eClerx Services Limited (NSE: ECLERX) Q1 2026 Earnings Call dated Jul. 25, 2025
Corporate Participants:
Unidentified Speaker
Kapil Jain — Managing Director and Group Chief Executive Officer
Pratik Bhanushali — Vice President – Legal & Company Secretary
Srinivasan Nadadhur — Chief Financial Officer
Analysts:
Unidentified Participant
Sandeep Shah — Analyst
Mihir Manohar — Analyst
Dipesh Mehta — Analyst
Shradha Agarwal — Analyst
Vikal Gupta — Analyst
Girish Pai — Analyst
Rehan Saiyyed — Analyst
Debashish Mazumdar — Analyst
Jalaj Manocha — Analyst
Aashray Vasa — Analyst
Pratik Dharamshi — Analyst
Presentation:
Pratik Bhanushali — Vice President – Legal & Company Secretary
Hi everyone, good day and welcome to the Q1 FY26 earnings call of eClerx Services Ltd. Please note that this webinar will be recorded to take us through the results and to answer your questions. We have with us the top management of eClerx represented by Kapil Jain, Managing Director and Group CEO, and Srinivasan Nadhadur, Chief Financial Officer. We will start the call with brief opening remarks by Kapil followed by Srinivasan who will be sharing the financial update and then we will open the floor for Q and a session as usual. I would like to remind you that anything that is mentioned on this call that gives any outlook for the future or which can be construed as forward looking statement must be viewed in conjunction with the risks and uncertainties that we face.
These risks and uncertainties are included but not limited to what we have mentioned in the prospectus filed with SEBI and subsequent annual reports which you can find it on our website. Having said that, I will now hand over the floor to Kapil. Over to you Kapil.
Kapil Jain — Managing Director and Group Chief Executive Officer
Thank you Prateek and good evening everyone. We are pleased to share the highlights of our performance in FY26Q1. It was a good quarter on both the revenue and margin fronts. Operating revenue for Q1 was 109.2 million up 4.2% sequentially and 17.1% year on year in INR terms. Q1 operating revenue was INR 9,346 million up 4% sequentially and 19.5% year on year. Margins came in stronger as well despite the impact of the annual wage increase which we see in Q1 a bit offered. Q1 was INR23.46 million at a margin of 24.8 down 6.3 sequentially but up 25.3% year on year.
PAT for the quarter was INR14.17 million at a margin of 15% down 6.9% sequentially but up nearly 27% year on year. Our deal wins were at 32 million for Q1. We are happy to note that analytics and automation went up 6% over the previous quarter, stronger than the firm growth rate and that emerging client growth has outpaced top 10 client growth. Growth has been broad based across all our verticals other than fashion and luxury segment on the new centers. We have recently opened our Lima operations which went live this quarter and operations in Cairo will be going live in Q2.
I would like to share some commentary and outlook about our businesses on banking, financial services and insurance clients in that segment have reported strong results on the back of high volatility. There are broad opportunities across large and small clients, both new and existing. We are working on several interesting KYC client onboarding opportunities with new clients as well as expansion and existing clients. These opportunities are a mix of tech, data and operations on the fashion and luxury. There has been no change in the outlook from the previous quarter. This segment continues to remain weak with US market underperforming, weakness in China and appreciation of the Euro.
Both high tech and MND and our emerging businesses grew strongly in the last quarter and the outlook remains broadly positive. Our market intelligence, platform and tech services are resonating well with clients on communication, media and telecom. We see good traction on both new logo wins and in cross sell of CX services omnichannel services that we provide. We will leverage the new delivery centers to grow footprint with both existing and new clients. Clients continue to remain focused on cost control and operational efficiencies on technology and analytics services did well in Q1. We see interest in our productized services offerings around compliance, Compliance Manager, Market intelligence and in low code no code services.
I’ll now cover some of the brief awards and recognitions that we have received this quarter. We have been included in the Leaders Quadrant of Everest Group’s Financial Crime and Compliance Operations Services Peak Matrix Assessment 2020, our recognition that demonstrates our commitment to delivering innovative and effective compliance solutions to our clients. E Clerk’s Chief Technology Officer Sanjay Kukreja has been honored as the Evangelist 100 by the Chief Security Officer Award CSO 100 by Foundry and IDG Inc. Co. For his outstanding leadership in driving technology transformation and fortifying cyber security strategy. Eclux has also been honored with the prestigious Financial Express CFO Award FE CFO in the Medium Enterprises Services segment, underscoring the company’s commitment to financial discipline, risk management, sustainable growth and having a highest set of corporate governance.
As many of you know, learning and development forms the foundation of our delivery model. Six months ago we introduced a cutting edge Gen AI training course in collaboration with the Technical University of Munich, one of the world’s top universities in computer science and engineering. I am proud to share that as a result of this initiative, 8,000 employees have successfully upskilled, which represents roughly 40% of our employee count. We are also upskilling the entire technology team on GitHub Copilot. In line with our CTO’s vision to drive 25% productivity gain by leveraging AI code generation tools, FY26 has started on a positive note and we will continue to build on this momentum.
We are grateful to our clients and partners for having placed their trust in us and for giving us the opportunity to be part of their journey. We look forward to their continued support in the future. Thank you and over to Srini for more details.
