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Good evening, participants, and welcome to the Q1 FY '24 earnings call of eClerx Services Limited. Please note that this webinar will be recorded, to take us through the results and to answer your questions, we have with us the top management of eClerx represented by Kapil Jain, Managing Director and Group CEO; PD Mundhra, Co-Founder and Executive Director; Anjan Malik, Co-Founder and Executive Director; and Srinivasan Nadadhur, Chief Financial Officer. We will start the call with brief opening remarks by Srini, and then we will open the floor for Q&A session.
I would like to remind you that anything that is said in on this call that gives any outlook for the future, or which can be construed as forward-looking statement must be viewed in conjunction with the risks and uncertainties that we face. These risk and uncertainties are included, but not limited to what we have mentioned in the prospectus filed with the SEBI and subsequent annual reports, which you can find it on our website.
With that said, I will now hand over the call to Srini. Over to you, Srini.
Thanks, Asha. Ladies and gentlemen, good evening, and welcome to eClerx earnings call for the first quarter of FY '24. We experienced a sequential decline in top line attributable to weak demand and budget cuts, which resulted in a reduction of technology and onshore spend, a decline in project renewals and unanticipated project closures, particularly among our larger clients in the digital and the financial markets businesses. U.S. dollar revenues for Q1 were $83.9 million, down 2% Q-on-Q in USD terms, 2.2% in constant currency terms. Total revenue for the quarter was INR 6,920 million, down 0.9% Q-on-Q. In Y-o-Y terms, revenue were up 5.5%, both in U.S. dollars and in constant currency terms. EBITDA for the period was INR 1,750 million at 25.3%, a sequential drop of 506 basis points.
The larger-than-usual drop is because of the annual wage hikes and additions in our onshore sales and development teams and on top of the decline in revenue. Net profit was INR 1,063 million, up 7.2% over the previous year. Net profit margin was 3.4%, down 61 basis points sequentially. CapEx was higher this quarter as we [ facilitate ] consolidation in [ ROE ] went live, and this needed about 500 additions.
Attrition for the quarter was significantly low. In Q2, we expect an attrition increase, the attrition from the current levels. But it will remain at lower levels than has historically been the case for the same quarter which usually is our highest efficient [ core ]. On the key metrics slide, please do note that we have updated the classification of revenue on the BPaaS. And we stated we work for the last 8 quarters. There is a 1% drop Q-on-Q with the BPaaS percentage, which would also have been the case in the older [ rate ].
Coming to the outlook, we should be able to recover most of the top line reduction of Q1 in this current quarter, but expect weakness in technology spend and client specific challenges to continue for the next several quarters. As in previous years, we expect margins to steadily improve through the rest of the year. However, we believe margins for the full fiscal year will end up somewhat below the lower end of our [indiscernible]. With this, we come to the end of our opening remarks, we can now move on to Q&A today. Back to you, Asha.
Thank you, Srini. Participants, we will open the floor for Q&A. [Operator Instructions]. I think we have first question from the line of Hitesh Arora. Hitesh, Please go ahead.
Sorry, could you sort of elaborate a little bit on the statement? I didn't fully get it, you'll be able to recover your lost revenue or the decline in revenue in Q2 itself? Could you kindly elaborate a bit?
Yes. So given the pipeline -- [ maybe probable, maybe hand it over ] so given the pipeline that we [indiscernible] with the [ conversion ]. We think that we should be able to recover most of the reduction in Q2, so you might go back to year about what Q4 [ volumes ].
Okay. So between Q4 and Q2 were largely flat essentially.
That's right.
And what would be your full year -- how are you looking at the full year? How should we look at the full year in terms of revenue growth?
Kapil, you want to take that?
Yes. Sure, Srini. So I think Hitesh, overall pipeline is good. And the reason for the decline in Q1 was for the demand in the pipeline that was there in Q4. Because the quarter in which you are in, determines the next quarter's growth. I think we'll have a greater clarity as we move forward because there are overall macroeconomic challenges, right, in terms of interest rates, inflation and the geopolitical uncertainty. But our pipeline is robust. So I think we should be moving forward in terms of Q3, Q4 as well from an overall growth perspective. But I think we will have a greater clarity as we get closer to the quarters.
