eClerx Services Limited (NSE: ECLERX) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Asha Gupta — Vice President of Investor Relations
Kapil Jain — Managing Director and Group Chief Executive Officer
Srinivasan Nadadhur — Chief Financial Officer
Analysts:
Sandeep Shah — Analyst
Shradha Agrawal — Analyst
Unidentified Participant
Rahul Jain — Analyst
Jalaj Manocha — Analyst
Nitish Rege — Analyst
Sameer Dosani — Analyst
Girish Pai — Analyst
Presentation:
Asha Gupta — Vice President of Investor Relations
Hi, everyone. Good evening, participants and welcome to the Q3 FY ’25 Earnings call of Services Limited. 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 Eatglobes represented by Kapil Jain, Managing Director and Group CEO; and Vasant Nadaru, Chief Financial Officer. We will start the call with brief opening remarks by Kapil, followed by, who will be sharing the financial update and then we will open the floor for Q&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 statements 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 the SEBI and subsequent annual reports, which you can find 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, Asha, and good evening, everyone. Let me share highlights of our performance in FY ’25 Q3. Operating revenue in Q3 was $100.7 million, up 1.8% sequentially, driven by growth in our digital and financial markets business. For the nine-month period, dollar revenue was up 11.7%. In INR terms, Q3 operating revenue was 8538 million, up 2.6% quarter-on-quarter and 14% for the nine-month period. As we had indicated, margins in Q3 were lower and in-line with our Q2 commentary. This is because of the removal of one-offs in Q2 and the lower utilization in Q3, which is in-line with our long-term average. EBITDA for Q3 was INR281 million at a margin of 26.1%, while PAT for the quarter was INR1371 million at a margin of 15.7%. Our analytics and automation business is at $20.8 million this quarter, up 9% sequentially driven by pickup in change and transformation work. We saw growth in the non-top 10 clients in this quarter, analytics and market services within digital grew and we also saw growth in creative services, albeit on the lower base of Q2. Growth in financial markets was predominantly in the trade lifecycle segment. ACV of the deal wins for the quarter was $33 million, up sequentially. We continue our efforts to further strengthen the pipeline to focus on our technology business and on large deals and cross-sell efforts. Let me also provide some commentary and outlook for the three businesses. We continue to see opportunities in financial markets in client lifecycle, compliance, onshore delivery and technology services. In the digital business, after a challenging Q2, fashion and luxury showed a minor recovery in Q3 with the industry expecting demand in the low-single digits for CY 2025, high-tech retail and manufacturing and distribution performed in-line with the industry growth. In customer operations, we are seeing momentum around new logo acquisition and are seeing early success in cross-sell of our care business into other verticals. An important strategic initiative of geodiversification is successfully underway. We have set-up a subsidiary in Peru and will launch operations in late Q4. We also expect to start providing care support from our Manila delivery center. As I have mentioned earlier, the cable and telecom industry continues to be under pressure and there is a lot of focus on the subscriber retention by our clients. On technology and analytics, we see continued traction with banking, high-tech and retail clients with wins in change data engineering and productized services. Finally, I’ll conclude with awards and recognition and hand it over to Srini for more detailed commentary. We were recognized as a major contender in the experience-driven integrated BFS operations peak Matrix and Assessment 2024. We are also now certified for ISO 42001, a very recent standard focusing on AI management systems, which was only introduced in December 2023, as of last month, we were one of the five global companies to have received this certification and recognition. In conclusion, crossing the 400 million run-rate is a significant milestone for us. We are immensely grateful to our customers, employees, investors and partners for their trust in us and we look-forward to the support of all our stakeholders as we navigate the future.
Thank you, and over to you, Sri.
Srinivasan Nadadhur — Chief Financial Officer
Thank you, Kapil. Good evening, everyone. Just to provide a little more color on our financial performance. So the operating revenue was of $100.7 million was up 1.8% sequentially and 2.2% in constant-currency terms. On a Y-o-Y basis, the revenue increased by 11.2%. Total revenue for the — for this quarter was $8752 million, up 3.6% sequentially and 13% Y-o-Y. Other income for the quarter was $214 million, largely due to revaluation income on the back of INR depreciation. The EBITDA of 2281% at 26.1% margin is flat both sequentially and in Y-o-Y terms. The PAT of INR1371 million for the quarter is at 15.7% margin. The reasons for sequential reduction in EBITDA percentage are largely because of the one-offs in Q2 and the lower utilization in Q3 as compared to Q2. We also incurred higher legal fees related to setting up the new entity and to tax consulting services. You would have noticed in the business metrics slide that the seating capacity has increased by 1,800 seats as new facilities in Mohali, Pune and Mumbai have gone live. This has also led to an increase in facility housekeeping, security and associated transportation costs. And the three facilities went live in the latter part of Q3, so the full impact of this cost increase will be felt in Q4. The exit headcount increased by about 400 to 1,8642. Attrition is at 19%, well within control. Our top-10 client concentration is about 62%, DSO is 83 days as compared to 77 in the previous quarter.
