ECLERX - eClerx Services Limited Share Price

During the Q2 FY26 earnings call, management provided a positive outlook, highlighting robust growth and strong performance metrics. For Q2, operating revenue reached $115.5 million, representing a 5.7% sequential increase, with INR operating revenue at INR 10,049 million, up 7.5%. EBITDA was reported at INR 2,983 million with an impressive margin of 28.8%, reflecting a 27% sequential increase. The PAT for the quarter was INR 1,832 million, with a margin of 17.7%, also up 29% sequentially.

For H1 FY26, total USD operating revenue was $225 million, showing a 17% year-over-year growth. In INR, H1 operating revenue was INR 19,394 million, up 20% year-over-year, with PAT at INR 3,249 million, increasing 29% from the previous year.

Key forward-looking points included deal wins of $46 million in Q2, driven by strong growth in analytics and automation, which was up 6% sequentially. Management expects Q3 margins to be slightly lower than in Q2 due to recent INR appreciation, but they maintain an overall margin outlook of 24% to 28% for the fiscal year.

Management noted that growth in emerging business segments was strong, particularly in finance and accounting, with a notable emphasis on client conversations in the BFSI sector. The company anticipates opportunities to grow in core businesses while managing pressures in the fashion and luxury segments, which analysts believe may be stabilizing soon.

Additionally, the board has approved a buyback plan of INR 300 crores, signaling a strategic commitment to return capital to shareholders while enhancing share value. Overall, the management's commentary was cautiously optimistic, reflecting confidence in achieving consistent growth driven by strategic initiatives and market positioning.

Q&A Section

1. Question: "Do you have any special project which was kind of one-timer in Q2 growth?"

Answer: There weren't any special projects that led to the growth in Q2. The growth was attributed to our ongoing efforts, and we maintain a consistent business strategy without relying on one-time gains.

2. Question: "What makes you say that we would not have similar improvement in Q3 margins?"

Answer: I noted that from September 30, the INR appreciated by about 0.5%, which could affect Q3 margins. Our focus remains on optical investments and operational efficiency, with no major headwinds expected aside from currency fluctuation.

3. Question: "Can you clarify the rationale behind the buyback price of INR 4,500?"

Answer: The buyback price announced is a minimum as per SEBI regulations. It can be subject to increase post-shareholder approval. The price reflects our strategy to return capital to shareholders while ensuring market stability.

4. Question: "Can we think mid-teen to be a new growth level for the company?"

Answer: While it's too early to label mid-teen growth as a new norm, we're cautiously optimistic given our strategy around cross-selling. We aim to position ourselves among the top quartile in our industry segment for growth.

5. Question: "Can you share your thoughts regarding growth between top 10 customers vs. emerging customers?"

Answer: The growth from non-top 10 clients has strengthened, and while we continue to focus on these accounts, our strategy allows us to grow with top clients and emerging ones. This balance mitigates risk and leverages opportunities across segments.

6. Question: "What are the notable margin headwinds you foresee?"

Answer: Currently, we don't foresee significant margin headwinds aside from potential FX impacts. Our margin strategies remain intact, and we're focused on maintaining necessary investments for sustainable growth.

7. Question: "Is the recent hiring an indicator of your growth confidence?"

Answer: Yes, the addition of around 1,000 employees in Q2 reflects our confidence in meeting client demand. This positions us well for the upcoming quarters in terms of growth and client servicing capabilities.

8. Question: "What's the growth outlook across your industry segments?"

Answer: We see positive growth prospects across most segments like BFSI, HiTech, and CMT. The only sector we are cautious about is high-end fashion, which faces ongoing macroeconomic challenges.

9. Question: "How much of the growth in emerging segments is from new clients?"

Answer: In emerging segments, growth comes from both new client additions and existing client expansion. The absolute size is small, affecting growth rates, but both factors contribute positively.

10. Question: "What differentiates your EBIT margin compared to peers?"

Answer: Our EBIT margin benefits from our technology integration and domain expertise, which enhance operational efficiency. We aim to keep margins within the established range of 24% to 28% while sustaining growth investments.