And maybe once these uncertainties over how are we looking at things? And have we had a change in strategy, change in product area focus, things like that, if you could maybe for the medium term, FY '25, if you could...
Yes. So I think in terms of how we are looking at our overall products and services, I think one of our strengths is in terms of enabling technology, we are focusing on Gen AI, we have 32 POCs, client conversations that we are involved in. And I think digital and customer operations are the 2 service areas where we feel that Gen AI could make impact and will be relevant for our clients. So I think from overall in terms of the capabilities that we have, our ability to influence client revenues and not only impact the SG&A side of the equation, I think are all very robust capabilities that we bring to the table. We will continue in that direction. In terms of overall strategy, as I had indicated in the last call that we would have a greater view and we would be able to provide a clarity onto 20-20 vision towards Q4. prior to the start of '24, '25.
Next question is from the line of Dipesh Mehta from Emkay Global.
A couple of questions. First about the S&D investment, if I look last 2 quarters, we have seen good uptick in business development head count. So just want to understand focus areas, where we are making this investment either you can say from segment or capability perspective or a geographical perspective, whichever you want to provide some perspective?
Second question is about the demand outlook. If you can provide some sense about across 3 segments, how you see demand in your opening remarks, you provided some color where you are seeing [ socmed ] as digital financial market. But if you can provide more insight into that.
The third question is about top 10 clients. This quarter is showing some softness as well as prepared remarks, you indicated about some client-specific challenges may persist for next few quarters. So just want to get more clarity because in the past, our growth rates suffer because of top line specific challenges and then growth rate was very muted for some time. So if you can provide what kind of challenges you see in those clients and how you expect it to play out?
And last question, more data related. You changed some kind of BPaaS revenue class [ make sense ]. So if you can help us understand what defines and differences we made.
Right. So I take the last question and then I'll answer this first. And then Kapil, I hand over to you for the first 2 questions on S&D investments, demand by vertical and talk then outlook. So on the BPaaS clarification, we awaited the classification of what constitutes BPaaS revenue and then we apply that classification to all our existing engagements. And in this process, we do remind that some items do not fall under BPaaS and we applied those changes on the start of the [indiscernible]. Which is why we have restated for the last 8 quarters, we have restated what the BPaaS [indiscernible]. Kapil, in questions 1 to 3?
Yes. So in terms of the overall demand, what we are seeing is clients are facing pressure on their overall revenue, right? As you have seen, whether it's financial services, cable industry, except the high-end fashion and luxury, I think we are seeing tepid demand in terms of -- as far as client revenues are concerned. So they are looking at the cost side of the equation. They're also looking at in terms of leveraging technology, AI, automation to see how they can drive cost.
I think what we are also seeing is because of the overall macroeconomic environment and the uncertainty that is there, the clients are making -- delaying their decision-making. So that's where the overall cycle times in terms of conversions are increasing. In terms of -- so that's the broad theme we are seeing in terms of investments where we are making. It's mostly in diverting our solutions in terms of automation and building and bringing in generative AI to really see how we can make an impact on the digital as well as on the customer operations side because that's where we see the maximum number of use cases in deploying our AI solutions. I hope I answered your question I think you had asked.
And in terms of the top 10 outlook, I think that continues to stay, and we're also looking to see how do we grow the next 10. So as to derisk the top 10 as well as continue to see how we can take our other capabilities into the top 10 accounts.
So let me just [ pro for ] this last part of 10 related. Do you think any specific challenges which can have implications in Q2. You indicated about flattish kind of Q4 to Q2 kind of projection. But entering into H2 earlier, are we expected H2 to have a growth recovery. But do you see that to play out? Or do you think some uncertainty may weigh even on H2 kind of growth recovery?