Thank you, everyone. And with this, we conclude our prepared remarks. We can now move on to the Q&A. Over to you, Asha.
Questions and Answers:
Asha Gupta
Thank you, sir. Thank you. [Operator Instructions] We have first question from the line of Sandeep Shah. He is from Equirus. Sandeep, please go-ahead. I have unmuted your line you are on.
Sandeep Shah
Can you hear me?
Asha Gupta
Yeah.
Sandeep Shah
Yeah. Last conference call, we said that the roll-offs have started in 2Q, which will have a full impact in 3Q. So can you give us some update whether these roll-offs may continue in 4Q at a higher or lower level and that may give us confidence in terms of fourth quarter growth could be better because the ACV deals as well as employee addition has been good.
Srinivasan Nadadhur
Yeah. So your roll-offs in Q2 as we had noted were on the higher side and that has come down in Q3 and everything else being equal, then that should result in better performance in Q3 than — in Q4 than in Q3?
Sandeep Shah
Okay. And Srini, do you expect further margin downside because of the new facility which has been commenced both in terms of G&A as well as in terms of depreciation in the fourth quarter. And when do you believe those costs would normalize, is it fair to assume those costs will be stable to increase the revenue increase from 1Q of next year?
Srinivasan Nadadhur
So to answer your first question first, the G&A cost should be nearly the same or maybe 10 bps 20 bps higher than Q3. And the reason for that is why the housekeeping, transportation, et-cetera, cost will go up, but that will be offset by a reduction in the rent of the temporary facilities which we have given up. But on a — below the EBITDA level, there will be, be I think somewhere around 50 bps impact because of the new facilities. The normalization should happen in-line with revenue. So we are looking at least 1/4 away, if not two.
Sandeep Shah
Okay. And just last question then I will come in a follow-up. Kapil, sir, any — because some of your IT services peers are saying clients are asking for productivity gains because of the automation. So what is our experience? And is it possible to quantify Gen AI-related revenue scale-up as of today and where it can go on a going-forward basis? Will it impact the sales growth or it can increase the volume?
Kapil Jain
So Sandeep, thanks. So Sandeep, like I had mentioned in prior calls also, all our services have an underlying technology component in-built in it. And where required and we are and we are able to drive the productivity and efficiency, we have passed on the benefits to the client. So in terms of Gen AI, we have had number of pilots, but the potential monetization in terms of are we seeing a significant uplift in terms of monetization and getting revenue that we have not seen, but all our services are staying relevant because of the underlying technology that we have and enhancements we have done to bring in Gen AI. And we are also using it in delivering our services to our clients.
Sandeep Shah
Okay, thanks. I will come in the follow-up.
Asha Gupta
Thank you, Sandeep. [Operator Instructions] We have questions from Shradha Agrawal. She is from AMSEC. Please go-ahead.
Shradha Agrawal
Yeah, am I audible?
Kapil Jain
Yeah.
Asha Gupta
Yeah.
Shradha Agrawal
Yeah, hi, sir. Congratulations on a very strong deal TCV win. Two questions. First is, if I look at the growth, the growth has come through largely from the non-top 10 clients. So anything to read for the top clients as to why have they not grown? Was the roll-off impact felt higher in these top-five, top-10 accounts?
Kapil Jain
So I think if you look at the portfolio mix, Shradha, I think quarter-on-quarter, there will be some aberrations. And also given the size of our book, which is relatively small, this is the first-quarter where we have crossed the $100 million mark. So I think we always take a view of medium to long-term. We haven’t seen any aberration in terms of what the norm is in terms of and our focus on driving cross-sell opportunities and also where we had invested earlier in the sales are resonating well in the market and with our clients. So I wouldn’t take anything in terms of any directional view in terms of the — whether the top-10 growth or top — outside of non-top 10?
Shradha Agrawal
But there is no weakness in any particular account in the top-five or top-10 categories that you would want to highlight?
Kapil Jain
No.
Shradha Agrawal
Right. And sir, on the ACV of new deals, which is at a very multi-quarter high number. So any qualitative commentary on what drove this kind of a strong ACV win and what is the pipeline looking like versus what it was a quarter back? And any commentary on the deal win pipeline to order book conversion that would be helpful.
Kapil Jain
So I think we are seeing as in my opening remarks, the change work that we are seeing on the discretionary spend, I think that’s slightly opening up and pipeline continues to be healthy. And across our service lines is where the pipeline is — is around as well as the wins have been across financial markets, digital and customer operations. So I think in terms of the service portfolio mix that we have and the client that we have, we feel that we have a healthy pipeline and we are cautiously optimistic about the future. Yeah.
