IT services firm Happiest Minds Technologies has liquidated its entire investments in mutual funds (MFs) and shifted them to bank fixed deposits (FDs), Venkatraman Narayanan, MD and CFO, told FE. The move comes as the equity market returns have been sub-par since early 2022, he added.
“Returns on mutual fund has been sub-par of late. During the last few quarters, we moved our entire cash balance of Rs 650-700 crore to FDs with various banks. Today, FDs are providing a return of about 7.5% per annum. There is no mutual fund investment for us today,” Narayanan said.
The company has fixed deposits with banks like State Bank of India, Axis Bank, ICICI Bank, Federal Bank, and others.
“Of our total revenues, 67% accrues in the dollar. Around 10-11% comes through our India business, while the rest accrues in the euro and other currencies. Around 95% of our employees are based in India, while the remaining 5% are based overseas. Around 80% of our cost is incurred in India,” Narayanan said.
During the October-December quarter, Happiest Minds posted a revenue of Rs 366.88 crore, up 29.21% on a year-on-year basis.
From the current financial year (which began on April 1), debt mutual funds do not enjoy a lower effective tax rate as these have been brought on a par with bank FDs. If the debt MFs invest less than 35% of their assets in equities, they will not enjoy long-term capital gains benefit. They will be taxed at the investor’s tax slab rate.
Generally, Indian IT services company, which earn a major part of their revenue in dollars, park their cash balance with Indian banks and other financial instruments like certificates of deposits and mutual funds.
According to industry experts, the 10-year interest rate in the US is about 3.5–4%, whereas the same in India is around 7-9%.