Yes. At this stage, I think we do see a recovery basis the pipeline that we have currently. But as I had indicated that because of the overall macroeconomic conditions, we will have a better view as we get into Q3, Q4. So we should be able to give you a better color as we get closer to the next quarter. But from where we are standing today, we do see recoveries what I had said, and that's what we are seeing in H2 yes.
Thank you, Dipesh. Next question comes from the line of Mihir Manohar. He's from [ Planinin ] Asset Management. Mihir, please go ahead.
Sir, lastly, I wanted to understand, I mean, given the fact that there is a weakness in the revenue of adjusted 1Q. I understand that you had given an indication during the last call itself, but I mean just wanted to get understanding, I mean, given the fact that we have a larger exposure towards U.S. capital markets. U.S. capital markets have been doing well. I mean, why is it that we are still facing challenges? Because naturally, because what the broader quarters [indiscernible] settlement onto modest things go up in the markets to well. So I just wanted to get an understanding around that. I mean, why is that you're still seeing a softness despite the U.S. market is doing well.
My second question was on the generative AI side. I mean we are -- I mean at that part of the market where generative AI something affecting the store to a larger extent. So I mean just wanted to understand our preparedness or this particular part of the piece because currently, the situation is there that we can gain a larger market share or we can lose a larger market share, specifically that depends on the [ gen AI ] side because that is currently at the disruption phase. So I mean, during this event, I mean, how do you see this event? Is it going to be pivotal for us? I just wanted to get an understanding on that.
And my third question was on the margin front. I mean we saw a sharper contraction in margins for this particular quarter. And you have also -- I mean, given the bifurcation around the margin book, but just wanted to get a sense of how do we see margins recovering and which will be the tailwinds, which will drive the margins recovering for us. Yes. So those were the questions.
So I'll take the question on margin first and then hand over to Kapil for the questions on the [indiscernible] and U.S. markets. So our margins, I think we have talked about what factor is going to be the reduction in margin, primarily [ wage hikes ] and additional people in the onshore fields and decision means. There is some one-off also in there. That should move from [ Q2 to ] Q4, plus as a matter of course and attrition-based demand, we are able to replace people with pressure, less margin to [indiscernible]. And that has happened beyond [indiscernible] since the last several years. So are at the moment, mitigating the [ pavement ] and if revenue picks up, then we already -- that should be a [indiscernible]. I'll hand over to Kapil for the questions on generative AI and the U.S. market.
So thanks, Srini. So overall, I think on the U.S. financial markets, we are seeing an interest on the regulatory and compliance side, and that's where we see and will continue to see growth area, which is also a strong capability area for us on this entire KYC client life cycle remediation, right? So we will continue to see that.
In terms of generative AI and how it will impact us because all of our operations that we deliver has embedded technology and domain on it. We see that the generative AI as a huge opportunity for us because our ability to deploy Gen AI because the technology is already there, the fine solutions that we have built products that we have built. We are leveraging Gen AI to further enhance our tools and capabilities. And the reason we are able to do that is because of our deep domain that we bring in our operations.
So yes, can there be a threat in terms of the existing revenue, but I see the opportunity without pay the implications of Gen AI on the ops business that we see. Over medium to long term, short term, yes, if there are aberrations, I think we have never shied away from cannibalizing our revenue because of technology interventions because that's what the clients look at us instead of protecting our revenues because it's FTE model. We have a deep as model we have in terms of transaction-based pricing. So we will continue to bring technology to deliver benefits to the clients, and enhance the overall experience, efficiency and effectiveness.
Sure. And just last question was on the business development side, are we seeing increasing investment on the BD side. If you can just quantify what is the increase over there and some color as to BD or business development, either on the U.S. side, Europe side. What is the quantum of increase that you are seeing in number of people and any action around that? So that would be helpful.
So we've added 5 people in this quarter. And I think in the quarter before [indiscernible].