Shradha Agrawal
Yeah, that’s helpful. I’ll come back-in the follow-up questions if you require. Thank you.
Asha Gupta
Thank you. [Operator Instructions] We have follow-up questions from the line of Sandeep Shah. Sandeep, please go-ahead.
Sandeep Shah
Yeah, sir. Thanks for the opportunity again. Kapin, sir, this would be the almost a fourth quarter of a Q-on-Q increase in our ACV of new business. So looking at your pipeline, looking at your investment in sales, marketing, branding, do you believe this trend may continue year-after year or quarter-after-quarter till the time we hit the peak based on whatever investment we might have done and that help us to enter FY ’26 with a very-high confidence.
Kapil Jain
So Sandeep, I think like I said, we are cautiously optimistic because of three reasons. One, our pipeline is healthy. Our service kit of where like every service that we sell has an underlying technology, productized services is resonating well with the clients, as well as the cross-sell opportunities, which I had laid out as one of the of the strategic pillars when we had made a presentation to all of you in May, we are seeing some green shoots around it. It’s still too early. So that would be my comment. And like I said, I think it’s difficult to predict in terms of what the future outcome would be, but we are cautiously optimistic about the future.
Sandeep Shah
Okay. And sir, any — with investments trying to bring the results are bearing fruits in terms of better pipeline and the conversion of pipeline into deal wins, which is leading to better order book. Do you believe this margin range of 24% 28 which we have given in FY ’25 can have upside entering into FY ’26 because FY ’26 may not see an incremental investment like FY ’25.
Kapil Jain
So Sandeep, I think we will continue to make investments in the business are in terms of — because the view we are taking is, which is what I had told you earlier is medium-to-long term, be it opening up of new centers, which will again enhance our ability to cross-sell, up-sell with existing clients, bring new clients. We’ll continue to invest in sales. The leadership hiring we had said we were done with. So I think at this point in time, I would say that we will continue to stay-in the range that we had given you, 24% to 28% and predicting beyond that given this overall size of the book, which is about $100 million, a small movement can have a big impact on the EBITDA. So I think we’d like to stay-in the range and look at medium to long-term view from both growth and EBITDA perspective.
Sandeep Shah
Okay, fair enough. And, sir, I think DSO has increased materially, which has led to slightly below, though it has been still healthy in terms of cash generation. Do you believe it may normalize in the fourth quarter?
Srinivasan Nadadhur
I think we’ll have to take a look. Some of our invoicing processes are manual, we are trying to strengthen them. We are trying to put more governance on how we can consistently keep these numbers down, but I think we’ll have to see and see if this becomes a — if we are able to bring it down consistently?
Sandeep Shah
Okay. And the last question, sir, with the change in the precedent in the US and election headwind being behind, is it clients are more open in terms of discussion and conversion of pipeline into deal wins or they are slightly cautious on outsourcing now?
Kapil Jain
I think the clients are also waiting. I think if you look at from an H1b perspective, we don’t have any reliance on H1b because we are able to hire local talent. So that is not going to impact us. In terms of client decision-making, we haven’t seen any shift. I think it’s still too early or for us to exhibit any view or for the clients to change any of their behavior in terms of the decision cycle times.
Sandeep Shah
Okay. Thanks.
Asha Gupta
Thank you, Sandeep. We have next question from the line of Jasdip. Jasdip, please go-ahead.
Unidentified Participant
Hi, can you hear me?
Asha Gupta
Yeah.
Unidentified Participant
So thanks for taking my question. Sir, during your previous remarks, you mentioned that you’ve implemented some you know you’ve used Gen AI to deliver some services to your clients. So how has been your experience? What kind of productivity gains were you able to achieve? And with respect to that, what do you think will be the deflationary impact of AI on your sales going-forward?
Kapil Jain
Yeah. So, in terms of its, it’s not the productivity, you see productivity people were talking about in olden days, right? It’s more in terms of effectiveness on a BPAS if let’s say you were charging a client X dollars widget because of technology now how are you charging a fraction of X. Those are the discussions we are having, not like our 20 FTEs and now I can delivery — I can deliver with 18. I think the discussion has moved to a very different level and a lot of work that we do impacts the business and involves a lot of domain. So I think to quantify that what is the benefit of productivity, it’s not like if you ask me what is the incremental value we have been able to add to the clients, which is reflected in our pipeline, which is reflected in our growth momentum. That’s, I think is what we are focusing on as opposed to driving productivity because the business that we are in, clients are looking at, can you reduce my risk? Can you ensure that I am compliant with the regulation. Can you help me increase my sales? Can you help me increase my product launches? Can you help me get better, right? Today, if I have X number of SKUs, can you get me to 10x? So I think if I’m able to deliver that using technology and bring that alpha, that’s what clients are looking at us.
