eClerx Q1 FY27: Strong revenue growth, but margins soften after wage hikes

eClerx Services opened FY27 with another quarter of healthy top line momentum. For the quarter ended June 30, 2026, total revenue came in at INR 11,702 million, up 23.8 percent year on year and 3.1 percent sequentially. Operating revenue was INR 11,524 million, with USD revenue of USD 125.9 million, up 15.2 percent year on year. Profitability stayed solid in absolute terms, but margins eased as cost pressures rose. EBITDA was INR 2,831 million, up 20.6 percent year on year, while PAT grew 16.0 percent to INR 1,643 million.

The quarter carried a clear message for investors. Demand remained strong enough to support double digit constant currency growth, and the company continued to add scale across delivery. But near term profitability reflected a mix shift toward higher employee costs and a normalisation in other income related tailwinds. Wage increments effective April 1, 2026 were a visible driver in the cost line, and the rupee moved less versus the dollar than in the prior quarter, reducing revaluation gains.

Growth remains broad based, with a shifting industry mix

Operationally, eClerx reported constant currency growth of 15.1 percent year on year and 2.9 percent quarter on quarter. This is a continuation of the company’s multi year growth trend. Operating revenue in INR has compounded at 17.5 percent CAGR from FY22 to FY26, according to the presentation.

Under the surface, the revenue mix continues to evolve. BFSI still represents the largest vertical, but its contribution has been trending lower. In Q1 FY27, BFSI contributed 37.6 percent, down from 40.8 percent in FY26 and 43.3 percent in FY25. At the same time, the Emerging segment rose to 11.7 percent in Q1 FY27 from 8.4 percent in FY26, suggesting new program ramps and diversification. CMT stayed steady at 26.2 percent and HiTech and M and D at 16.3 percent, indicating stability in the company’s second and third largest verticals. Fashion and Luxury and Retail contributed 8.2 percent.

The geographic and currency exposure continues to reflect eClerx’s positioning as a global delivery business. USD billing remained dominant at 87 percent, with Euro at 8 percent and GBP at 3 percent. North America remained the primary market at 78 percent of revenue, with Europe at 16 percent. Client concentration remains high but broadly stable, with the top 10 clients contributing 60 percent.

The quarter also shows continued traction in commercial activity indicators. A and A revenue, disclosed in USD, was USD 25.9 million in Q1 FY27, compared with USD 89.5 million in FY26 and USD 73.2 million in FY25. New deal ACV, shown quarterly through FY26 Q3 in the presentation, remained robust over the past few years, with annual totals rising from USD 82.4 million to USD 169.9 million across the displayed periods. While Q1 FY27 ACV is not shown, the historical trend supports the view that the company has built a consistent deal engine over time.

Margins compress as employee costs rise and other income normalises

While revenue growth was strong, the margin story was the key swing factor in the quarter. Operating EBITDA was INR 2,652 million, translating to an operating EBITDA margin of 23.0 percent. On total revenue, EBITDA margin stood at 24.2 percent, down 330 basis points sequentially.

The operating cost walk is telling. Delivery and support employee cost increased to INR 6,401 million, which is 55.6 percent of operating revenue, versus 52.8 percent in FY26 Q4. This step up aligns with the stated wage increments effective April 1, 2026 and also reflects scale up in headcount.

Other cost heads moved, but less dramatically. Total G and A was INR 990 million or 8.6 percent of operating revenue versus 8.1 percent in FY26 Q4. Selling and distribution was broadly flat at INR 1,480 million, but as a percentage of operating revenue it reduced to 12.8 percent from 13.4 percent.

Another element was the change in other income. Total other income fell to INR 178.6 million in Q1 FY27 from INR 280.8 million in FY26 Q4. Revaluation income dropped sharply to INR 35.7 million from INR 105.7 million. The presentation links this to lower INR depreciation against the USD during the quarter. For investors, this is a reminder that reported profitability can be influenced by currency movements and treasury dynamics, even when the underlying operating engine is stable.

