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Emerging companies - Mid caps that can become large cap
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Message Icon Topic: eClerx - A brand new KPO opportunity !!! Post Reply Post New Topic
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manish_okhade
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Quote manish_okhade Replybullet Topic: eClerx - A brand new KPO opportunity !!!
    Posted: 08/Aug/2009 at 11:37am
eClerx is the only listed company operating in the area of KPO. This is a new field unlike IT,ITES or BPO which is already crowded and lost its niche in the milieue.
 
KPO is targetted as 16-18 Billion US opportunity and approx 60-70% is going to be an outsource business to mainly india and other poor nations like China, Romania, Hungary etc. But here again India will have an edge due to following reasosn:
 
1) Proven model for IT,ITES or BPO - historical leverage
2) English speaking abundant manpower supply
3) Again there is no shortage of skilled manpower in diverse areas like
    medical, Legal, Marketing, analytics etc.
4) eClerx has 100% focus on KPO only, not tempting to enter into IT,ITES
    or BPO
 
Risks:
 
In KPO sector confidentiality and skill retention is the key. In IT,ITES or BPO secotr skill issues are mitigated to large extent by processes and tools but in KPO one needs a good doctor to analyse X-Rays , a sound legal knowldge for legal tasks and so on. So in one way such diversity of skill base is an issue.
 
eClerx is having following statistics:
 
CMP: 300
RoE: 36
Profit Margin: 30%
Div:  100%
Mkt Cap: 565Cr
Debt : Zero
PE: 9+
 
MCap/Sales FY09 : approx 2.5 - 3
Growth rate for last 2 yrs: 50%
 
If you have the horizone of 2-3 yrs then i expect eClerx to grow by 1000Cr.
Why you are waiting?
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chimak10
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Quote chimak10 Replybullet Posted: 09/Aug/2009 at 12:09pm
Originally posted by manish_okhade


Why you are waiting?



For kulmanjee and smartcatjee's and rest of the pepole's seal of approval.


Sounds interseting very interseting.
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manish_okhade
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Quote manish_okhade Replybullet Posted: 09/Aug/2009 at 12:40pm
Forgot to add one more risk.
 
Presently company is in nascent stage and bulk of its revenue comes from top 5 customers so client concetration is another risk.
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basant
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Quote basant Replybullet Posted: 09/Aug/2009 at 12:51pm
What are the promoter's qualifications and experience? Any idea?
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in
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manish_okhade
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Quote manish_okhade Replybullet Posted: 09/Aug/2009 at 1:01pm
Directors and mgmt team is mostly MBAs from US. Most striking thing which i observed is that in mgmt team there are many whites which is a smart move in such business to generate an excellent traction with customers. Check yourself at http://www.eclerx.com/directors.html.
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Quote RahulB Replybullet Posted: 09/Aug/2009 at 2:19pm
Some points to consider:
 - KPO is a crowded market with a good mix of small and large players, Evalueserve, WNS, Exl, Genpact.  Most of the large software companies have KPO business units- Infosys, TCS, Wipro

 - The business model is similar to Software Services companies - linear relationship between staff strength and sales; with limited margin expansion possibilities

- Large part of KPO revenues are driven by short terms project work (5-50 days), which results in big pressure on Utilisation. In software services companies most of the the project duration 1+ year and so this is not a big issue

 - Biggest cost component is salaries, which once the economy recovers, will increase at 10-15%, while the billing rates will decline due to intense competition

 - Given the confidentiality issue, several companies plan to setup their own captive units rather than outsourcing. Though they don't mind testing the concept through third party service providers


Edited by RahulB - 09/Aug/2009 at 2:24pm
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manish_okhade
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Quote manish_okhade Replybullet Posted: 09/Aug/2009 at 3:33pm
Some points to consider:
 - KPO is a crowded market with a good mix of small and large players, Evalueserve, WNS, Exl, Genpact.  Most of the large software companies have KPO business units- Infosys, TCS, Wipro
 
Evalueserve, WNS, Exl, Genpact are not listed. Infosys, TCS, Wipro do not have full focus on KPO.

 - The business model is similar to Software Services companies - linear relationship between staff strength and sales; with limited margin expansion possibilities
Right its a service not a product!

- Large part of KPO revenues are driven by short terms project work (5-50 days), which results in big pressure on Utilisation. In software services companies most of the the project duration 1+ year and so this is not a big issue

May not be always, suppose a KPO unit tie up with a say some hospital then work flow will be continuous....
 
 - Biggest cost component is salaries, which once the economy recovers, will increase at 10-15%, while the billing rates will decline due to intense competition
eClerx is playing smart here, while others a re laying off eClerx is hiring and getting best talent at low prise.

 - Given the confidentiality issue, several companies plan to setup their own captive units rather than outsourcing. Though they don't mind testing the concept through third party service providers

Yes but still the size of opportunity is huge.
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kumardiwesh
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Quote kumardiwesh Replybullet Posted: 09/Aug/2009 at 4:19pm
The size of opportunity of huge and eClerx is free cash flow positive.
However, as Basantji once told me, currency risk is a major factor.
"History does not tell you the probability of future financial things happening" - Warren Buffett
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