Unidentified Participant
Got it. So basically, Gen AI as of now has broadly, you know, helped you increase your pipeline with your clients. That would be the correct understand, right.
Kapil Jain
I wouldn’t say just Gen AI alone, I’m saying technology, Gen AI domain, a combination of all this together is a unique value proposition, which has helped us, yes, yes, enhance our pipeline and the ACV of the deals.
Unidentified Participant
Got it, sir. Thank you.
Asha Gupta
Thank you. We have next question from the line of Rahul Jain. He is from Dolat Capital. Rahul, please go ahead.
Rahul Jain
Yeah, hi. I hope my line is okay.
Kapil Jain
Yeah.
Asha Gupta
Yeah.
Rahul Jain
Yeah. So just wanted to understand how our onshore delivery mix is working. If I see the number of people that we have on-site versus the total strength of base delivery staff, it is a much smaller number versus the contribution from the onsite. So is it that a significant amount of subcon is happening in the onsite market or any other reason to reconcile it back.
Srinivasan Nadadhur
So one is that the onshore staff that we have are for the most part they have consulting skills so they are also problem solvers, they are providing much higher-value typically than what we would see in an offshore agent. So the billing rates are definitely much different when you adjust for the skill difference. And that explains most of the difference between the headcount and the revenue. But also it is also difficult for us to find good-quality resources onshore. So our subcontracting is also higher also. So there is — both reasons are in play. I would say the first one is the more meaningful reason.
Kapil Jain
And also just to add Rahul to what Srini is saying, we also keep a healthy mix between Subcon and employees and we monitor it very closely and we believe that we are in that range given the projects and the work we are delivering for our clients and we always have the option to bring Subcons as an employee and hence, it’s also the portfolio view that we take.
Rahul Jain
Right. So just to your remark of you know, average profile of those would be much better, but our basic thumb-rule of 3x on a like-to-like basis and slightly more because of a better service mix. Is that the right way to look at that number to understand what should be the ideal billing rate in broad market.
Srinivasan Nadadhur
I’ll have to look at that number in more detail, but maybe I can come back to you offline.
Rahul Jain
Sure. And the reason of getting into this is to understand that how much margin lever this could be because our understanding from other companies is that generally on-site, third-party is significantly premium in terms of manpower costs or is it more a leverage for us because of the volatility in the requirement of the talent mix or till the time we scale it up, we might have to be dependent on such a arrangement.
Srinivasan Nadadhur
Right. So just to answer the question on which I said I’ll come back, the onshore rate for us is actually more like 3.5x, 4x. The obviously the subcontractors are more expensive and therefore we are very judicious about when we use them and how we use them and really depends on a case-to-case basis and how much growth are we supposed to deliver and whether the client has urgent requirements that we are trying to fulfill at very short notice. So we engage subcontractors when we feel that there is really a necessity for us to do that.
Rahul Jain
Right. Of course I understand. And last bit for Kapil. Of course, you alluded your response to Sandeep’s question, but still it would be just a thought that if we could — if you are able to refine that band slightly more when we announce it in the Q4 or any subsequent period, because it gives a very wild point as you could understand that it may operate. So I’m sure you now would have a much better grip on that investment versus revenue potential versus what you might have four quarters back. So that’s just a thought to share.
Kapil Jain
So Rahul, if I heard you correctly, you’re saying for us to revisit the EBITDA guidance, which currently we are giving between 24% to 28, can we narrow that range is what your ask is?
Rahul Jain
Yeah. Yeah, that’s a small thing because I’m sure you have a much better handle than that. And that uncertainty four-quarter back, we could clearly understand because it’s like your first few steps of gauging — gauging the situation. But I’m — I’m sure the way ACV has responded, the way we are investing, I think you have a far better understanding of it in terms of what would be the two end of it. So that’s what the thought. Thank you.
Kapil Jain
So Rahul, we’ll consider your request.
Rahul Jain
That’s it from me. Thank you.
Asha Gupta
Thank you, Rahul. We have next question from the line of Jalaj Manocha. He is from Svan Investments. Jalaj, please go ahead.
Jalaj Manocha
Yeah. Am I audible?
Asha Gupta
A little distant.
Kapil Jain
Yeah.
Jalaj Manocha
Just a second is it any better?
Asha Gupta
Yes, better.
Kapil Jain
Yeah go-ahead go ahead, Jalaj.
Jalaj Manocha
Is it any better?
Asha Gupta
We can hear you just go-ahead.
Jalaj Manocha
Yeah, I hope this better now.
Asha Gupta
Yes.
