In conversation with Srinivasan Nadadhur, Chief Financial Officer, eClerx Services Limited

Technology and analytics are crucial differentiators in our industry, elucidates Srinivasan Nadadhur, Chief Financial Officer, eClerx Services

Can you share your outlook on the Indian IT-BPM industry? What are the opportunities you are currently focusing on?

In the two years after the pandemic, the IT and BPM companies have performed exceptionally and are expected to do well in the coming years. Geographically speaking, India has done better compared to other countries and so the outlook is positive. There has been a shift in how clients view their businesses – they see digitisation as necessary for survival and success, they are more comfortable with outsourcing, and they have seen that productivity under work-from-home remains the same or even improves. These are positive developments for the IT-BPM industry, and for eClerx Services in particular.

Could you elucidate your H1FY23 financial performance? Also, what is your earnings’ outlook for the next few quarters?

Our H1 performance was very strong. In sequential constant currency terms, we grew 3.9 per cent in Q1 and 4.6 per cent in Q2, which easily puts us in the top quartile of the industry. Margins were a little lower than the previous year owing to supply-side challenges around attrition and the supply of skilled resources. We may see growth slowing down in the future because of macroeconomic headwinds but the margins should improve as supply-side constraints have largely eased out.

What is your segment-wise revenue mix and how do you expect it to evolve over the next 2-3 years?

The revenue mix in our three businesses – financial markets, digital and customer operations – is roughly 40:40:20 and this ratio has remained stable over the medium term. A higher portion of the client spend in our digital business is discretionary, and so is more likely to face headwinds because of the macro-economic environment. So, in the near term, we expect financial markets and customer operations to grow faster than digital. Over the medium to long term, the original ratios should hold good.

Can you throw some light on your plans to leverage new technologies and make the best of the wave of digital adoption?

Technology and analytics are crucial differentiators in our industry, and we have been early adopters. We are applying artificial intelligence and machine learning technologies to detect anomalies in our work queues, which enable our team to identify process exceptions faster. We are using speech analytics and natural language processing (NLP) tools to mine information from customer calls and documents, allowing us to take quick decisions and resolve issues faster. These technologies and their applications are yet to reach full maturity, and we will continue to make investments in these areas as we believe there are significant benefits which can still be achieved.

Can you highlight some of the biggest challenges you are currently facing?

The near-term challenge is obviously the deteriorating macro-environment in our client geographies. We think a slowdown is imminent, and our challenge will be to continue to sell and grow in this environment. On a broader level, the biggest challenge, and a question we often ask ourselves, is how to stay relevant to our clients. Our industry is one of rapid change, the pace of innovation is high, and we need to keep abreast with evolving client needs and continuously keep exploring, evaluating and investing in solutions which meet these needs.

What are your key growth levers in the medium-long run?

In each of our businesses, we have identified 2-3 key services which we believe will drive our growth. Examples of these would be institutional KYC in our FM business, marketing automation in our digital business and field technology in our customer operations business. We are investing in productizing these services using technology and analytics, designing commercial models to create variable costs for clients, and focusing sales efforts on these productized services. At an industry level, the outsourcing story, and especially the India outsourcing story, continues to resonate with clients, and I feel there will be healthy demand across the board despite the near-term challenges.

At the moment, what are your top three strategic objectives?

Our top imperative is to productize our services, which I alluded to earlier, and the next is to integrate Personiv, the company we acquired in December 2021, with the rest of eClerx Services, derive synergies through integration and increase cross-sales.