See, our selling is more in terms of very consultative let selling. It's not like we are responding to terms of RFIs and RFPs. It's a very consultative let selling. It's also a very referenceability-based selling. Because the work we do is highly appreciated by our clients. I have met clients in the last quarter across all industry segments. And one thing that consistently came was our very strong delivery track record. And clients who work with us want to do more business with us as well as they, when they move from client A to client B, it's a referenceability that drives our business. So yes, we have added business development. We'll continue to invest in sales and business development, but I think that's a huge asset that we also carry along with us.
Sure. Sure. And just one last question on our client-specific side. I mean, lastly, during 2018 to 2021. We had some challenges on the client-specific side led by insourcing. I mean are there any challenges that you're seeing in your top 10 or top 15 clients. I mean I understand it's a repeat question, but just wanted to get an understanding, I mean is there any insourcing challenge for you?
See, there is -- currently, we don't -- there is nothing that we have seen. However, this -- or to stay always stay above the game, add more value compared to what an insourcing or the GSEs or captives can provide is always something that we have to continuously deliver upon. And like I said, that the clients -- all the clients that I met during the last quarter, they have said that our delivery is very strong, and they're very happy with the overall delivery and execution.
Thank you, Mihir. Next question comes from the line of Sandeep Shah. He's from Equirus Securities.
Just on the margin, Srini, even if I assume just a hypothetical scenario of 27% EBITDA margin, then your walk from 1Q to 4Q would require a quantum jump of 450 basis points at the EBITDA level. So what will drive this? And you, in a previous question also answered that most of the margin improvement could be in second half rather than second quarter because attrition may still be higher in second quarter. Is it right way to look at the margin map in that direction?
Broadly, yes. broadly.
Okay, okay. So you believe that most of the margin improvement may happen in the second half rather than in the second quarter.
Yes.
Okay. Okay. And in terms of Gen AI, your initial comment is helpful. Just wanted to understand in these POCs, which you are working, 32 POC, what is an experience in terms of the cannibalization risk, which can emerge based on the current negotiations with the client because what reports we have, reading my papers, we are reading the impact of Gen AI could be one of the highest on the BPO business rather than any other application development or enterprise IT side of the business. So in the near term, you believe this could be a risk to the revenue growth? And when do you expect the penetration adoption level to start increasing? It could be in the FY '25 or it could be FY '26.
So Sandeep, I don't see a risk in short to medium term because this time, I think Gen AI, I think where it will make the maximum impact is more on the white-collar jobs and the innovation side of the business, right, in terms of R&D, innovation and so on and so forth. In terms of short to medium term because the way our clients have their underlying technology, the technology architecture, I think in the short to medium term, I do not see an impact. In fact, it's an opportunity for us to enhance the end user experience by leveraging generative by building more use cases by helping clients deploy their products faster in a shorter time span. So I see this as an opportunity as opposed to threat on our existing revenues. And all the POCs that we are doing are in that area. It's like in terms of the -- like I mentioned earlier, our inherent strength is deploying technology for whatever work we take on the upside of the business, right? Whether it's in terms of cable and telco side, whether it's KYC remediation, whether it's on the digital side. And this gives us an opportunity to embed Gen AI on the technology tools and solutions that we have built.
[Operator Instructions]. We have a next question from the line of Shradha Agrawal from Asian Securities.
So how should we look at hiring trends for the next few quarters given that we been declined in the last 2 quarters. And given where attrition is today, do we expect some improvement in hiring for the next few quarters?
I think this quarter we are getting flat, maybe slightly up, I think. We were getting [ inflation ] will improve. We [ are giving color ] beyond that is kind of hard because it [ will solve ] in the pipeline [ RFIC ].
Right. And another question is Srini, on the depreciation and amortization number. It came down quite a bit this quarter. Was there any one-off in this quarter expense? Or how should we exit?
So at the beginning of early financial year, as you may be aware, we updated the return on [ revenue ] [indiscernible] depreciation for me the existing [ assets ], and that [ automated results ] in lower depreciation. And in this quarter, the depreciation on [ press ] CapEx was not enough to outweigh the reduction in the existing assets.