Jalaj Manocha
Yeah. So thanks for the opportunity. Couple and sir, I had one question particularly with regards to the deal wins. Has there been a change in the tenure or per se of the of the deal wins or the nature of the deals we are winning as such indeed, so let’s compare them a few quarters back.
Kapil Jain
Sorry, what are you saying? Has there been a change in the tenure?
Jalaj Manocha
Yeah, tenure of the nature of the deals?
Kapil Jain
I think some like small, but I think it’s — I wouldn’t say that there has been a directional shift in the tenure of the deal. There has been marginal increase in per deal per ticket size, but not something which is substantial to talk about.
Jalaj Manocha
Okay. And nothing per se in the pipeline also as in the short-term deals are getting — are more of discussions are around the short-term deals, nothing of that sort.
Kapil Jain
No, it’s like it’s not changed in either direction. So broadly, I would say it’s neutral to positive, not only that there are more short-term deals.
Jalaj Manocha
Okay. Okay. And just one more point. If I were to check, looks like the BPAS as a practice, there has been a sort of a degrowth or the pace isn’t as great as the company’s average growth rate. So how should I understand this? Is it by choice or the offering, we are not — the acceptances is reducing in the market or there is some client-specific issue there?
Kapil Jain
No, I don’t think there is any client-specific issue or there is any lesser acceptance, I think we are revisiting in terms of how we would like to report for FY ’26 onwards because like I said, see, if you look at how the Street reports on digital revenue or BPaaS, every of our service we are using underlying technology. Every service kit that I have, I have an underlying technology, either deployed at the client side or our employees are using it to deliver that alpha to the clients. So in that sense, I can say 100% of our business has is digital and has is like again to BPAS, but we were very conservative in the way we were reporting BPAS. So we will revisit the definition. It doesn’t concern me in terms of if that number is going up or down, what we are looking for is, am I using technology to deliver value to the clients along with the domain that I have. And as long as that is there and that allows us to win the deal, that’s really what our focus is on.
Jalaj Manocha
Understood. And could you talk a little more about the discussions we are having in the digital vertical, specifically because I guess there was some client-specific issue or the slowdown per se in the some specific pockets there?
Kapil Jain
Yeah. So I think on the overall digital, like as I said, we are having discussions with clients in terms of how do we make them more efficient, effective, how we can help them grow their top-line, how we can help them stay more relevant by having a higher and a better product mix that they are selling to their end-customers, how we can help them on their campaign operations, how we can help them get better ROI on their marketing spend, how we can help them on their customer journeys, reduce the friction points. So what we are beginning to see is, which I alluded earlier also on the cross-sell, some of these services are resonating well outside of the digital industries that we were traditionally selling them to. And it’s still very early days, but I think we are cautiously optimistic in taking some of our digital service kit into other industry verticals.
Jalaj Manocha
Understood. Thanks a lot. Thank you.
Asha Gupta
Thank you, Jalaj. We have next question from the line of Maheshwari. Please go ahead.
Unidentified Participant
Hi, am I audible?
Srinivasan Nadadhur
Yes.
Asha Gupta
Yes.
Kapil Jain
Yes, Gokul.
Unidentified Participant
Okay. I just wanted to understand that of the three verticals which you were present in the objective of hiring sales leadership was to get better to sell these products to your clients, cross-sell, etc. Have you been making any pricing changes to accelerate this growth rate or what you were charging? You’re charging the same?
Kapil Jain
So I think it’s difficult. So, we always have said that we have to look at total cost of ownership. It’s not like price per FTE or I am — because I am the cheapest cost provider and hence, I should get the business. No client gives business because of cost. It’s a value game. So and particularly in the services that we are offering to our clients. The sales team, I think you asked two questions. One was on the pricing. So I think, yes, we are pricing efficiently and in terms of what will help us win the deal, not — we are not seeing any downward pressure on the pricing because tech, we are pricing tech, people, domain the block and then pricing it efficiently and effectively. To answer your first question on the sales team in terms of how we are hiring and who we are hiring, see, we have a lot of capability that exists within the organization from a domain perspective, practice perspective. We are hiring people who are a little more generalist and who can take our services across the client segment along with the people and capability that already exist within the organization.
Unidentified Participant
Okay. So in that context, if you are assuming you’re successful in terms of the investments which you’re doing that brings in more business and there is better cross-sell, which is pretty evident given the growth in the pipeline in the last few quarters. Logically speaking, over-time your sales — sorry, your profit should grow faster than your sales once you get the benefits of the operating leverage for the investments made. I’m not putting on a number, but more just as a broader direction from the next two to three year perspective?
Kapil Jain
Absolutely. I think if you look at two to three year point-of-view, Gokul, we do expect the bottom-line to have a better gradient than the top-line. It right is what we are also working towards.
Unidentified Participant
Great, sir. Thank you, and all the best.
