IT consulting and outsourcing services provider eClerx Services is hopeful of a positive growth trend in the remaining quarters of the current financial year, despite the margins declining in Q1.
Commenting on the results, Chief Financial Officer of eClerx Services, Srinivasan Nadadhur said, “Overall, we are pleased with how Q1 turned out. Revenue came in on the positive side, though margins were down, which is atypical for this quarter. We invested heavily in hiring business development leaders in key client geographies, a major factor contributing to the margin decline. Despite this, we remain optimistic about our growth potential, especially given the deals we have signed and those in our pipeline.”
The company’s net profit dropped 13.7% year-on-year in the June quarter to Rs 112 crore, while revenue increased 2% to Rs 782 crore, despite a decline in margins. Its EBIT fell by 16.8% to Rs 135 crore, with the EBIT margin decreasing to 17.2% from 21.1% a year ago.
Despite the company’s margins taking a hit in Q1, Nadadhur is hopeful of a positive outlook in the remaining quarters of the current financial year. “We do not anticipate further impact from wage hikes, and we expect margins to improve from Q2 through Q4,” he told NDTV Profit.
Geographically, eClerx continues to see strong performance in North America, while Europe presents a mixed picture. Nadadhur said that North America continues to be a strong performer with a lot in the pipeline, but Europe, particularly in the luxury segment, has shown some softness. “We expect North America will continue to perform well, while Europe may remain subdued,” he said.
In terms of sector performance, Nadadhur highlighted the financial services sector as a key growth area. He said that the financial services segment made up the bulk of the company’s pipeline and has been a major contributor to the growth in Q1. “We expect this trend to continue in the upcoming quarters.”
On the demand environment, Nadadhur pointed out some delays in deal closures, particularly in the digital business. “We’re seeing delays in closing larger deals, particularly in Europe and North America, though this is not uniform across all sectors.”
Addressing the decline in the BPaaS (Business Process as a Service) segment, which constitutes 21% of total revenue, Nadadhur explained that the drop is partly due to seasonality and a shift in strategic direction under the new CEO. “This drop is partially seasonal, as higher KYC transactions in Q4 usually enhance revenue.”
Nadadhur also reaffirmed the company’s adjusted Ebitda margin guidance of 24-28% for FY25.
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