Earlier this month, eClerx released its March quarter results results, reporting a year-on-year revenue growth of 10.5% to ₹766 crore, compared to ₹752 crore in Q4FY23. The profit after tax dropped to ₹130 crore in the March quarter, down 1.5% from ₹132 crore in the same quarter last year.

EBITDA also declined by 4.1% sequentially to ₹218 crore in Q4FY24, from ₹228 crore in Q3FY24.EBITDA margins slipped by 169 basis points in the January-March quarter of FY24 to 23.4%.

We caught up with the company CEO Kapil Jain to gain more insights into the company’s quarterly results and plans for the future.

Q4 Overview

We delivered revenue growth in U.S. dollar terms of 1.5% quarter-on-quarter in Q4, reaching an operating revenue of $91.9 mm. Jain attributed this growth to the performance of the customer operations and financial markets business. “As with the previous few quarters, growth this quarter has been led by our Customer Operations and our Financial Markets business. We have seen exceptional growth in our large clients in these businesses,” the CEO added.

When asked about the flattish growth observed sequentially in revenue Jain said, “The flat revenue growth this quarter is largely due to one of our key client relationships ending in Q3 and the 1.5% we delivered includes the revenue replaced for that client.”

He further added that most of the growth this quarter came from the company’s top 10 clients. The Digital business saw a decline as clients continued to be cautious about their discretionary spending.

“This is a strong performance, bearing in mind the slowdown in developed markets and the loss of one of our large clients in Personiv, whose revenue had to be replaced in this quarter,” said Jain talking about the results.

“We have given a guidance of 24-28% for our EBIDTA and will stay in the top quadrant for both revenue and margin,” he said sharing the outlook for the year.

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Margins Under Pressure

Jain said that the decline in margins was because of two reasons, one, investments in our Sales and Delivery teams and two, an increase in general and administrative costs.

“As part of our four-year strategy, we have strengthened our sales leadership team and augmented delivery capabilities in analytics and automation. general and administrative (G&A) costs rose by 7.7% in Q4 due to an increase in license and subscription fees, while travel and marketing costs have also increased,” he added.

“Higher transportation, license fees, and other administrative costs have led to the increase in our G&A expenses, bringing them to ₹75.1 crore for the quarter ended March 31, 2024. We expect G&A expenses to remain relatively flat for the two quarters. We are in the process of adding new facilities to our existing locations, and G&A will increase in the 2^nd half of the year as these facilities go live,” the CEO said.

He remarked that while these factors have impacted margins, these investments are crucial for positioning eClerx for long-term success and ensuring we continue to deliver exceptional value to our clients.

Attrition

When asked about the increase in the company’s attrition rate, Jain told Benzinga India, that while there has been an increase as guided it is still well below the historical levels. 

“We do expect attrition to rise some more in Q1 and Q2, particularly after the annual wage hikes, but to remain within manageable levels. Our retention strategies are strong, and we’re continuously working on growth, development, and engagement initiatives to keep our employees engaged and motivated,” Jain added.

Is Demand Going To Make A Comeback?

One of the major hindrances faced by the IT sector last year was the hawkish macro environment. This challenging economic backdrop, characterised by high interest rates and stringent monetary policies, created an adverse setting for growth and profitability. We asked whether he saw things changing in FY25.

“Looking ahead to FY25 and beyond, we remain cautiously optimistic. We believe the use of GenAI will be a differentiating factor between businesses. At eClerx, we are using GenAI360, our orchestration platform powered by foundational models like GPT4, Stable Diffusion, Llama, etc, to address real-world business problems in the areas of Content Operations, Care Operations, and Insights on Demand.GenAI is embedded in many of our products, such as Compliance Manager for KYC and M360 for digital shelf management. This helps us deliver higher productivity and quality to clients. So while overall demand for IT services is yet to see a pickup, there are pockets of demand in the areas of compliance, CX and technology, which we continue to service.”

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Note: This interview was conducted over email.