Asha Gupta
Thank you, Gokul. [Operator Instructions] We have next question from the line of Nitish Rege from ChrysCapital. Nitish, please go ahead.
Nitish Rege
Hi, hope I’m audible.
Kapil Jain
Yes.
Asha Gupta
Yes, sir.
Nitish Rege
So my question is on the EBITDA margin. Now that majority of our investment phase is done, should we start seeing an increase in operating EBITDA? I’m talking about EBITDA excluding interest income. EBITDA margins over there from Q4 and in FY ’26.
Kapil Jain
So Nitish, I think it’s not — I wouldn’t agree that all our — see, we are not a mature business that all investments are done and now growth. If you have to see, are you putting us as a mature business or a growth business. Now if — so I wouldn’t say that all investments are done. We spoke about the new centers that we have opened up. We are exploring, opening up another center as well. So there will — we will continue to invest for growth, for us to stay relevant for our clients and that will continue to happen. And however, like as I had said, we will continue — we will ensure that we operate in the margin band that we have given you. I have also noted the request that you guys have asked us and we will continue to be sequentially positive on EBITDA. And the relation on the bottom-line will be higher than the top line.
Nitish Rege
And you know what kind of growth are we envisaging double — doubling the revenues in around four to five years from here?
Kapil Jain
I think, Nitesh, let’s see, I think it’s a little difficult to predict four to five years in terms of what the outlook would be. But I think, yes, we are working towards accelerated growth of firing from all cylinders and also cross-sell the franchise we have of our clients and delivery is very strong, strong reflexibility to predict four to five years depends upon a lot of macroeconomic factors which are beyond our control.
Nitish Rege
Got it. And just a suggestion, could we start giving our operating EBITDA margin guidance, that would be quite helpful because you know to compare with other peers.
Kapil Jain
So I think Nitesh, the guidance we have given our band and like as I was telling earlier, because of the small book and high volatility that we encounter, we have traditionally not given guidance both on the top-line and the bottom-line and we will continue to stay…
Srinivasan Nadadhur
We give guidance and operating EBITDA don’t give on EBITDA, including other income.
Kapil Jain
Sorry.
Srinivasan Nadadhur
So I think, Nitish, what you want is the guidance on operating EBITDA and not EBITDA, including other income as…
Nitish Rege
Yes. Yeah.
Kapil Jain
Yes.
Srinivasan Nadadhur
Let me think about it.
Kapil Jain
Yeah, no, but I’m saying even for operating EBITDA, Nitesh, because of the volatility that we have in our business, at this stage, we are not looking to give quarter-on-quarter guidance. We have given you a broad range and we will revisit the request that you guys have made that when we come for our full-year results, whether we can look at giving you a smaller band than what we have given.
Nitish Rege
Yeah. No, the request was that we can give an operating EBITDA band as a full-year margin removing the other income.
Kapil Jain
Okay. For the full-year, you’re saying instead of the full-year EBITDA, do we — can we give it — yeah, that’s something we will revisit and come back to you in our next earnings call.
Nitish Rege
Okay. Thank you all the best.
Asha Gupta
Thank you, Nitesh. We’ll have next question from the line of Sameer Dosani from ICICI Pru. Sameer, please go-ahead.
Sameer Dosani
Am I audible?
Kapil Jain
Yeah, Sameer.
Sameer Dosani
Yes. So any color on what’s happening on partnerships and alliances that is also one of the focus areas if I remember correctly from your strategy presentation. So any updates on that question.
Kapil Jain
I think we are continuing to work on it, Sameer, but nothing substantial that we would like to report and as and when we have some developments, we will inform you.
Sameer Dosani
Okay. And also like in last nine months, we have invested in SNM as a percentage of revenue, if I’m not wrong, it has not moved up that much versus the last year. It’s still at like same percentage do we — do we think it will interrupt from here? S&M sales and distribution not sales and distribution expenses?
Kapil Jain
Sorry, Sameer, I didn’t understand the question.
Sameer Dosani
I’m saying sales and distribution expenses are at same 12.5% — 12% to 13% range, which is same as last year. So what is that we have made investment in that — in that number should have gone up or are we think it will go up from here on?
Kapil Jain
So if it had gone up and we would have gone below 24, then you would have said what have you guys done? No, jokes apart. I think we do expect the S&M to be in the range in which you are seeing it currently. So we don’t expect it to go up.
Sameer Dosani
Okay. Okay. No, if it’s required for the business, I mean it’s — it’s your activity.
Asha Gupta
Thank you, Sameer. We have next question from the line of Girish Pai. Girish, please go-ahead.
Kapil Jain
Girish, we can’t hear you.
Girish Pai
Can you hear me?
Asha Gupta
No, not yet.