Srinivasan Nadadhur — Chief Financial Officer
Thank you Kapil and good evening everyone. I will provide some additional detail on our performance this quarter. So as Kapil mentioned, the performance this quarter has been strong on both the revenue and the margin fronts. In constant currency terms, operating revenue was up 3.3% sequentially and 16.4% YY, including other income of 105 million. Total revenue was 9,451 million, up 3.1% sequentially and 17.7% YY on a Q on Q basis. There was margin decline in both EBITDA and PAT of about 250 and 160bps respectively owing to the annual wage hikes and the impact of the new delivery centers.
This is lower than the decline usually seen and was achievable thanks to the strong top line growth in BFSI and CMT offshore, enabling us to hire at the bottom of the pyramid. You will notice that we have added a couple of slides, one on key performance metrics indicators and the second on balance sheet metrics which show a long term view of our performance in a graphical format and we hope that you find these slides useful. One thing that I’d like to call out on this slide is the net operating cash flow of 223 million and the EBITDA conversion metric 9.5% in Q1 are much lower than usual.
There are a couple of reasons for this. Number one is that DSO has gone up from 80 days to 86 days. This is because of system and process changes in some of our large clients resulting in invoices being hold for some time. These are clients with whom we have tenured relationships and I want to emphasize that there is no risk to collections. The second reason is that we made a large contribution to our gratuity fund basis advice from our auditors. The contribution is tax deductible and the returns are tax free and this will reduce our liabilities in future.
Without these two, the Q1 net OCF would have been higher than that of last year. Another point to note is that we pay annual bonuses in Q1, so Q1 in general does tend to be lower than Q2 to Q4. Coming to the P and L I had mentioned last quarter about a reclass of 120bps from delivery to sales. So that reclass last quarter had resulted in a higher SNB cost. Last quarter 14.1% of revenue. And excluding that, the Q1s and D of 12.3 is roughly about down about 60 bips. Q1Q DNA as a percentage of revenue has gone down as happens every Q1 because of the recalculation of WDV in the new financial year.
And on the other key metrics, top 10 concentration has reduced by 1%. We have added about 750 seats in our iron facility in Navi Mumbai. Attrition at 18% is lower than Q4 and about the same as Q1 of last year. Staff utilization is down by about half a percent. And I have already touched upon DSO earlier. So that concludes our prepared remarks. We can now move on to the Q and A. Back to you Pratik.
Questions and Answers:
Pratik Bhanushali
Thank you Srinivasan. Thank you Kapil. So we will now open the floor for question and answer session. So first question comes from the line of Sandeep Shah from Aquarius Securities. Sandeep, I think Sandeep has moved out. I guess so. The next question comes from the line of. Yeah, Sandeep, is there. So Sandeep, please, you can go ahead. You can unmute your line and please ask your question.
Sandeep Shah
Yeah, there was no option to unmute. Sorry for. Yes, yeah, just congratulations on a great execution both on revenue margin as well as employee addition. Just the first question, sir. Is there a seasonality in the ACV booking from Q4 to Q1 though on a yoy we have done well. But do you believe the decline Q1 Q is seasonal and may continue in future or there are some delay in decision making.
Kapil Jain
So Sandeep, thanks for the question. Like as I had mentioned in the last quarter as well, quarter on quarter, there will always be some amount of volatility up or down. If you look at full year ACV of last year we did roughly about $140 million. We expect to do higher than that on a full year basis.
Sandeep Shah
Thanks. That was great. Also some commentary about roll off. It continues at the scale of 1520% of the top line.
Srinivasan Nadadhur
Yeah. About saying there is no significant change in roll off percentages.
Sandeep Shah
Okay. And last few things in terms of employee addition being robust. So that implies we also have a healthy growth visibility at least in the near term. Is it a right way of looking at it?
Kapil Jain
Yes, Sandeep, I think we do see client demand and the overall strategy that we have laid out for the company is working well in terms of service line Capabilities and the verticals that we have created. Okay.
Sandeep Shah
Okay. And just last two questions. Srini. Generally Q1 margin is lower for wage hikes. But if we compare the full year margin versus Q1 margin, it improves by 3 to 4 percentage point. So in this scenario, do you believe this time we could be near the upper end of the comfort guidance of 24, 28% in this year?
Srinivasan Nadadhur
We don’t know. The year has just started and it’s possible that we may want to invest more in the business if we see margins trending up. So I mean that is a decision that Kapil and the executive team will take during the course of the year.
Sandeep Shah
Okay. And the last question, last year the buyback got concluded in the second quarter. So when we come out with a Q2 result, we could have mandatory period of 12 months would have completed. So in a fair scenario one can expect the buyback can be considered by the board in the near to medium term.
Srinivasan Nadadhur
It’s possible, yes.
Sandeep Shah
Okay, thanks. I may have a follow up and come back.
Kapil Jain
Thanks.
Pratik Bhanushali
Thank you. Sandeep. We have next question from the line of Mihir Manohar, Carnelian Capital Me. You can unmute and you can ask your question.
Mihir Manohar
Yeah. Hi. Thanks for giving the opportunity and congratulations. On great set of numbers. Largely wanted to understand the margin side. Generally 1Q is a period where we have 200 or 300 basis points, kind of a drop in margins. But however, this time that is not the case. If you can quantify the headwinds and tailwinds for margin on a QQ basis for this quarter, that will be helpful.
Kapil Jain
Yeah. So roughly about 250bps has come through because of wage hikes and about 20 has come because of the new delivery centers that we have opened. On that view we were able to recoup margin because of the strong growth, especially offshore. And as I mentioned, when the growth happens in but couple of our areas like BFSI and cmt we are able to replace at the bottom of the pyramid which results in the overall wage cost going down.
Mihir Manohar
Understood. Sure.