Right. And sir, just to probe you more on the Gen AI thing, I think. So one of the large BPO companies did indicate that they expect the revenue cannibalization impact of almost like 20%, 25% for the next 2 years because of Gen AI because they also have a lot of operations around customer operations. So how do we see the cannibalization impact of Gen AI on our customer operations business specifically?
In customer operations, the areas that we operate in, like I have mentioned, I see Gen AI as an opportunity to enhance customer experience and the demand that we are seeing on the CX side, we don't anticipate cannibalization to the numbers that you are indicating. In fact, we see this as an opportunity because we have deployed technology in whatever work we are doing on our customer operations side, whether it's -- there are 3 or 4 areas that we operate in the customer operations side, and we have leverage technology. Roughly 10% of our revenue comes on tech and that has 80% intersection from the areas in which we work on the upside of the business. So that, to me, is an area of opportunity for us by leveraging Gen AI. So I'm not sure what you are referring to, but I don't see that in our book of business.
Yes, I think couple is exactly right. I just wanted to add 1 point that the impact of Gen AI also depends on the portfolio of book for a respective company, right? So many of the larger BPO players tend to have portfolios where they have large numbers of people in a team performing a relatively similar task. And therefore, the applicability and the business case for investing in Gen AI technology is very high. So there is a huge motivation to do that and to automate and reduce headcount.
In our case, across the 3 businesses, typically, we have many teams of fewer headcount each. So it's much harder for technology to have a broad impact in terms of reducing headcount or cannibalizing revenue. So I wanted to point out that there is some difference in the portfolio characteristics of our revenue book versus those are some of the larger BPO players, which is why you see the divergence in commentary from them versus what Kapil is saying about our situation.
We have follow-up question from Sandeep Shah. Sandeep, please go ahead.
Yes. Just on the margins, is it fair to say within our objective of recruiting Mr. Kapil Jain to accelerate the growth, this may lead to some amount of new band -- operating band on the EBITDA margin, which could be lower than 28%, 32%? Or you believe this is just 1-year blip, and we can comfortably even the search of higher growth, we can operate at 28%, 32% kind of EBITDA margin level.
PD, you want to think that.
Yes. So I think, Sandeep, the answer is what we have seen this quarter is basically a function of inherent business dynamics, right? As Kapil mentioned, he is in the process of assimilating the business, its strengths, its opportunity areas. And he sort of will need some time. It's only fair to build a point of view and a plan for execution. So I think we, as he mentioned, we hope to have that available and share some high-level view on that with all of you by the end of this financial year. And I think at that point, we would have made some trade-offs. If we feel appropriate between growth rates, margin, whatever it is, and we can share those with you. All I would say is I won't prejudge that right now because I think he's still in the stage of understanding what the options are and thinking about what the pros and cons are of different approaches. So we haven't yet reached any definitive stance. But hopefully, by the end of this year, we'll be able to share a more conclusive outlook with you.
Yes, yes. And just a follow-up. In terms of Gen AI, I do acknowledge it could be a long-term opportunity. But keeping in mind with some cannibalization impact. Is it fair to assume that we may also accelerate our pedal in terms of creating more pipeline, more conversion of deal pipeline, which will help us to even reduce and minimize the risk, which may come through cannibalization. And just a clarification, [ a couple ] sir, you said that 10% of the revenue is tech-driven, right? That is what you said in one of the reply and 80% of intersection of the same is for digital operations.
Yes. Yes. So what I said, and I think PD also clarified that the nature of work that we do, which is like not large headcount for similar functions. And what I had said earlier that Gen AI will enhance experience. So we see this as an opportunity. In terms of -- and the reason I say that is the 10% and the cross-section it has with our ops revenue, right? So wherever we are doing ops, we have deployed technology, our tools, platform, solutions, and that gives us the confidence to say that generative AI will only lead to enhancing experience, and I see this as an opportunity as opposed to a threat.
And in terms of deal pipeline, is it fair to assume we can accelerate on that side to minimize the risk of any cannibalization, which can come on near to medium term or long term?
