpal

  • EBITDA Margin Profitability · FY28 · Low confidence 9%
    Definitely, definitely. And we had already diversified some other portfolios also, so definitely you will see that strong growth.

    — Shailesh Rajpal

Technology

  • AI Investment Completion Technology · FY27 · High confidence 100%
    We target this FY27 that we complete our 100% investment into technology.

    — Shailesh Rajpal

Business Mix

  • Government vs Large Corporate Business Mix Business Mix · this year (FY27) · High confidence 50%-50%

    From 40% government, 60% large corporate today

    But this year, you will see this 50%, 50% of both industries, either in government and large PSUs as well as the large corporate and the new start-ups.

    — Shailesh Rajpal

International Expansion

  • Overseas Operations Start International Expansion · this quarter or maybe within the next quarter, by the half of this year · High confidence 100% operations started
    either this quarter or maybe within the next quarter, by the half of this year, we will have 100% of our operations started in the overseas market.

    — Shailesh Rajpal

Technology Adoption

  • AI tool usage in work Technology Adoption · future · Medium confidence 50% work done through AI

    From 35% work done through AI today

    in the future, we are in that stage where 50% of the work is done through the AI and 50% of the work is done through the manpower involvement.

    — Shailesh Rajpal

What to watch in Q1 FY27

AI Investment Completion & Margin Improvement

FY27 for 100% investment, 'this year' for margin improvement.
Current 35% of AI product launched, pilot project successful. EBITDA margin impacted by investment.
Target 100% AI investment completion, margin increase towards 9%.

Why it matters

AI adoption is key to future profitability and operational efficiency, and its completion is expected to drive margin recovery.

We target this FY27 that we complete our 100% investment into technology.

Risks & concerns

  • EBITDA margin compression due to AI/Technology investments

    medium

    FY26 EBITDA margin declined due to heavy investment in AI and technology, including purchases of OpenAI and Claude, and in-house development, but expected to improve in future.

    Both acknowledged

  • High data center costs for large database management

    low

    Currently paying heavy rent for data centers to manage over 1 million data points, but developing in-house solutions and anticipating future cost reductions from India's data center investments.

    Management acknowledged

Q&A highlights

8 direct
Reason for FY26 EBITDA margin decline and future sustainable margin. Direct
No, it is we are investing into this AI process and technology. That is the thing. In the future, we have targeted more growth on that part because now we have adopted the 50% AI process.

Clarifies the impact of strategic AI investments on current profitability and sets expectations for future margin recovery.

Asked by Yash, Nishita Shanklesha

FY27 Revenue Growth Target. Direct
For FY27, we are targeting, I would say, maybe an 80% growth from the present situation.

Provides a key top-line growth target for the upcoming fiscal year, indicating aggressive expansion plans.

Asked by Yash

Investment amount in AI processes and data center costs. Direct
As of now, to be honest, we are planning to add on INR2 crores to INR2.5 crores. But because this costing of online -- there is cloud as well as the process of online deployment -- it depends on how much data we have settled down on the cloud.

Quantifies the capital expenditure for AI and highlights the ongoing challenge of cloud/data center costs.

Asked by Nishita Shanklesha

Clarification on 'raw material costs' in financial statements for a service company. Direct
Since this is a service company, we do not have any material cost as such majorly. The component which you are seeing is the payroll cost the salaries which we pay of our clients over which we charge a mark-up and agency fee.

Corrects a common misunderstanding of service company cost structures, confirming that 'raw material' refers to direct payroll expenses.

Asked by Paryan Sharma

Shift in client mix towards government business. Direct
Previously, we targeted 70% business from the top large corporates and 30% from government business or PSUs. But now we are in that state where we go with a 50%-50%, 50% from government business and 50% from large corporates.

Indicates a strategic shift in client acquisition focus, potentially diversifying revenue streams and leveraging government opportunities.

Asked by Paryan Sharma

Details on AI integration and its impact on hiring efficiency. Direct
But now, after we use this AI technology, out of 5,000 people, we can identify the top 50 finance managers within a period of 5 minutes only.

Illustrates the tangible benefits and efficiency gains expected from AI adoption in the recruitment process.

Asked by Paryan Sharma

FY28 Revenue Targets. Direct
We are targeting that this year, FY28, we will almost cross INR200 crores plus and definitely we will cross INR300 crores plus.

Provides long-term revenue aspirations, indicating significant growth expectations.

Asked by Vishal Mehta

Plans for overseas expansion. Direct
Yes, we are targeting, despite this India, and this Europe government, you know, very well. They have signed the one MOU between the European country and Indian company... we have received our license also in this quarter only. So, definitely, we have started our operation overseas also.

Signals a significant strategic move into international markets, potentially opening new growth avenues.

Asked by Jiten

2 min read 6 chapters

Detailed narrative

Strong H2 FY26 Performance and Full-Year Growth

Happy Square Outsourcing Services Limited reported a robust H2 FY26 with total turnover of INR66.51 crores, marking a strong 35.92% year-on-year growth. Profit After Tax (PAT) for H2 FY26 also saw significant growth of 27.20% year-on-year, reaching INR4.21 crores. For the full fiscal year FY26, the company achieved a total turnover of INR109.88 crores, representing a 12.49% year-on-year increase, with an EBITDA of INR7.86 crores and PAT of INR5.98 crores.

Strategic Investment in AI and Technology

The company is heavily investing in AI and technology, including the purchase of OpenAI and Claude, and developing an in-house master CPU and Veera AI chatbot. This strategic shift aims to transform the company into a tech-driven solution provider, moving beyond traditional staffing. While these investments temporarily impacted FY26 EBITDA margins, management expects profitability to increase, targeting a 9% EBITDA margin by FY28, once 100% of the AI investment is completed by FY27.

Aggressive Revenue Growth Targets and Order Pipeline

Management has set an ambitious target of 80% revenue growth for FY27. The company is actively pursuing new government contracts, with a significant pipeline including an L1 bid for INR21 crores from the Rajasthan government expected within 15 days, and another INR15 crores order in July. Cumulatively, the company anticipates receiving INR35 crores in work orders within the next 50-60 days. Long-term, the company targets crossing INR200 crores and INR300 crores in turnover by FY28.

Diversification of Client Mix and International Expansion

Happy Square Outsourcing Services Limited is strategically shifting its client mix, aiming for a 50%-50% split between government/PSU and large corporate clients in FY27, compared to the previous 30%-70% split. The company has also initiated international expansion, having received a license and started overseas operations this quarter, with plans for 100% operations in the European market by the first half of the next fiscal year, following an MOU with a European country.

Evolution Towards a Tech-Driven Solution Provider

The company is repositioning itself from a traditional staffing firm to a comprehensive tech-driven solution provider, leveraging AI for efficient recruitment, bidding on government contracts, and managing a large data bank. Currently, 35% of its AI product is launched, with tools like Veera AI assisting candidates and clients. The company also plans to monetize its payroll and attendance app services, currently offered free, starting from the next quarter.

Focus on High-Growth Segments

Beyond traditional staffing, the company is focusing on high-growth segments driven by technology. This includes a strong vision for data centers, the EV segment, new petroleum replacement technologies like LNG, solar vision systems, and robotic technology. The company aims to integrate these technologies into its facility management services, further diversifying its offerings and leveraging its tech-driven approach.

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