Srinivasan Nadadhur
Second question was on the DSO side. I mean you mentioned systems and processes. Some change in some of the clients. What is this change exactly and for what part of the business is this change happening and will it will be reverse revert back to our original number. So they want some of our clients want to change the processes and their internal systems that they use for tracking purchase orders. And while they are migrating to the new system, some of our invoices are holding. This is in a couple of our BFSI clients and a couple of our retail and CMT retail and emerging clients and DSO you want to talk about?
Kapil Jain
Yeah, I think we definitely this year the DSO moved from 80 to 86. We do expect it to to bring in line with what it has been on average in the previous quarters to around 80 between 80 and 82.
Mihir Manohar
Understood. Sure. Third question was just on the GitHub Co pilot so what number of people are broadly we trying to train on GitHub copilot and trying to drive productivity?
Srinivasan Nadadhur
So the technology thing is about 1700. So I would expect that maybe about half of them will be doing pure technology work and the other half may be doing analytics kind of work. So rough assumption is about 60% but I would have to check with also.
Kapil Jain
I think the work that we do on the technology side broadly we classify in services that we are rendering on top of our IP and they are our technology team that’s working on the same. If they are able to get trained on GitHub you can realize the productivity immediately because that’s something on our infrastructure on prem and we are able to realize that productivity technology folks that are working on client systems where we are delivering services of the client systems or we are providing low code, no code or doing tech work there even if we are trained to apply that productivity is a function of clients infrastructure, security and other parameters.
So I think I wouldn’t take 25% of 60% of 1700 as the number I immediately I think what we are looking at is people who are working on the back of our ip. That’s something is yes we will see benefits as we move along.
Mihir Manohar
Understood. Sure. And just lastly on the margins and analytics division does analytics have higher margin for us versus the company average
Srinivasan Nadadhur
at a at a gross margin level the percentage gross margin is lower but the dollar gross margin is higher.
Mihir Manohar
Yeah, that’s it for myself.
Kapil Jain
Thank you.
Pratik Bhanushali
Thank you Mir. So next question is from the line of Dipesh Mehta, Emkay Global. Dipesh, you can go ahead and ask your question.
Dipesh Mehta
Yeah, thanks for the opportunity. Two questions from my side. First about the emerging client revenue. If I look at it after relative softness for up previous quarter largely because of fashion and luxury related and digital spend where you indicated some softness but this quarter it bounced back while your commentary remain largely similar on that fashion segment. So if you can provide what is driving growth in emerging client this quarter that is question one and how you expect that momentum to continue in coming quarter. Second question is about sales and distribution. Partly you indicated about the reclassification but Even adjusted for reclassification it is down.
So if you can provide some sense how one should look this sales and distribution investment going forward. Thank you.
Kapil Jain
So I think growth in emerging clients is a function of few things. One is average deal size going up, our ability to sell more services into our existing set of clients, cross sell upsell that I spoke about in terms of high end fashion and retail. I think what you’re seeing margins is on account of the the currency, constant currency. I think we still are cautious on that segment of business. And what was your last question on.
Srinivasan Nadadhur
Sales and distribution cost?
Kapil Jain
No, what was the question? Sorry.
Dipesh Mehta
So sales and distribution even adjusted for reclassification is down when I look sequential as well as any YOY perspective. So. So how one should look in as a percentage of revenue going through.
Kapil Jain
So I wouldn’t look at quarter on quarter I think and like I said, we will continue to let go of the bottom performers, continue to hire at the top end, continue to hire where we see growth momentum either across service lines, vertical GEOs. So I wouldn’t look at a trend line quarter on quarter on a yearly basis we should be around the number that we had last year.
Dipesh Mehta
Understand and last question is about overall demand scenario perspective. Let’s say from the beginning of year. Considering the way deal pipeline shape up happened as well as quarter one performance, are we more confident about growth acceleration or you think things are largely stable? So if you can provide some context compared to where you started versus now.
Kapil Jain
So we are cautiously optimistic Dipesh in terms of what we are seeing. Like I said, our overall strategy is working well in terms of cross sell as well as in the financial services space compliance. KYC seems to resonate well. We have recently been acknowledged by Everest on the peak metrics. So I think all these things definitely are the tailwinds that we have. But overall macroeconomic environment continues to be volatile and hence we are cautiously optimistic.
Dipesh Mehta
Thank you.
Pratik Bhanushali
Thank you Dipesh. So we have next question from the line of Shradha Agarwal from AMSEC. Shraddha, you can go ahead and ask your question.
Shradha Agarwal
Yeah. Hi. Hi sir. Thanks for taking my question and congratulations on another great quarter. Two questions. Last quarter we had indicated that the pipeline for FY26 looks better than what it was at the beginning of FY25. So with strong conversions coming through this quarter. Also do we still have a stronger pipeline compared to what it was at the end of FY25?
Kapil Jain
Yes, the pipeline continues to be strong. As I was mentioning that our deal sizes have gone up which is taking longer from a conversion point of view which is why Q1 you saw a decline over Q4. But year on year there is a growth and like I said that on the ACV basis for full year we do expect to do higher than what we did in FY25.
Shradha Agarwal
Right. And in terms of GCC, IT companies at least have a specific GCC approach now and they have carved out business units to focus on GCC as a focused area. So what is our strategy around gcc? Are we doing anything different now compared to what historically we have done around that space?
Kapil Jain
So Shraddha, we have been working with gccs from the very beginning. I think every client we work with has a GCC in financial services sector. So for us this is an opportunity and we have put a dedicated team as well. So I think it’s just doubling down on what we were already doing to capture market share from the gccs.
