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Company Background
Incorporated in 2000, eClerx is one of the first KPOs to be listed in India
and provides data analytics and customized process solutions to global
enterprise clients from its offshore delivery centers in India. The Company
provides business solutions leveraging the cost effective combination of
people, process and technology. These provide clients with benefits beyond
cost reduction by designing solutions that incorporate talent management,
process improvements, better reporting and metrics. It currently offers services
to clients in the financial services, retail and manufacturing industries.
Investment Rationale
Well Diversified Service MiX
eClerx has a wide range of
non-voice, data intensive and
analytical service offerings
that have a blend of BPO and
KPO.
Apart from financial services,
eClerx also provides Sales
and Marketing support to
companies in E-commerce
domain. Company’s both
verticals contribute roughly
50% of the revenues.
Fastest Growing company in BPO and KPO Space
eClerx Services’ Q3FY11 profits were well ahead of consensus estimates, while
revenue growth further strengthened to 9% Q-o-Q in USD terms. It reported total
revenues of Rs. 890 mn, up 6% Q-o-Q and net income of INR 360 mn, up 30% Qo-
Q and up 69% Y-o-Y. After five quarters of sequential decline in operating
income margins, the current quarter saw increase of 800bps. This increase is due
to lower per employee costs (operating at optimal Utilization).
Yesterday, Today and Tomorrow…
The company has shown consistent performance over the period of time. The top
line and the bottom line of the company is maintained and looking at its present
earnings and future outlook the levels look sustainable.
We expect that with the improvement in Global Economy will pave the way for
more opportunities for the company. As per NASSCOM report, IT BPO (Export)
revenue will increase from current $59bn to $70bn in FY12 and around 16-18%
growth. We expect with such Encouraging Global environment company will be
able to maintain momentum of both top line and bottom line. We further expect
that increase in 32% and 34% revenue growth of the company for FY11 (full year)
and FY12E along with 72% and 20% bottom line for FY11 ( Full Year ) and
FY12E.
Inorganic Growth will boost top line and bottom line
EClerx acquired Ingentica Group in 2007 for US$3m.EClerx has not acquired any
other company since then, but plans to do so in the coming 12-18 months. It is
looking to acquire non-voice BPO companies, with revenues in the range of
US$15m-40m. The company recently got Board approval to raise Rs10bn mainly
for funding acquisition.
Extending service offerings to buy Side clients in Capital
Markets vertical
eClerx’s is presently working for 9 out of top 14 Investment Banks. Through these
engagements eClerx has demonstrated domain expertise across most of the back
office operations in Capital Markets domain. The company now plans to extend
trade processing services like trade confirmation and settlement to buy side
clients, Hedge funds etc.
Quality Clientele
The company has 50 active clients, with 15-20 in financial services and 30-35 in
sales and Marketing support business unit. It has ~500 engagements across its
clientele, which includes more than 20 Fortune 500 companies. The top5 clients
accounted for ~86% of revenues in Q3FY11.
Valuation
At INR 647 the stock is trading at P/E of 15X & 13X for FY11E and FY12E. We
expect eClerx to trade at a PE band of 16-17 for FY12E given the high dividend
payout and return ratios along with recovery in US and Europe which are major
market for the company. Our 12 months target is 820Rs.
Concern
1-Client Concentration risk
2-1% appreciation of rupee impacts eClerx’s operating margins by ~50 bps
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
CMP 647
~Business Vertical – Well diversified Service mix
~Fastest Growing company in BPO and KPO Space
~Inorganic Growth will boost top line and bottom line
~Extending service offerings to buy Side clients in Capital
Markets vertical
~Quality ClienteleCompany Background
Incorporated in 2000, eClerx is one of the first KPOs to be listed in India
and provides data analytics and customized process solutions to global
enterprise clients from its offshore delivery centers in India. The Company
provides business solutions leveraging the cost effective combination of
people, process and technology. These provide clients with benefits beyond
cost reduction by designing solutions that incorporate talent management,
process improvements, better reporting and metrics. It currently offers services
to clients in the financial services, retail and manufacturing industries.
Investment Rationale
Well Diversified Service MiX
eClerx has a wide range of
non-voice, data intensive and
analytical service offerings
that have a blend of BPO and
KPO.
Apart from financial services,
eClerx also provides Sales
and Marketing support to
companies in E-commerce
domain. Company’s both
verticals contribute roughly
50% of the revenues.
Fastest Growing company in BPO and KPO Space
eClerx Services’ Q3FY11 profits were well ahead of consensus estimates, while
revenue growth further strengthened to 9% Q-o-Q in USD terms. It reported total
revenues of Rs. 890 mn, up 6% Q-o-Q and net income of INR 360 mn, up 30% Qo-
Q and up 69% Y-o-Y. After five quarters of sequential decline in operating
income margins, the current quarter saw increase of 800bps. This increase is due
to lower per employee costs (operating at optimal Utilization).
Yesterday, Today and Tomorrow…
The company has shown consistent performance over the period of time. The top
line and the bottom line of the company is maintained and looking at its present
earnings and future outlook the levels look sustainable.
We expect that with the improvement in Global Economy will pave the way for
more opportunities for the company. As per NASSCOM report, IT BPO (Export)
revenue will increase from current $59bn to $70bn in FY12 and around 16-18%
growth. We expect with such Encouraging Global environment company will be
able to maintain momentum of both top line and bottom line. We further expect
that increase in 32% and 34% revenue growth of the company for FY11 (full year)
and FY12E along with 72% and 20% bottom line for FY11 ( Full Year ) and
FY12E.
Inorganic Growth will boost top line and bottom line
EClerx acquired Ingentica Group in 2007 for US$3m.EClerx has not acquired any
other company since then, but plans to do so in the coming 12-18 months. It is
looking to acquire non-voice BPO companies, with revenues in the range of
US$15m-40m. The company recently got Board approval to raise Rs10bn mainly
for funding acquisition.
Extending service offerings to buy Side clients in Capital
Markets vertical
eClerx’s is presently working for 9 out of top 14 Investment Banks. Through these
engagements eClerx has demonstrated domain expertise across most of the back
office operations in Capital Markets domain. The company now plans to extend
trade processing services like trade confirmation and settlement to buy side
clients, Hedge funds etc.
Quality Clientele
The company has 50 active clients, with 15-20 in financial services and 30-35 in
sales and Marketing support business unit. It has ~500 engagements across its
clientele, which includes more than 20 Fortune 500 companies. The top5 clients
accounted for ~86% of revenues in Q3FY11.
Valuation
At INR 647 the stock is trading at P/E of 15X & 13X for FY11E and FY12E. We
expect eClerx to trade at a PE band of 16-17 for FY12E given the high dividend
payout and return ratios along with recovery in US and Europe which are major
market for the company. Our 12 months target is 820Rs.
Concern
1-Client Concentration risk
2-1% appreciation of rupee impacts eClerx’s operating margins by ~50 bps
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