Yes. Medium to long term, absolutely, yes. We will -- we are working in terms of how to accelerate the deal pipeline as well.
Thank you, Sandeep. We have a next follow-up question from Mihir. Please, go ahead, Mihir.
Yes, sure. I mean, lastly, I wanted to understand, you mentioned that the pipeline is building up good. So if you can just quantify what is the growth over there. I mean, I understand you don't disclose the number, but I mean is it like a 5% kind of a sequential growth, 10% growth, that will be really helpful. I don't know which are the areas which are driving this? And also, you mentioned that even from a medium- to long-term perspective, you see this accelerating driven by Gen AI. So I just wanted to get an understanding, which are the application areas, which are the end-user areas? Where you see this happening for an acceleration pipeline? I mean what is giving you the confidence? So I just wanted to get an understanding around that. And my second question was on these POCs. I mean you mentioned you are working with 32, you're working on 32 POCs. So I mean, any large 3 or 4 large and important POCs, which are material, which are important, which will be a key differentiator service offering. So if you can throw some color, some highlight as to what are the -- any 3, 4 large POCs. Just look at an understanding that will be helpful.
So I'll take a question on the pipeline side and the kind of opportunities and then Kapil [indiscernible].
Sorry, sir. I think your audio is not audible, sir. It's getting muffled.
Sorry, is it better now?
That is better now, yes.
So I take the first question, and in pipeline, we don't give a specific number on how big is it. [ Pipeline ] a comment that across all 3 areas, the digital customer operation market, we have seen that pipeline to be higher than it was 6 months earlier.
On the applications -- applicability of Gen AI and the POCs, which are going on, Kapil, would like to comment.
Yes. Yes. Sure, Srini. So see, most of these discussions are on providing value-add and adding cognitive capability on our current services to existing and new clients, right? So that's the 1 bucket. And these are areas around content management, data management, board automation, insights on demand and customer care, which predominantly are around our customer service side as well as on the digital side of the business.
And we are building business-specific IPs on the foundation models, which will help solve specific problems across industry verticals, right, whether it's industrial or high-end fashion and retail. And most of our discussions are around digital and customer operations-centric verticals is where we are seeing the active discussions. We won't be able to share in terms of exactly which clients, what is the size of the pilots that we are doing at this stage.
Sure. No, that's -- that's right. I mean this is what something that gives you confidence from a medium to long-term angle. I mean that's what you commented upon in the pipeline part of the piece driven by Gen AI.
Yes.
Next question comes from the line of Hitesh Arora. He's from Unifi Capital. Hitesh, please go ahead.
Yes. So you mentioned earlier that the pipeline is longer, it's taking longer to convert. Just wanted to check any visibility on roll-offs, especially the bigger ones, how is it how are you seeing any threats there?
But we did have some rocks in Q1 and Q4. Beyond that, I think there may be some that we currently see would happen as a matter, of course, which happened in [ converting ]. But we are not seeing anything large.
Okay. Nothing large or unexpected?
Nothing large [indiscernible].
[Operator Instructions]. We a follow-up question from Sandeep Shah. He is from Equirus.
Just a clarification bookkeeping. Srini, what is the quantum of the nonrecurring margin impact in this quarter?
This is somewhere around [ finances ] [indiscernible].
We have next follow-up question from the line of Dipesh Mehta from Emkay Global.
Yes. Just on the, I think, prior question, you said nonrecurring 60. Can you help us understand nature of that nonrecurring, what played out? Second question is about the margin trajectory. Now because Q2 is likely to a positive growth, H2 we are more positive. So are you suggesting quarter-on-quarter growth likely to accelerate in coming quarters for FY '24? Or are we referring to provide that kind of comfort.
And on margin also, I think in some of the earlier question, you said Q2 is unlikely to [ vary ] big margin delta compared to Q1. So in a way, we are looking very big shift in H2 margin trajectory. What gives you that comfort in terms of that big delta? Because usually, when we have a [ seller ] next quarter, we see margin recovery. But this time, we are indicating it is more gradual and H2 phenomenon.