Shradha Agarwal
The last question, what drove a very strong growth in our analytics and automation practice this quarter?
Kapil Jain
So I think it’s there were a couple of things. One is again on the analytics martech and some of the other capabilities that we have, our ability to cross sell upsell that into wider set of clients. Second is we had made a structural change to bring analytics and technology under one umbrella. So that was other reason. So we are able to bring in more synergistic view for the clients across data engineering, analytics insights and it’s broad based across capital markets, financial services clients, high tech and customer operations.
Shradha Agarwal
Right. And the last question, I know you had not commented on revenue growth guidance for 26 but you had indicated that the DLCV number would be higher. But given how we’ve started off the year and given the kind of hiring momentum that has happened in the quarter. So would you be comfortable in saying that 26 growth could be on the revenue growth as well? 26 could be better than 25 I.
Kapil Jain
Think Shrata, I won’t comment on that. I think what I can say is because as I said there are a lot of macroeconomic uncertainties that we are living in. Definitely Q2 we will be confident of showing our sequential growth over Q1 and then we will give the further guidance as and when we meet in the Q2 earnings call.
Shradha Agarwal
Great, great. Thank you so much sir and wish you all the best.
Kapil Jain
Thank you. Thanks Shraddha.
Pratik Bhanushali
Thank you Shraddha. We have next question from the line of grishpai from Bob Capital Markets. You can go ahead and ask your question. Grish, you can unmute your line and ask your question. I think we he has dropped. So we have next question from the vi. Gupta. Vi. You can go ahead and ask your question.
Vikal Gupta
Hi, good afternoon everybody and congratulations for yet another fantastic quarter. Thank you very much for that. So my question is, you know, when the, you know, result are coming so fantastic, don’t you think that you know, looking for revising the guidelines to the upside or is it too early to, you know, comment on that? And the second question is and in the near future can we, you know, see that, you know, consideration for the bonus share?
Kapil Jain
Yeah, I’ll take the first question. I’ll let Shrini answer. On the bonus share. We, as I had said, we don’t give guidance for the future.
What we have indicated is that pipeline is robust. We have seen sequential growth in Q1 and Q2. We are reasonably confident to deliver a sequential growth. And the margin guidance we continue to maintain between 24 to 28% despite opening up two new centers, one in Cairo, one in Pero. And as you know, when you are opening a new center it takes time to break even. So I think we are not going to change the guidance on the EBITDA and margin front and sequential increase in EBITDA is what we have said. So I am continuing to maintain the same guidance.
Srinivasan Nadadhur
And on the bonus, it is something for the board to decide. We are of course cognizant of the fact that we want more retail investors to participate and therefore we would like the share price, at least from a psychological standpoint to be in a certain low range where people can actively trade. And therefore when the time is right, we’ll propose it to the board and I’m sure the board in their wisdom will take the right decision.
Vikal Gupta
Thank you. Thank you very much for answering the question. And my main idea was, you know, a request for the bonus share for making more, you know, availability in the market and you know, liquidity for the, you know, retail shareholders. Thank you very much for that.
Srinivasan Nadadhur
Thank you.
Pratik Bhanushali
Thank you, Vikal. So we have the next question from the line of Girish Bhai. Girish, you can unmute your line and go ahead.
Girish Pai
Yeah. Am I audible?
Pratik Bhanushali
Yes, you’re audible.
Girish Pai
Okay. One of the running themes in this result season has been vendor consolidation that most companies have been talking about. What has been your experience with regard to that?
Kapil Jain
So I think yes, there has been, we have seen vendor consolidation and in larger clients where as I had mentioned that our delivery continues to be strong backed by productized services technology. So if anything, we have benefited from the consolidation in the industry.
Girish Pai
Okay. And. Can you give out an outlook vis a vis verticals and the service lines that you have especially retail and the consumer oriented side of the business. How is that kind of working?
Kapil Jain
Sorry, I said that the growth this quarter except the high end fashion and retail was broad based on financial services. I think we see healthy demand and outlook. So is also true on the communication, media and telecom, high tech and MND. Also we see a growth in Q1 and as well as in emerging markets. So I think except high end fashion and retail where we are still seeing some headwinds which I mentioned in my opening remarks. We see positive momentum across all other.
Girish Pai
Four verticals and any outlook on how ordering flow is going to look like in the coming quarters? Sorry, what will look like order inflow?
Kapil Jain
I mean that the acv I think like I said quarter on quarter I think it’s little difficult in terms of the timelines. I think what I am saying is that we are reasonably confident to close the year higher than what we closed our ACV in FY25.
Girish Pai
And between H1 and H2 which will be a stronger half.
Kapil Jain
I’m hoping that H2 should be stronger than H1 but I think like I said there is a lot of overall macroeconomic uncertainty which we are living under. We will give you a better outlook when we meet in Q2. Earnings call. I’ve already mentioned about Q2.
Girish Pai
Okay, thank you very much.
Pratik Bhanushali
Thank you Girish. So we have the next question from the line of Rehan Sayed from three Netra asset managers ran. You can go ahead and ask your question.
Rehan Saiyyed
Oh yeah. Good afternoon to everyone and thank you for giving me the opportunity as I am Most of the questions were already answered so I have left with one or two. So let’s go. Hello. Hello. Am I audible?
Srinivasan Nadadhur
Yes.
Kapil Jain
Yeah.
Rehan Saiyyed
So one of us. One of my first question is regarding the sir, can you please share an update on new clients means in North America and Europe and the pipeline visibility from these geographies please some put light on this.
