eClerx Services Limited: A Strong Q2 FY26 Performance Driven by Strategic Execution

eClerx Services Limited, a leading specialist in business process management, automation, and analytics, has reported an exceptional performance for the second quarter of fiscal year 2026. The company's consolidated financial highlights reveal robust growth across key metrics, underscoring the effectiveness of its strategic initiatives and operational efficiencies. Total revenue, including other income, surged to INR 1,035.2 crore, marking a significant 22.6% year-on-year increase. This impressive growth was fueled by operating revenue reaching $115.5 million in USD terms, a 16.9% rise year-on-year, and INR 1,004.9 crore in INR terms, representing a 7.5% sequential increase.

The quarter also witnessed substantial improvements in profitability. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) stood at INR 2,983 million, achieving a healthy margin of 28.8% and demonstrating a 27% sequential growth. The Profit After Tax (PAT) followed suit, increasing by 29.3% sequentially to INR 1,832 million, with a margin of 17.7%. Basic Earnings Per Share (EPS) for the quarter was INR 39.0, up from INR 29.7 in the previous year. These figures highlight eClerx's ability to not only expand its top line but also enhance its bottom-line profitability through disciplined execution and strategic focus.

Strategic Pillars Driving Growth

eClerx's management attributes the strong performance to several strategic pillars. The 'one eClerx' strategy, focused on cross-selling and upselling, has been instrumental in leveraging the company's diverse capabilities across its client base. This integrated approach allows eClerx to address complex client problems holistically, rather than through fragmented service offerings. The company's commitment to technological innovation is evident in its continuous investments in modular automation and Generative AI (GenAI) adoption. These advancements are embedded into core products like Compliance Manager and Market360, enhancing delivery efficiency and maintaining a competitive edge.

Deal wins for Q2 were robust at $46 million, with analytics and automation services showing a 6% sequential increase. The company observed stronger growth from its non-top 10 clients compared to its top 10, indicating a healthy diversification of its revenue streams. The 'Emerging' business segment, in particular, experienced strong growth due to new operations going live in the Finance and Accounting (F&A) subsegment. Geographically, the Cairo Center, launched just four months prior, has already achieved top-quartile performance, reflecting eClerx's successful global expansion and delivery capabilities.

Operational Excellence and Capital Allocation

Operational excellence was a hallmark of Q2 FY26. The EBITDA margin expanded by 400 basis points quarter-on-quarter, with approximately 200 bps attributed to favorable foreign exchange movements and 60 bps from improved delivery efficiency, primarily due to better utilization and a shift in the onshore/offshore mix. The net operating cash flow showed a sharp improvement, reaching INR 3,137 million, with an EBITDA conversion metric of 105%. This improvement was partly due to the reduction in Days Sales Outstanding (DSO) to 76 days, alongside the absence of one-off factors that impacted Q1.

In a move demonstrating confidence in its financial health and commitment to shareholder returns, the Board approved a buyback of equity shares for an amount not exceeding INR 300 crore through a tender offer route. This decision aligns with the company's capital allocation policy, aiming to return 50% of cash to shareholders over a 12-18 month period if not required for business use. The management emphasized that the buyback price is a floor, with the final price to be determined after shareholder approval.

Outlook and Future Focus

Looking ahead, eClerx remains cautiously optimistic for Q3 and Q4. While Q3 margins are expected to be slightly softer due to the recent appreciation of the INR, the management reiterated its full-year margin guidance of 24% to 28%. The company is confident in delivering a higher Annual Contract Value this year and aims to be in the top quartile of its operating segment in terms of growth. The pipeline remains strong, and the company continues to see broad opportunities across core, intermediate, and small new clients in BFSI, CMT, and HiTech. The 'Fashion & Luxury and Retail' segment, however, remains an area of caution due to ongoing macroeconomic headwinds.

eClerx's Q2 FY26 performance reflects a company with strategic clarity, robust execution, and a disciplined approach to capital allocation. The focus on integrating technology, expanding client relationships, and optimizing operations positions eClerx for sustained growth and continued value creation for its shareholders.