Yes. So on the one-offs, I think [indiscernible] quantify that.. On the margin [indiscernible].
Sorry, your voice was muffled, I can't understand. Would you say it for nonrecurring?
Sorry, there is public information available for [indiscernible], which will give you an indication of what the nonrecurring company place. And on the margin improvement, the nonrecurring component will impact from [ itself ] and we expect stronger recovery towards the back end of [indiscernible] in Q4.
What about revenue growth trajectory?
So all this is -- all this -- or this implicit in all this is -- that revenue could be up.
[Operator Instructions]. I think we have next question from the line of Mihir. He has a follow-up question. Mihir, please go ahead.
Largely wanted to understand, you mentioned about this. But I mean, after couples are joining and you had in the last call indicated about accelerating of the growth. So I mean any color around that, what will be the differentiation in strategy, which will drive the acceleration growth versus what we had historically. Because I mean, we continue to have good growth in '22 and '23 as well. So any color you mentioned at end of the year, you're looking to give a proper commentary, but still [ if any ] indication at this point in time, any color around the strategy that will be helpful. And just on the second part of the piece on the Gen AI, I mean, how do we rate our preparedness versus the competition? And how do you see -- I mean, we prepared versus competition? Just wanted to get an understanding around that.
So perhaps on the first point, I don't know if you have a strategy to share at this point, but maybe you can share some observations from your 3 or 4 months, whatever it's been so far and then you can take the Gen AI question.
Yes. Thanks, PD. So I think in terms of overall observations, like I said, right, in referenceability, repeat business, how we are winning business, consultative-led high on domain, having subject matter expertise, ability to deploy technology bringing the BPaaS revenue outcome based, not a [ bump on ] seat model for the entire book of business. On the creative side, digital, we are opening up a center in Paris. We have expanded our facility in Bangkok which you would have seen from the release that we have done. So I think overall, if you ask me, we have a lot of assets that we have in terms of whether it's technology, whether it's domain subject-matter experts and plant referenceability.
And we work with Fortune 500, Fortune 1000 clients, the set of clients that we have are all marquee clients. So those are the assets that we have. In terms of overall strategy, obviously, we will have to double down on high focus and pick certain areas. I am still evaluating and meeting the clients because the areas we will pick have to be relevant from a client point of view. And so that we can match our focus areas with the demand that we see in the market. And like I said earlier, in Q4, we should be able to provide you some clarity in terms of what our focus areas would be and how we would be able to accelerate growth and present to you a 3- to 5-year plan. So that's the broad thinking at this stage. PD, please add if there's anything that you'd like to add.
No, I think that's good.
Sure, that's helpful. And just on the -- I mean, on the preparedness on the Gen AI side versus competition. How do we see ourselves versus what competition is being out just on...
Yes. Our focus right now has been because it's so new and it has accelerated at a speed where none of the previous technology interventions have had. So I think rather than seeing in terms of what the competition is being, we are doubling down in terms of what -- how we can deploy Gen AI and enhance the cognitive capability of the tools and platforms that we already have deployed in the ops area, like I mentioned before, and that's really where we are focusing on and on the back of it. Like I had mentioned, we have about 32 POCs pilots that we are working on.
Thank you, Mihir. We have next question from the line of Sameer Dosani. He is from ICICI Pru. Sameer, please go ahead.
Yes. So on the financial services piece on the financial operations that you have so any indication of any consolidation in your top line? Anything you can share and how are we participating in those consolidation opportunities. If you can share some color on that.
Kapil, you want to take that?
Sorry, can you repeat the question, Sameer?
Yes. So in financial operations, right? That business, is there some consolidation opportunities because clients would be very much interested in consolidating vendors. Is there some opportunity now that our participation in those opportunities which can [indiscernible].