Kapil Jain
So Rayan, we don’t give client names. I think like I said the pipeline is robust across US and Europe and across verticals that I just mentioned and pipeline remains healthy.
Rehan Saiyyed
Okay so you have tell that majority of your client coming consideration coming from the US and Europe markets, right? Am I right sir?
Kapil Jain
That’s correct. Yeah.
Rehan Saiyyed
And just my second question is on the capex side so what was the capex plan for this upcoming year going forward? If you just could mention the number.
Srinivasan Nadadhur
Numbers we don’t usually mention but our Capex is led by demand. So demand for facilities and demand for computing equipment. So to the extent that we see growth in the business, the Capex will follow.
Rehan Saiyyed
Okay, okay, okay. So that’s it from answer. Thank you. Thank you for giving me that question.
Srinivasan Nadadhur
Thank you.
Kapil Jain
Thank you Rehan.
Pratik Bhanushali
Thank you Rehan. So we have the next question from the line of Debashish from Swan Investments. Devashish. You can go ahead and ask your question.
Debashish Mazumdar
Hope I’m audible.
Pratik Bhanushali
Yes, yes, yes.
Jalaj Manocha
First of all congrats on a great set of numbers. And this is Jalash, I work with Debashish. So sir, I had a few set of questions. First of all, first question was around AI, the general discussions around it. So what verticals or service lines is it supporting us in terms of the offerings and where is it impacting us negatively? Because there is a lot of noise around BPM businesses being negatively impacted by AI because the operational work is getting replaced. So how are we using it to our favor? Could you some put some light around it?
Kapil Jain
Sure. No, I think you said you.
Srinivasan Nadadhur
Okay.
Kapil Jain
So Jalaj, like I had mentioned that the productized services that we provide which are on our ip for example Compliance manager in the KYC space, we are extensively using Genai for client outreach, entity summarization and some of the other functionality that we provide on the quality audit function that we provide. On the care side we are using Gen for speech to text sentiment analysis and providing insights. Right. And the insights that we provide our clients are using it to drive elimination and automation. And because of our superior delivery we are net gainer in terms of over the overall top line.
Right. In terms of the numbers also I think we are also looking at passing on the benefits of some of the benefits that we are getting in terms of the work that we are doing by bringing in Gen AI, agentic AI into the products that we use to deliver the services. Some of those benefits we are passing on to the clients. In terms of agentic AI, we are leveraging our Robobooks platform that we have where we have integrated our agent TKI framework and we are building on top of the entire ecosystem that we have. So I think we are using it as an opportunity because we understand the domain, we have underlying technology, our IP on which we are delivering services and we have the process knowledge.
So if you bring it all together I think it’s a opportunity for us and we are not considering it like yes the industry is there but those are like traditionally the models which is bum on a seed model. But I Think the services that we are providing is an integrated offering across tech domain and process.
Jalaj Manocha
Understood? Understood. Makes sense. Fine. So that answers it. And my second question was around. If I look at the Europe numbers quarterly, there was some abrupt fall last quarter and it has recouped now. So I’m, I’m talking the run rate it has, it is running in 16 million quarterly run rate in the Europe geography. It had gone to 14 levels and now it is back. So were there some changes we did or was it a one of how should we understand what is the reason behind it?
Srinivasan Nadadhur
Well, there was a reduction in CLX in Europe. So most of our European revenue is based on cx. Are you looking at, are you looking at Euro numbers? Are you looking at USD figures for the Europe geography?
Jalaj Manocha
I’m looking at the USD numbers.
Srinivasan Nadadhur
So then that is the effect of the currency depreciation of the USD against the, against the euro. So if you look at constant currency numbers, I don’t know whether you’ll be able to work that out. But Europe is largely flat for us and that is in part that is largely driven because of this weakness in the CRX business.
Jalaj Manocha
Okay. Okay. So any plans or any focus area specifically on the Europe geography?
Kapil Jain
Yes, in terms of UK and continental Europe we do have plans to invest in sales hunting capability. And as and when we find the right leadership, we will continue to invest in continental Europe and uk.
Jalaj Manocha
Okay, okay. And verticals would still continue to be same. No.
Sandeep Shah
Okay, got it, got it.
Jalaj Manocha
And so my last question was around specifically bfsi. So we were talking about predominantly we have been working in B2B so far flavor of it. So there was some discussions that B2C is also we were trying to get into B2C vertical of the in banking. And specifically it looks like the numbers have been very strong in the growth growth numbers in banking. So what would. Could you put in some flavor as in why or from where has the growth come in and has there been something crack. We have been able to crack on the B2C part also of the business.
Kapil Jain
So the growth I would say predominantly has come from the institutional side, which is B2B. However, we have made some inroads and success on the consumer side as well on B2C in certain areas and we do hope to continue our focus on the consumer side as well.
Jalaj Manocha
So currently it’s not a sizable part.
Kapil Jain
Of the as the overall size of the business. You’re right. But I think it’s good to see that we have had some success on the consumer side of the Banking as well.
Jalaj Manocha
Got it. And just a extension of you also been mentioning one part of banking banks reporting better numbers because of the volatility in the markets. So what, what attribution of our growth would go to or would be due to the volatility in the markets? Because I understand that we do a lot of processing of backend derivatives also as a part of our offering. Has that also been happening helping the growth in our banking vertical or something else?
Kapil Jain
Yes, some of it is attributed to the growth in the volatility that we have seen, but I think I would only ascribe a small percentage to that.
