Less than a year after eClerx Services' Rs 100-crore initial public offer in December 2007, Lehman Brothers - its largest customer in the financial services business, accounting for nearly 15 per cent of its revenue - went bankrupt, and this entire business was on the line. Its investors, such as private equity firm Burwood Ventures (which had acquired a 21 per cent stake in eClerx just before the IPO), were worried.
Company co-founder and managing director P D Mundhra, confident that over a period of time eClerx's banking business would grow, assured employees that no matter what happened, no one would be asked to leave. He was right, as the company won new business from Lehman's successor entities such as Barclays and Nomura. Of course, its banking business grew as well.
Its market capitalisation rose to Rs 3,199 crore at the end of March 2014, from Rs 463 crore at the end of 2007-08, the year it was listed. Revenue grew seven-fold over this period, to Rs 840 crore from Rs 121 crore; and profit after tax grew to Rs 255 crore, from Rs 44 crore.
Burwood Ventures exited the company in 2010, booking profits of Rs 157 crore, against an initial investment of Rs 2.46 crore. Another PE firm - Sequoia Capital - bought a 2.9 per cent stake in the company in 2009, increasing it to 9.7 per cent in 2010, with a total investment of Rs 72.7 crore. This showed continued investor confidence in eClerx.
"When we started, if you had asked me to guess if we will reach where we are today, I would have not given a high probability to that outcome," says Mundhra, recalling how he co-founded the company with his MBA classmate from the Wharton School, Anjan Malik.
After graduating, both went their separate ways - Mundhra joined Citibank in India, while Malik joined Lehman Brothers in New York. However, they remained in touch. Both read the same magazine article that talked about US conglomerate GE outsourcing middle and back office work to India, as technology allowed the work to be shifted. And both thought of ways to exploit the opportunity.
The two co-founded the company in 2000, its first few customers coming through their business school network. The initial clients were all small dot-com start-ups that do not exist anymore. The first large client was a UK-listed medical devices company. After a year they bid for a Fortune 500 company's business, and this was their first marquee client, within 18 months of the company's founding.
Mundhra says that this company is in the technology space and the contract was to provide support to its e-commerce store. eClerx hasn't looked back since, and now works with 65 companies, over 30 of them Fortune 500 companies.
"What worked for us is being in the right place at the right time. We caught that trend early on and we were among the first companies offering these types of services from offshore," Mundhra says.
eClerx now has three business divisions - digital marketing (with services such as web publishing and search engine optimisation), which contributed about 40 per cent of the company's revenue in 2013-14; financial services and capital markets, which involves doing middle and back office work for the capital markets business of large global banks, including settlement for securities, managing collateral against trades, and preparing profit and loss reports (this too contributed 40 per cent of revenue); and the cable and telecom business that came to eClerx in 2012 with the acquisition of US-based Agilyst, with its facilities in Chandigarh. This contributed 20 per cent of revenue in 2013-14, and entails working with large cable operators in the US and UK to help them improve the quality and cost-effectiveness of their customer support.
"We also decided to invest heavily in client-facing teams onshore, and it was helped by the fact that my partner was based abroad - the strength of our client-facing team was disproportionately strong for a company of our size," Mundhra explains.