eClerx Services Q2 FY27 Results (NSE: ECLERX)
Signal: Margin pressure
The read
The key inflection is sequential rather than YoY: consolidated EBIT margin recovered 76bps QoQ to 19.19% after Q1FY27 compression, but remains 324bps below last year because employee costs grew 21.5%, subcontractor costs 69.4% and depreciation 31.3% against 18.3% revenue growth; the consolidated group is still materially weaker than the parent, with PAT down 1.6% versus standalone PAT up 22.8%.
| Metric | Value | YoY | QoQ |
|---|---|---|---|
| Revenue | ₹1,188.66 Cr | +18.3% | +3.2% |
| EBIT | ₹228.06 Cr | +1.2% | |
| Net profit | ₹180.6 Cr | -1.6% | |
| EPS | ₹19.63 | +0.7% | |
| EBIT margin | 19.19% |
P&L walk
Revenue grew 18.3% YoY and EBIT grew only 1.2% as employee costs rose 21.5%, subcontractor costs 69.4% and depreciation 31.3%; lower other income and higher finance costs then pushed PAT down 1.6%, although EBIT margin recovered 76bps QoQ.
Segments
The group-versus-parent gap is material: consolidated revenue of ₹11,886.57 million exceeded standalone revenue of ₹8,118.37 million, while consolidated PAT fell 1.6% YoY to ₹1,805.97 million versus standalone PAT growth of 22.8% to ₹1,351.76 million, indicating subsidiaries dragged group earnings conversion.
Key positives
- Consolidated revenue reached ₹11,886.57 million, up 18.3% YoY and 3.2% QoQ, sustaining double-digit growth.
- Consolidated EBIT margin improved 76bps QoQ to 19.19%, while standalone EBIT margin expanded 263bps YoY to 21.34%.
- Standalone PAT increased 22.8% YoY to ₹1,351.76 million, materially outperforming consolidated PAT because the parent business remained more profitable than the subsidiaries.
- Consolidated operating assets expanded with PPE at ₹2,466.78 million and CWIP at ₹80.07 million, while H1 operating cash flow was ₹3,198.77 million on a standalone basis.
Key concerns
- Consolidated PAT declined 1.6% YoY to ₹1,805.97 million despite 18.3% revenue growth, showing weak earnings conversion at the group level.
- Employee benefits rose 21.5% YoY to ₹7,411.38 million and increased to 62.4% of consolidated revenue, compressing EBIT margin by 324bps YoY.
- Technical subcontractor costs jumped 69.4% YoY to ₹337.81 million, while depreciation rose 31.3% to ₹558.22 million, limiting operating profit growth.
- Consolidated results materially lagged standalone results: group PAT fell 1.6% while standalone PAT rose 22.8%, pointing to subsidiary drag.
Research and educational content only. Not investment advice.