Jalaj Manocha
Understood, Understood. Thanks. I’ll get back to the queue. Thanks a lot.
Pratik Bhanushali
Thank you. Jalaj, before taking the next question, I would like to announce that those who want to ask the questions they can raise their hand. So next question is the follow up question from the line of Sandeep Shah from Equator Securities. Sandeep, you can go ahead and ask your question.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity. Kapil Just your qualitative and expert view regarding Capgemini announcing acquisition of WNs especially during times where people have a concern that BPM can be impacted more through Genai and agent DKI So do you believe what has driven this? And second, do you believe this may create a competitive pressure may not be near term but in the next three.
Kapil Jain
To five years I think Sandeep I would suggest the best people to answer this question is Capgemini who have acquired WNS and only time will tell. I have told you our strategy how we are using gen AI agentic AI and how we are able to bring in technology domain and process layer all together and I wouldn’t want to comment.
Sandeep Shah
On the competition okay and just a second question when you apply the gen AI or agentiga in customer live projects how the budgets shapes up post that for you as a particular vendor with that client does that lead to better outsourcing because of the saving in other areas or how to look at it this as a whole budgets within the client once you execute the gen AI and agent again so when you say.
Kapil Jain
See what I am saying is that the the products that we have which we are leveraging to deliver services to our clients we enabling them gen AI and also now agentic AI Right. So there as I was telling you it’s on prem on our infra and I’m able to deploy gen AI agentic AI and get the benefit and pass some of that benefit to the clients. It is helping a both on the efficiency side as well as effectiveness side because it’s allowing me to deliver a better outcome for the clients because my agent is now able to focus in enhancing the overall experience as opposed to looking at data and bringing data together.
Right. Because a lot of the traditional tasks we are using are productized tools and which are enabled by gen AI. So that’s. Those are the two reasons. So it’s helping us both enhance the experience efficiency and effectiveness.
Sandeep Shah
Okay. Okay. And just last thing on a lighter note sir, when you are cautiously optimistic, you are delivering mid teens or higher growth. So once macro recover I think street may expect more than 20% growth.
Kapil Jain
All the best. Thanks for letting me know the street expectations. Sandeep.
Srinivasan Nadadhur
Expectations, not your expectations.
Sandeep Shah
Thanks sir. All the best.
Kapil Jain
Thank you.
Pratik Bhanushali
Thank you Sandeep. So we have the next follow up questions from the line of Girish from Bob Capital Market. Girish, you can go ahead.
Girish Pai
Hello?
Pratik Bhanushali
Yeah, you’re audible. Yeah, yeah.
Kapil Jain
Okay.
Girish Pai
Just want to dig a little deeper into the GCC situation. So you’ve been saying that you’ve been working with gccs for a very very long period of time. What would be the percentage exposure, you know, as percentage of your total revenue now if you can give that number, would it be mid high single digit type? And has the work changed over the years? I mean what you’re doing now, can you come, can you compare that with what you were doing for the GCC is five years back? And the other thing with GCC’s insourcing threat, how have, how has that played out for you in the last five, 10 years that you’ve been working with GCC?
Kapil Jain
So you asked three questions. One was the percentage of revenue, when you said percentage of revenue coming in from GCC versus clients, the clients like the same client from US or Europe.
Sandeep Shah
No.
Girish Pai
As percentage of your total turnover, how much is coming from gcc?
Kapil Jain
GCC we don’t count in terms of revenue that is coming from gcc. We count revenue on client index, vertical and geography wise. When I said we were already collaborating with GCCs in Ops KPO. If you look at we are working with clients in financial services space which majority of them have a GCC in presence. So we are collaborating, cooperating and working along with GCC and delivering the value to our clients. That gives us an edge to leverage the gcc. And like what I think the question that was asked that a lot of SIs have created a separate unit vertical.
So we have also, we also have a dedicated team to sell into gccs now, which is what I said that we are building on top of what we already existed from a collaboration point of view in gcc. Did I ask a question?
Girish Pai
No, I think two other questions regarding the kind of work you do now versus say five years back on the GCC side.
Kapil Jain
So the book, the work that and threat of enforcing the work that we do today versus five years back. Obviously we have moved up the value chain because the repetitive task which is there has either got eliminated or automated either by client or by us. So the nature of work, the complexity of work has increased the nature of work with GCCs, like I said, I think it goes back to the previous answer that I gave that we are not differentiating that look, this is the work specifically I’m doing for GCC or for the client. It’s like what we are delivering it as a service and we have created a dedicated team.
So the nature of work I would. The only thing I would add is we are also working on the technology side with gccs which let’s say five years back we may not have been working.
Srinivasan Nadadhur
Third question is insourcing.
Girish Pai
Insourcing threat. Have you seen episodes of insourcing happening and how have you handled it?
Kapil Jain
We haven’t seen that in terms of. Except I think when in Q3 of 2324 one of the clients that we were working with did look at in sourcing but other than that we have not seen that impact.
Girish Pai
Okay, my second question has to do with margins and the impact of Gen AI on margins. You said you keep some of it and then you pass on some back to the client. So does that help in the overall context of margins, does that help?
Kapil Jain
I think I won’t. It’s difficult to say whether it’s margin. It’s look, we are looking at the overall top line and bottom line and then we take a business call along with the client. In terms of what are the benefits we would pass on to the client And I think it’s a discussion that we have with the clients and then we make a call. It’s not like you would only look at margin. We’ll also look at what is the value we are bringing to the client and are we helping them get better? Are we helping them enhance their end user experience, their retention of their clients and in a holistic manner then we take a call.
