eClerx Services Limited — Q2 FY26 earnings call

Call held 27 Oct 2025

Management summary

eClerx Services delivered a strong Q2 FY26, marked by robust sequential growth in revenue, EBITDA, and PAT, alongside significant margin expansion. The company secured $46 million in deal wins and saw improvements in operational metrics like DSO and utilization. However, management anticipates Q3 margins may soften due to currency appreciation, and the Fashion & Luxury segment remains a watch item.

Highlights

  • Q2 operating revenue grew 5.7% sequentially in USD to $115.5 million, and 7.5% sequentially in INR to INR 10,049 million.

  • EBITDA margin expanded by 400 bps sequentially to 28.8%, with 270 bps from FX, 60 bps from delivery, and 10 bps from G&A.

  • PAT for Q2 increased 29% sequentially to INR 1,832 million, achieving a margin of 17.7%.

  • H1 FY26 USD operating revenue grew 17% Y-o-Y to $225 million, and H1 PAT grew 29% Y-o-Y to INR 3,249 million.

  • Net operating cash flow showed sharp improvement to INR 3,137 million, with EBITDA conversion at 105%.

  • DSO improved to 76 days, and utilization increased by about 2%.

Concerns

  • Q3 margins are expected to be 'not as strong as Q2' due to the recent appreciation of the Indian Rupee.

  • The Fashion & Luxury vertical continues to remain under pressure, with Q3 revenues of top fashion houses declining or staying flat.

  • Attrition increased to 20% compared to Q1, which is typical after annual pay hikes and bonuses.

Key financials

2 periods

Headline

  • Operating Revenue (USD)
    115.5 Mn
    QoQ +5.7%
  • Operating Revenue (INR)
    10,049 Mn
    QoQ +7.5%
  • EBITDA
    2,983 Mn
    QoQ +27%
  • EBITDA Margin
    28.8%
  • PAT
    1,832 Mn
    QoQ +29%
  • PAT Margin
    17.7%
  • Net Operating Cash Flow
    3,137 Mn
  • DSO
    76 days
  • Attrition
    20%

H1

  • USD Operating Revenue
    225 Mn
    YoY +17%
  • INR Operating Revenue
    19,394 Mn
    YoY +20%
  • PAT
    3,249 Mn
    YoY +29%

What they filed

Q1 FY27: revenue up 23.2%, net profit up 15.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue832 854 898 935 1,005 +21%1,070 +25%1,107 +23%1,152 +23%
EBITDA216 207 219 224 271 +25%276 +33%283 +29%265 +18%
Net profit140 137 153 142 183 +31%192 +40%190 +24%164 +15%
How to read this

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

Capital allocation

high confidence
  • Buyback ₹300 Cr Max ₹4,500/share
    The Board has approved a buyback of INR 300 crores, and this will be put up for shareholders' approval in the coming weeks. Please note that the promoters and the promoter group will not participate in this buyback. Thank you, everyone.

Guidance & targets

Margin

  • Overall Margin Range Margin · for the year · High confidence 24% to 28%
    We do expect margin to remain in the 24% to 28% range for the year.

    — Srinivasan Nadadhur

  • Q3 Margin Strength Margin · Q3 · High confidence not as strong as Q2
    We expect that Q3 margins will not be as strong as Q2, given that the INR has appreciated recently.

    — Kapil Jain

Growth

  • ACV Number Growth · this year · High confidence higher than last year
    We are confident of delivering a higher ACV number this year compared to what we delivered last year.

    — Kapil Jain

  • Segment Growth Position Growth · Medium confidence top quartile
    we want to be in the top quartile of the segment that we operate in, in terms of growth.

    — Kapil Jain

Operational

  • Roll-off Rate Operational · High confidence 15% to 20%
    Roll-off, we haven't seen a change in the trajectory. I think we have stated that 15% to 20% is what we have seen. So that continues in the same range.

    — Kapil Jain

What to watch in Q3 FY26

Q3 Margin Performance

next quarter
Current 28.8% in Q2 FY26
Target Not as strong as Q2

Why it matters

To verify the impact of INR appreciation on profitability as guided by management.

We expect that Q3 margins will not be as strong as Q2, given that the INR has appreciated recently.

Risks & concerns

  • Q3 margin compression due to INR appreciation

    medium

    Q3 margins are expected to be lower than Q2 due to the recent appreciation of the Indian Rupee, which was a primary contributor to Q2 margin expansion.

    Management acknowledged

  • Pressure in Fashion & Luxury vertical

    medium

    The Fashion & Luxury segment continues to face headwinds, with Q3 revenues of top fashion houses declining or staying flat, though analysts believe the industry is near the bottom.

    Management acknowledged

  • Macroeconomic challenges

    medium

    There are macroeconomic issues (trade, tariffs) outside of the company's control, though the pipeline remains robust and strong.

    Management acknowledged

  • Increased attrition post annual pay hikes

    low

    Attrition increased to 20% compared to Q1, which is a typical seasonal effect following annual pay hikes and bonuses.

    Management acknowledged

Q&A highlights

8 direct
Q2 growth drivers and Q3 margin outlook due to currency Direct
No. I mean, there wasn't any one-time projects that led to the growth in Q2. ... I think from September 30, the INR is appreciated by about 0.5% and that's the only reason that makes us feel that margin performance may not be as strong in Q3 as in Q2.

Clarifies that Q2 growth was organic and explains the primary reason for expected Q3 margin softness.

Asked by Abhishek Bhandari

Rationale behind the buyback price of INR 4,500 Direct
On the buyback, the SEBI regulations are that the buyback price that we announced is a minimum price. So we are not allowed to go below that, but still the price can be increased after the shareholders' approval is received and the final price is then determined after receiving the shareholder approval. So, bear in mind that this price is announced to the floor and it's not a ceiling.

