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The mayhem on Wall Street has started to take a toll of Indian BPO/KPO players, with KPO services provider — eClerx Services reporting $1 million of receivables from a troubled US investment bank, believed to be Lehman Brothers. This is about three per cent of its FY-08 revenues (Rs 126 crore). More worrying is the fact that 13 per cent of its 2008-09 revenues are expected from this client. The exit of one of its top five clients may dent the company’s $40-million revenue guidance for 2008-09.

Incidentally, Barclays, which bought a key portion of Lehman’s operations, may also be a client of eClerx. This clouds what the overall pie of outsourced work for eClerx would be, not to mention the modalities of how the receivables are likely to be settled.

With Merrill Lynch being bought over by Bank of America and AIG taken over by the Federal Reserve in the US, the outlook for outsourcing from financial services segment remains uncertain. Given that eClerx works only in one other vertical — retail/manufacturing, there may be limited leeway for being insulated from the macro environment.

eClerx had listed late last year, and has heavy client concentration with its top five clients accounting for as much as 85 per cent of its revenues. US dependence has come down, but is still 67 per cent of eClerx’s overall revenues. The services are at the lower end of the value chain — in the realm of transaction processing, data reconciliation and the like commanding lower billing rates.

A tough environment may mean more pressure on the billing rates. Even the rupee depreciation may not improve realisations for eClerx as, like other mid-tier software players, it has hedged $22.5 million at Rs 40.66/dollar, a huge discount to the current exchange rate. All these concerns seem to have found an echo in the form of eClerx’s downward spiralling stock price, which is down 67 per cent from the time of its listing.

More Stories on : Stocks | Foreign Institutional Investors | Outsourcing

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