Girish Pai
No, I’m asking from in recent quarters, has Genai helped you add to the margins that you have now?
Kapil Jain
We don’t look at in terms of whether Genai has helped. I think from overall perspective we are what we are looking for is am I staying relevant relevant for the client? Am I helping clients to stay in compliance with the regulators and the jurisdiction in which they are working? From our compliance and KYC practice that we have to say whether Genai has helped me on the margin I think we we cannot quantify but I would think that Gen and our technology ability is helping us both on the top line as well as on the margin.
Girish Pai
Okay, thank you.
Pratik Bhanushali
Thank you Girish. So we have the next question from Ashray Vasa from Nippon. Ashley, you can go ahead and ask your question.
Aashray Vasa
Hello Results. So I was of the opinion or correct me if I’m wrong, macro uncertainties impact KPO BPO or are offering slightly lesser than IT services. But you have kind of mentioned twice about macro uncertainties. So is it just delayed decision making, more roll offs or just just any color on that? How to connect the the strong performance of our our company over the last few quarters versus the macro uncertainties that you are kind of seeing. And just second question on on the gratuity transfer Srini sir, just when was this last done? I I know you called out the auditors mentioned it but just anything any more color on that or it’s just a regular practice that, that that has been done.
Kapil Jain
Yeah. Thanks. So Ashley, I’ll answer the first question and I’ll pass on to Srini for gratuity. I think we are not seeing any increase uncertainty from our overall macroeconomic environment however and which is what is making me say that we are cautiously optimistic. You don’t know. What you don’t know in terms of the actual thing is the only thing we have experienced is a delayed decision making which you’re right. Other than that I think like I said on Q2 which is short term, we are optimistic to show Q on Q growth. Beyond that we will let you know as we meet next in the next earnings call.
Does that answer your question?
Aashray Vasa
Yes. Yes sir. Thanks.
Srinivasan Nadadhur
So on the graduity we had applied to shift our graduate fund from LIC to HDFC way back in 2019 and then Covid happened and somehow that application got lost. We lost track of it. And when the auditors brought it up is when we realized that this hadn’t been completed. And we did that process, we got it approved and we got the fund approved, transferred and then we made a big payment in this quarter till for the last four, five years we’ve been paying as we go. So this is a the significant contribution that we have not made in the past.
Aashray Vasa
Okay, understood. So I mean the Cash conversion will again be back to our normal range going forward. Yeah, thank you so much.
Pratik Bhanushali
Thank you Ashra. So we have the follow up questions from the Dipesh Mehta MK Global Depish, you can go ahead and ask your question.
Dipesh Mehta
Yeah thanks for the follow up opportunity. I think partly you answer but I just try to get more detail about the delay in decision making because you said we expect full year delay CB to be better now earlier is better for revenue conversion in that year. The delay in deal closure obviously has implication on future growth not in immediate period. In that context I just want to understand whether delay in decision making could have some bearing on your growth expectation for the current year or you think things are fairly stable and it is as per plan kind of thing.
Kapil Jain
So Dipesh, like I said we don’t comment quarter on quarter for full year we expect and as you would have seen we have shown growth on ACV on a year on year basis. If you look at Q1 of last year versus Q1 of this year we have shown growth sequentially. Yes we have declined. We continue to expect the same momentum as we had last year across the quarters. So we don’t see major change in the overall mix and that’s all I can comment at this point in time. And in addition to that I’ve also said that we are expecting a higher ACV than what we delivered in FY25.
Dipesh Mehta
So sir, let me ask it slightly differently whether this delay in decision making is area of concern for you which could have some bearing about our plan or you think it is broadly stable in last three, four months nothing unusual.
Kapil Jain
So yes the delay in decisioning is happening as of now I am not not concerned with the delays that are coming. However if there is a further delay in clients decision making, yes that can have an impact. But as of now we don’t see the delay. Whatever has happened will impact the trajectory that we are on.
Dipesh Mehta
Understand. Thank you very much.
Kapil Jain
Thank you.
Pratik Bhanushali
Thank you Dipesh. So we have the next follow up question from from Jalaj from Swine Investment. Jalaj, you can go ahead and ask your question.
Jalaj Manocha
Yeah thanks again sir. With regards to the margins I wanted to understand one thing. So while you had joined in post that there was a discussion around margins and being under slight pressure because of the investments which were we were trying to make. So would it be fair to assume that we have made those investments and from now this should be the as in a higher margin should be a new normal.
Kapil Jain
So Jalaj, like I had said in my previous Earnings call. We are a growth business or 400 million growth business. So we are. We’ll continue to invest in the growth and margin guidance we have given you between will stay between 24 to 28%.
Jalaj Manocha
Okay so I just wanted to understand has the investment phase been over or. It’s a going. It’s a continuous process for us. That’s the. That’s what the agenda I wanted to understand.
Kapil Jain
It’ll continue. Investments will continue. We’ll continue to invest to drive the top line growth in the business.
Jalaj Manocha
Okay. More so from a perspective of propensity or for of those spends being they would have reached to a certain level. That was the directionally I wanted to understand as in have we reached to a threshold of where the incremental spends would not be as much as required.
Kapil Jain
When you say as much as required meaning what? Whatever is required. We will continue to invest to drive the top line growth. As long as we are delivering to the guidance that we have given on the. On the sequential growth on the top line growth that we will be in the top quartile of the competitor set we’ll continue to invest in the business. If. If we are not then investors should be concerned that why are we delivering a higher margin? Why are we not investing for growth?