Girish Pai
Can you hear me now?
Kapil Jain
Yeah.
Asha Gupta
Yes.
Girish Pai
Okay. Thanks for the opportunity. The commentary on Gen AI seems to be a little circumspect. The commentary on Gen AI seems to be a little circumspect. So are you — do you think you’re investing enough in Gen AI capabilities, capability building? Because a lot of your peers seem to be waxing quite a bit on that. So I was just wondering whether you’re investing enough.
Kapil Jain
Girish, yes, we are investing in genetic AI. So we are investing, we are taking use cases. What I said was there is investments in Gen AI, there is investments in enhancing our in bringing in Gen AI. We are also investing and have built our AI platform. What I said was that we are not seeing deals in that area or monetization of the investments and efforts that’s going-in. In terms of direct, that look you have won X million dollars in Gen AI business. Are we seeing the value lever in the pipeline or winning additional businesses because of the underlying technology? The answer is yes. So I hope I have answered your question.
Girish Pai
Okay. Regarding budgets for 2025, since we are close to-end of January, what are you hearing from your clients for 2025?
Kapil Jain
I think the budgets, we have heard we are hearing neutral to positive momentum. I think if you see in financial markets, a lot of our clients have delivered excellent results on the street. I think what they are worried about is the policies and that’s what they are cautious about and which is why I think there is a think-tank in every company that is working in most of our large clients to understand, analyze the impact of the current administration and the policies it will have on their businesses. So that’s really on one-side the tailwinds is that results were extremely were very good and the headwind is the policies and what some of the surprises can come from there. So that’s really what we are seeing. And I think it’s a little too early because it’s not even 10 — just about 10 days from the time the new administration has come in.
Girish Pai
My last question is on your financial markets clients. A lot of them have operations in India through the GCC format. Are you working with any of these GCC setups?
Kapil Jain
Yes, we will then collaborate with all our clients, GCC. So that’s an opportunity and we are in a unique position to work and the value they see in our coexistence is huge.
Girish Pai
And what would that DCC percentage be of your financial markets turnover like?
Kapil Jain
When you say what would — sorry, just like…
Girish Pai
The collaborative work you’re doing with the GCCs, how much would that be of your total — your financial markets revenue?
Kapil Jain
It’s not collaborative work. The work is like in terms of they see us as a value player in terms of the services they are entering and the services we are providing. It’s not that like there is a wind diagram in terms of where there is intersection. That intersection will be very small. That’s what you were asking. But I think the clients — the clients, the GCC and us co-exist and in the ecosystem and there is a value for the three players to exist.
Girish Pai
Yeah. So you’re not directly doing any business with GCCs.
Kapil Jain
We are doing some, but we can — yeah, very little, but I think we consider like — it’s not like that GCC is a separate entity. It’s like clients see GCC as an extension of themselves, they see our ODCs as an extension and the three coexist in a equilibrium manner.
Srinivasan Nadadhur
I think if your question, Girish, is whether we are directly contracting with the GCC, that’s not the case. I mean, our preference in any circumstance would be to directly contract with the plant entity, which is the US or UK-based.
Girish Pai
Okay. Thank you.
Asha Gupta
Thank you, Girish. We have next follow-up question from the line of Sandeep Shah. Sandeep, please go-ahead.
Sandeep Shah
Yeah, thanks. Thanks. Sir, just on the AI, you said you have developed one platform. So is it still in a pilot phase or in terms of production phase? And if it goes into production phase, what is our savings we are able to generate for the client?
Kapil Jain
I think it’s not at a stage where we can comment in terms of the savings we’ll be able to generate for our clients. As you know, we had our RoboWorks platform, which was an RPA platform. We have enhanced its functionality and build the AI platform on that and we have called it Robox. And I think the use cases that we will be working on are on internal like in terms of shared services functions to see how we can enhance value, as well as on the digital side, we would be leveraging it. We are having — like it’s not at a stage where we are like saying that this is the level of productivity we can deliver to our client because I think, see, the difference, Sandeep in the way we sell our services versus the other players is that we are not selling Agentic AI as a offering that, look, I’m giving you Agentic AI, I’m giving you BPO, I’m giving you technology, I’m giving you SI, I’m giving you change. Our ability to bring it all together and sell it as a service is the unique value proposition that we deliver and that’s what resonates well with our clients. So I think it’s difficult to answer your question in terms of exactly how much productivity benefit we can give.
Sandeep Shah
Okay, thanks. Sir, generally we speak that roll-offs are 15% 20% of the top-line, whether that range remains same or further increase decrease. And why I’m asking is…
Kapil Jain
Yeah.
Sandeep Shah
Why I’m asking is now the ACV of new business roughly on a yearly basis 30% of the top-line. So 30 minus 15% or 20, we can still achieve a double-digit kind of a growth CAGR in the coming years. Is it a fair way directionally in terms of thought process?
