eClerx Services Limited

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.

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.

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.

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.

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.

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.

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.