The company’s hedging program provides a degree of visibility on currency conversion. As of the current status update, outstanding hedges total USD 273.6 million at an average INR 93.41, fully in forwards. This includes USD 156.2 million for FY27 at an average INR 91.16 and USD 112.0 million for FY28 at an average INR 96.20. This layered hedge book can smooth near term volatility, but it also means realised rates can lag spot movements in either direction.

Operating discipline shows in cash, balance sheet, and efficiency metrics

Even with margin compression, the company continues to show signs of operational discipline. Cash and cash equivalents stood at INR 12,589 million at Q1 FY27, broadly stable versus INR 12,810 million at FY26. Net operating cash flow for the quarter was INR 1,073 million. The presentation also highlights that effective Q4 FY25, deposits of more than 12 months were included, which impacts historical comparability.

A key metric to track is EBITDA conversion, shown at 37.9 percent in Q1 FY27. This compares with 75.7 percent in FY26 and 73.2 percent in FY25. One quarter does not define a trend, but the drop is meaningful enough to watch because it speaks to how efficiently profit is turning into cash after working capital movements and other timing effects.

Book value per share increased to INR 300 in Q1 FY27 from INR 278 in FY26. Cash and cash equivalents per share stood at INR 137. This balance sheet strength provides flexibility for investment, shareholder returns, or inorganic options if management chooses. The company also proposed a dividend of INR 1 for FY27.

On the efficiency front, staff utilisation in delivery improved to 75.5 percent in Q1 FY27 versus 74.2 percent in FY26 Q4. DSO improved to 79 days from 81 days in the prior quarter, and it is also lower than the elevated 86 days shown for FY26 Q2.

Headcount continues to expand, reflecting business demand and capacity building. Total headcount reached 22,499 in Q1 FY27 versus 22,639 in FY26 Q4. The press release states total delivery headcount at 22,376 and notes this is a 10 percent year on year increase. Women employees stood at 39.7 percent. Offshore voluntary attrition improved to 18.1 percent from 21.7 percent in FY26 Q4, which may help stabilise delivery and reduce replacement costs over time.

What the quarter says about execution and the near term setup

The Q1 FY27 outcome reinforces eClerx’s core positioning. The company operates as a provider of AI powered analytics, digital operations, automation, and business process management, serving large global enterprises across BFSI, CMT, HiTech and M and D, fashion and luxury, retail, and other emerging categories. The revenue mix suggests a measured shift away from BFSI concentration, with Emerging gaining share and the rest of the portfolio holding steady.

From an execution standpoint, the company appears to be managing for growth while absorbing a cost reset. Wage hikes effective April are usually visible in early fiscal quarters for services firms, and the employee cost ratio reflects that. The margin decline is not trivial, but absolute profitability remains strong and year on year EBITDA and PAT are still growing at 20.6 percent and 16.0 percent.

The hedge book and the step down in other income also highlight an important point for investors. Recent quarters have benefited from currency led revaluation gains, and Q1 shows what happens when that tailwind moderates. With total other income falling by more than INR 100 million sequentially, core operating performance becomes the primary anchor for earnings quality.

The company’s market footprint remains concentrated in North America and USD billing, and client concentration remains high with the top 10 at 60 percent. This is not new, but it increases the importance of continued deal wins and diversification. In that context, the rising contribution from Emerging segments and the multi year ACV trend are constructive.

Investor takeaways: growth intact, margins to be watched

eClerx delivered a strong growth quarter on revenue, with 23.8 percent year on year expansion in total revenue and solid constant currency momentum. The company continues to scale delivery capacity, improve utilisation, and maintain a strong cash position.

But Q1 also shows the trade off that comes with growth and wage resets. Margins compressed sequentially, driven by higher employee costs and lower other income. For FY27, the key questions are whether operating leverage returns as new deals ramp, and whether cash conversion rebounds from the Q1 dip.

The quarter’s theme is disciplined growth with a near term profitability reset. If management sustains demand momentum while protecting utilisation and controlling overheads, margins can stabilise over the next few quarters. For investors, the story remains anchored in execution consistency, vertical diversification, and the ability to convert strong revenue growth into durable free cash flow.