Kapil Jain
So Sandeep, you asked two questions. One is we are not seeing any substantial change in the roll-off of in around what your number you said 15% to 20%. And in terms of to answer your second question, yes, if the pipeline continues to be in the range in which it is and like I had mentioned earlier, we are cautiously optimistic about it. Then yes, the way you are looking at it is the right way to look at it.
Sandeep Shah
Okay. And sir, last question, if I could. You mentioned pressure in the cable and wireless business. So can you explain what kind of a pressure is it more competitive pressure or it’s a client-specific pressure?
Kapil Jain
No, it’s across the industry. You see telecom industry is going — has been going through a tough times, right, because the Moose law, the technology cost is declining exponentially and all of us as subscribers want to pay — want higher bandwidth and pay lower-cost. And that’s the challenge that all tech companies are facing and they’re trying to reinvent themselves by looking at a more as a tech solutions provider as opposed to just being a cable provider or a tech company or a telecom company. I think in terms of the subscriber shift that is happening because of the price competitiveness is what — that’s not a particular client of ours that they are facing, it’s an industry-wide phenomenon. So they are doing efforts on client retention and ensuring that the client churn does not happen.
Sandeep Shah
Okay, thanks and all the best. Thank you.
Asha Gupta
Thank you, Sandeep. We have next question from the line of Jalaj from Svan Investments. Please go-ahead. I think we have lost his line. We’ll take next question from the line of Girish Pai. Girish, please go-ahead.
Girish Pai
Yeah. Thanks for the opportunity again. Kapil, I just want to pick your brains on AI, not so much an e-clux question, but an industry question. Does AI mean that reliance on software packages kind of go down, say, Salesforce or any service now, any of those kind of packages?
Kapil Jain
And when you say reliance, what do you mean — sorry, I’m not.
Girish Pai
Usage of usage of these packages, do you think that is going to go down or rather it’s going to be more customer application development which is going to come to the fore?
Kapil Jain
No, I think to answer your question, Girish, I think wherever Applicate will — like if clients have already deployed Salesforce or Copilot, they would want to leverage that and use it as opposed to building — to build custom-built applications because it’s easier to build-on the top of what already exists, the foundation layer, the pipelines is already all built-in. But where Salesforce or Copilot, Microsoft is not there, then obviously, you would build custom applications. But I don’t think that because of AI, the usage of these software will come down, but I am not an authority in this area, but that’s my personal view.
Girish Pai
Thank you.
Asha Gupta
Thank you, Girish. We have question from Jalaj, please go-ahead.
Jalaj Manocha
Yeah. I hope I’m audible.
Asha Gupta
Yes.
Jalaj Manocha
Yeah. So couple, just one point on two, if I were to look at the utilizations of the staff — delivery staff in particular, since the past three, four quarters, they have been on a decline and still we have been adding people. So has there been a shift structurally the way delivery is being given done right now as in we are keeping bench on a higher-level right now or how should I understand this.
Kapil Jain
So I think Jalaj, our utilization in Q2 was higher, but what we have reported in Q3 is in-line with our medium to long-term average. Are we investing and bringing people ahead of the demand when we see so as not to cannibalize any top-line growth? The answer is yes. But it’s not that utilization is lower because there was a lot of investments that were made-for the demand because I think it is in-line with our medium to long-term average.
Jalaj Manocha
Got it. Got it. And one last question maybe. So margins, I know there’s been a lot of discussion and you have given us directional 24% to 28%, but the investments — until when do you see that they’ll continue in the system. So sales and marketing eventually will start to show-up in revenue. So as a percentage that should start to fall, but other investments in the delivery or the other guys tech side, until when do you feel that they’ll keep the margins as a dragdown and what would — what sort of timelines are you seeing? I’m not asking for next quarter or something. Maybe you can talk about next year or somewhere in ’27, when do you see the impact coming in?
Kapil Jain
So Girish, like I said, we are a growth business. Until such time we see growth, we’ll continue to invest in the business. Sorry, Jalaj and we will stop investing when we see growth momentum coming down and I hope that doesn’t happen. So we will continue to invest in the business till such time, we are seeing growth by expanding into new geographies, bringing new capabilities, new offerings. Like I said, again, to stay relevant for our clients and also to all the stakeholders that we deliver to.
Jalaj Manocha
Got it. Thank you.
Asha Gupta
Thank you. As there are no further questions, I would now like to hand over the call to Srini for closing remarks.
Srinivasan Nadadhur
Thank you,. Thank you everyone for joining the call today, and we’ll see you again next quarter. Thank you.
Kapil Jain
Thank you. Thank you, everyone.
Asha Gupta
[Operator Closing Remarks]