Jalaj Manocha
I was just trying to understand if the intensity but that answers. Thank you. And so just one more question with regards to M and A. So we are sitting on a decent amount of cash right now and every few years we have been doing a few tuck ins. So what are your thoughts around the M and A? Are we looking actively and any spaces we are specifically looking out for them.
Kapil Jain
So yes we are looking. We have a dedicated senior person who is focusing on M and A. However we are very clear we are not going to do an M and A to just get the top line revenue we need to look at adjacent areas which is what we are looking at and bring in synergistic value either on the service kit capabilities that we have or on the client access. And as and when we find the right opportunity and obviously the valuation has to be right we will consider it and look at it. So we are absolutely looking at inorganic and M and A assets on a continuous basis.
But we will only do it when it makes right sense for us.
Debashish Mazumdar
This is devashish. Thank you so much for taking our question. Just a follow up on the acquisition point. So if I see the history of. Eclurks every three to four years we. Used to do a comparatively larger size. Acquisition as compared to the size that. We used to operate into and largely we used used those acquisitions to enter. Into either new geographies or completely new. Verticals or completely new capabilities. So just trying to understand what would be your strategy? Your strategy would be a tuck in. Acquisition or kind of acquiring a larger. Size company to get into a new business altogether. So that is the agenda of this question.
Kapil Jain
So devashi more than the whether it’s a tuck in or larger size, I’m more focused on the other attributes. Does can I if I acquire a company can I deliver an alpha basis either the capabilities that I’m delivering to the client or the vertical access that I have access to the clients I have access to. Either it enhances my capability side or it enhances the client access that I can take a new capability and take it to the client. That’s the synergistic value is it both top line and bottom line accretive and third is and can continue to give me the growth.
If I am delivering the growth that I am delivering it should deliver an alpha on the growth that I’m delivering. And third is the valuation has to be right. So instead of size, whether it’s a tuck in or a large size acquisition, these are the attributes or framework on which I’m evaluating the assets on the acquisition side.
Debashish Mazumdar
Very well answered.
Kapil Jain
Thank you so much. Thanks.
Pratik Bhanushali
Thank you. So we have the next question from the line of Pratik Dharamshi from Union mf. You can go ahead and ask your question. Pratik.
Pratik Dharamshi
Yeah, thanks for giving the time. And apologies if I’m repeating this question. I was slightly delayed in the call. How how should one see gender to. Impact our business or we benefiting out of it? How should one see the overall scheme of things? Jennair for us, like I have said in the previous earnings call as well as I think this question was asked earlier as well. We see this to as an advantage given the way we deliver services to our client and we are embedding Genai in our domain specific applications IP that we use to deliver services be it KYC compliance manager QA360 that we are bringing in to deliver services to the clients and this will help deliver value to the clients on efficiency effectiveness as well as enhance the overall experience.
And just the second one on hiring trends we have seen incremental net hirings. At RN which is contrary to what. We have seen in with other IT names. So how should one the hiring trends. Evolving considering we have a strong acv it’s a precursor basically that this should. Continue to be robust going forward.
Kapil Jain
So like I said for Q2 I have said that we are reasonably confident to show a sequential growth and beyond that we will we will give more color on Q3 and Q4. And there was also a question on H2 versus H1 which I answered. So I think in if you look at companies that have delivered 3 to 4% growth Q1Q versus I think the hiring is in line with the demand that we see as well as the expansion that we are seeing in the new geos.
Pratik Dharamshi
Yeah thanks.
Pratik Dharamshi
Thanks for my question. Thank you. Thanks for answering.
Kapil Jain
Thanks.
Srinivasan Nadadhur
At top of the hour.
Pratik Bhanushali
So okay, one last question. Yeah last question from the Sandeep Shah from the Aquarius Security. Sandeep, you can go ahead.
Sandeep Shah
Hi, thanks for the opportunity. Third time. Just wanted to understand what can go wrong in your consistent growth journey over the last eight months quarters despite weak macro and this question is outside macro concern. What other things which can go wrong? A in terms of client specific issue and B in terms of any technology related risk.
Kapil Jain
So it’s like a jari window. I don’t know. I don’t know. So what can go wrong is like I think there are things that I can I have control on. So I think we are focusing on in terms of what we have to do to drive the growth, continue to drive value for our clients, continue to stay ahead of the curve from a technology point of view. I think in terms of what can go wrong is like in an infinite set of outcomes. I I would want to comment in terms of what can go wrong but I I can comment in terms of what we are doing and what our focus is and what our strategy is.
Sandeep Shah
Okay. And so last thing when you took a control as a CEO you also highlighted one of the area of investment would be larger deals. If it requires some investment in a larger deals we would try out to do that. Any such deals are shaping up in the pipeline.
Kapil Jain
There are a mix. I won’t comment on specific deals but yes, I continue to maintain what I had said that we will not shy away in investing for our clients with our clients on deals and which I also mentioned earlier that some of the benefits that we are getting due to bringing technology gen AI we are not shying away from passing that on to our clients.
Sandeep Shah
Okay, thanks. All the best.
Kapil Jain
Thanks Sandeep.
Pratik Bhanushali
Thank you Sandeep. As this was the last question I will hand over the floor to the management for closing comments.
Kapil Jain
Thank you everyone for your continued support. And as you know this is our 25th year of existence and we are celebrating it in a big way. And thank you for all your support all these years and look forward to meeting you in the next quarter.
Pratik Bhanushali
Thank you, everyone.
Kapil Jain
Thanks, Pratik. Thanks, Asha. Thank you.