In an interview to CNBC-TV18, PD Mundhra, Co-Founder & Executive Director of eClerx Services spoke about the latest happenings in the company and road ahead.
The company is hopeful of clocking similar growth rate in FY15 like that of FY14. Mundhra said that growth in company's top five clients slowed, and grew 4-5 percent in FY14. He expects this pace to continue.
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Below is the verbatim transcript of PD Mundhra's interview with CNBC-TV18's Ekta Batra and Latha Venkatesh
Ekta: Could you just explain to us without elaborating too much on the numbers part but has this quarter been significantly better and has there been a spill over of revenues from the precious quarter?
A: I don't think we spoke about any spill over from Q4 to Q1. I would say Q1 has been more inline with the outlook we have for the whole year. So, if you look at FY14, our revenues grew about 10-12 percent in dollar terms and the outlook we have shared is that we see a similar environment this year. So, there will be some lumpiness in quarterly growth numbers but overall we see the same sort of growth rates continuing in FY15 as well.
Latha: One spot of bother could be that your top five clients account for a largish bit of your revenues; that has been declining. Can you give us an idea of how things are panning out in the current year and in the next year in terms of your dependence on the top five?
A: It is absolutely accurate to say that growth in our top five has slowed. In the last financial year our top five clients grew at about 4-5 percent where as our non top five grew in excess of over 25 percent in dollar terms. We see the same thing continuing this year. It has two effects; it pulls down our overall growth rates to the 10-12 percent number that I talked about earlier but more encouragingly every year our dependence on the top five is reducing.
Just by way of a data point, in FY12 our non top five clients were about 13 percent of our revenues or USD 13 million annualised. Last year they were 27 percent annualised, 27 percent in terms of revenue share and USD 39 million annualised. So, they almost doubled as a share of revenue over the last two years and if we can maintain that trend it is very healthy for the company in the medium-term.
Ekta: Are you still seeing uncertainty in two of those top five clients?
A: Yes, there is uncertainty in each of our three businesses. In the cable business there is a lot of industry consolidation happening. It is public knowledge that Comcast is buying Time Warner and as a part of that acquisition they will also have to divest certain markets and divisions. So, there are a lot of moving parts in that industry in the US.
In our digital marketing business which is almost 40 percent of revenues for us, some of our technology clients there are experiencing tectonic shifts in their native businesses and banking has changed fundamentally after the global financial crisis in 2008. So, the change has been a constant feature over the last three to four years and I don't see that changing in the next year or two either.
Latha: Your utilisation rates were at 64 percent in the previous quarter when you spoke to us, how much can that inch up, basically how will your margins do from that fairly healthy 43 percent that you struck last year; EBITDA margins?
A: Two points; on utilisation we reported a little differently than the IT companies because our denominator includes all employees in the firm, not just operation staff. So, if you were to recast our numbers in the same way the IT companies reported our utilisation would be in the high 70-80 percent. I don't think there is room to move that number up much because our benches are optimised for the kind of work we do.
So, I don't think that that will be a source of margin goodness. On your broader questions about margins our stated target is always been low to mid 30s in terms of operating margins. Last year we were higher, maybe around 38-39 percent. This year also we will remain in the mid 30s range hopefully over the course of the year.
eClerx Services stock price
On July 15, 2014, at 14:10 hrs eClerx Services was quoting at Rs 1153.00, down Rs 34.8, or 2.93 percent. The 52-week high of the share was Rs 1370.05 and the 52-week low was Rs 695.65.
The company's trailing 12-month (TTM) EPS was at Rs 81.42 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 14.16. The latest book value of the company is Rs 177.86 per share. At current value, the price-to-book value of the company is 6.48.
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