Explains that the announced buyback price is a floor, not a ceiling, and can be revised upwards after shareholder approval.

Asked by Abhishek Bhandari

Growth strategy focusing on non-top 10 clients and hiring as a growth indicator Direct
in terms of the top 10 and non-top 10 and emerging, as you see, the concentration has only improved by 0.5% point despite showing a good growth in non-top 10 and emerging, which we will continue to do and focus upon... In terms of hiring and the growth, like I said, I think Q2 has been an exceptional quarter, both on the growth and margin front. We are absolutely confident showing Q-on-Q growth.

Confirms strategic focus on diversifying client base beyond top 10 and indicates confidence in future growth based on hiring.

Asked by Manik Taneja

Pipeline strength and potential risks to growth journey Direct
Our pipeline continues to be healthy, and we are seeing a robust pipeline, both on Q-on-Q and Y-on-Y. ... I think that's a good question, Sandeep, in terms of what can go wrong. There are a lot of things which can go wrong, right, in terms of I think we are trying to de-risk the business.

Management expresses confidence in the pipeline and outlines efforts to de-risk the business, addressing macro and micro factors.

Asked by Sandeep Shah

Impact of GenAI on services and client demand for productivity gains Direct
I think it's very difficult to say that, look, what are you seeing because technology is ingrained. ... I think that we will continue to do and like I had said in the earlier calls that we see this as an opportunity because of our delivery has always embedded technology in how we deliver to our clients.

Highlights management's view of GenAI as an opportunity integrated into their delivery model, rather than a separate tailwind/headwind, and notes no explicit client shift in demand yet.

Asked by Sandeep Shah

High EBIT margin differentiator and utilization rate for an operations service provider Direct
I think our differentiator is in terms of, like I mentioned, tech, our ability to bring in tech in everything we do and as well as domain. ... In operations, we need to carry a bench. So, if you look at historically, 12 to 15 quarter performance, we would be in that 73% to 78% range. So that's where we will continue to operate in.

Explains the company's margin advantage through technology and domain expertise, and clarifies utilization targets for operations differ from IT services.

Asked by Sumukh U

Bonus for small shareholders and potential revision of buyback price Direct
So, second question first, I think the Buyback Committee will take a decision based on what available information at that point of time. And noted your question on bonus. I guess we'll put it up to the Board and they will decide. I guess the buyback has to pass, after that.

Acknowledges the request for bonus and reiterates the buyback price is subject to committee decision and shareholder approval.

Asked by Vikal Gupta

Rationale for buyback as part of capital allocation policy Direct
The second is you are right, it is part of the capital allocation policy that at any point of time, over, let's say, 12 to 18 months period, we would like to return 50% of cash back to shareholders if it is not required for use by the company. ... I would argue that buyback is somewhat more advantageous than dividend, although it takes longer to execute.

Clarifies the buyback is a strategic capital allocation decision to return capital to shareholders, with perceived advantages over dividends for individual investors.

Asked by Abhay Joshi

2 min read 7 chapters

Detailed narrative

Q2 FY26 Financial Performance Highlights

eClerx Services reported a strong Q2 FY26, with operating revenue reaching $115.5 million, marking a sequential growth of 5.7%. In INR terms, operating revenue was INR 10,049 million, up 7.5% sequentially. Profitability also saw significant improvement, with EBITDA at INR 2,983 million (28.8% margin) and PAT at INR 1,832 million (17.7% margin), representing sequential increases of 27% and 29% respectively.

H1 FY26 Performance Overview

For the first half of FY26, the company's USD operating revenue stood at $225 million, reflecting a robust 17% year-on-year growth. In INR terms, H1 operating revenue was INR 19,394 million, growing 20% year-on-year. PAT for H1 FY26 also demonstrated strong performance, increasing by 29% year-on-year to INR 3,249 million, underscoring consistent financial delivery.

Deal Wins and Client Diversification

The company secured $46 million in deal wins during Q2 FY26. Analytics and automation services grew 6% over the previous quarter. Client concentration improved, with the top 10 concentration reducing by 0.5%, and 90 clients now contributing $0.5 million or more in revenue, indicating successful client diversification efforts.

Margin Drivers and Q3 Outlook

EBITDA margin expanded by 400 basis points sequentially, driven by 270 bps from favorable foreign exchange movements, 60 bps from delivery efficiencies (utilization and onshore/offshore mix), and 10 bps from G&A. However, Q3 margins are anticipated to be 'not as strong as Q2' due to the recent appreciation of the Indian Rupee. Despite this, the overall margin outlook for the year remains within the 24% to 28% range.

Industry Vertical Performance and Strategy

Growth was exceptionally strong in emerging businesses due to operations going live for F&A clients, and also robust in CMT and HiTech. BFSI grew modestly, while the Fashion & Luxury segment remains under pressure, with top fashion houses experiencing flat or declining Q3 revenues. The company continues to focus on cross-selling, upselling, and leveraging technology and domain expertise across all verticals, with a particular emphasis on emerging clients.

Capital Allocation: Buyback Announcement

The Board approved a buyback of INR 300 crores, which will be subject to shareholder approval. The announced price of INR 4,500 per share is a minimum, and the final price can be increased after shareholder approval. This buyback is part of the company's capital allocation policy to return 50% of cash to shareholders over a 12-18 month period if not required for business use.

Operational Metrics and Employee Management

Net operating cash flow significantly improved to INR 3,137 million, with an EBITDA conversion metric of 105%, largely due to improved DSO of 76 days and the absence of prior quarter's gratuity fund contributions and annual bonus payments. Utilization increased by approximately 2% as Q1 hires became billable. Attrition, however, rose to 20% compared to Q1, which is attributed to the usual post-annual pay hike and bonus period.

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