So Sameer, I think we are not seeing the clients are not looking to stay with their existing suppliers in the current scheme of things, we are not seeing that clients are looking to consolidation because of the overall uncertainty that still prevails and there's always a cost to switch over. And the pressure that the clients are facing on the revenue side. And hence, at least we are not seeing consolidation happening in the industry currently. However, as and when that happens, I think in certain areas, I do see we will get in certain areas because that depends upon the clients where our footprint is and how we are positioned. And I think, like I said, we have strong referenceability with the client. So I think currently, I'm not seeing consolidation as a key driver in the clients that we work with.
Understood. Understood. And second thing, if I'm not wrong, our volumes in that business is dependent on the volatility of the market rather than the direction of the market. So how are you seeing volumes developed because in the last 6 to 9 months, it has not -- the ones would have been very low. So how do you see that? Is my -- correct me if I'm wrong. And how should we think about the pipeline or the capacity buildup by your clients in this space if [ interest, I think ].
No, I'm not clear.
So I think based on the capacity, your clients would have forecasted what are you seeing in this business. Last 6 to 9 months would not have been great even if some way can just share some insight on this.
So I think like I said, because of the overall macroeconomic environment, clients are cautious, but I think -- and the -- as you know, most of our U.S. clients, they have their planning cycles around October, November. And before December, they will freeze on their budgets, which is where we will get a better clarity. But at this point in time, we are seeing a better environment than we saw when we were entering this year, the Q1 of this fiscal, and we were exiting Q4, Q1, I think Q1. So I think in terms of what the outlook would be and how the clients are looking to have their discretionary spend, we will have a better view in Q3.
Sorry, Sameer, just when you talked about volumes, did you -- were you referring to trading volumes of our clients?
Yes, that is generally affected? Is it a correct understanding?
Well, so I think if you look at our markets work, it's 2 main buckets. One is trade processing and trade life cycle work. Where there is a loose linked to volumes. I won't say it's a very tight link. There's a loose link to volumes. But a good chunk of the money comes from also work to around client like [indiscernible] more regularly driven. In that case, for that word change in regulation, this is much more a driver of activity for us, than trading volumes of our clients. So in some senses, I would say those 2 parts of the markets book have different underlying drivers which determine how much work we get. And so to some degree, that reduces the correlation and across the book, which is good for us.
Next question is from the line of Nikhil Choudhary. Nikhil, I would request if you can just name your phone, before asking questions so that management can know you. Over to you, Nikhil.
This is Nikhil from Nuvama. So basically, we haven't seen any case of roll-off or compared to what we have seen in '16 to '19 period, right, completely stack in the last 3 years compared to pre-COVID appear. So just want to understand what is driving this change in the industry. And basically, why the clients are not choosing to do rollouts in-sourcing compared to '16 to '19 period? Has anything changed?
So let me take that because I think that is before a couple of times. I would say if you look at the roll-offs we have, I would categorize them into 2 broad buckets. One is a certain percentage of business that rolls off any given year just because of the nature of the book we have. It could be that, that work was short term, originally when we signed up for it. So we knew that it has a defined end date. It could be that the client has chosen to defocus from that area, so they've stopped that line of work, and so they don't need our support. It could be different reasons. But historically, in the 20-year history of the firm, there is a certain percentage of the work that tends to come to an end in any given year. And that, I think, is sort of baked into and accounted for when we build our forecast and projections.
The second bucket of rollouts is very client specific. Some corporate event typically happens. And as a result, there is a chunky amount of revenue that gets affected for us. And that, by its very nature, is hard for us to forecast because we get visibility into those events, pretty much at the last minute. What did happen, unfortunately, is in that period you're referencing between 2016 and '19 is that there was a bunching up of 2 or 3 of these events within a 4-year time period, which cumulatively had an impact of about $50 million in annual run rate for us. And at the time, we had a $200 million firm. So that $50 million was almost 25% of the book. And that was basically wiped out the effect of all the new sales that we were making into other clients.
Fortunately, that hasn't recurred, but again, by its very nature, those are not things that we can forecast. So if a large client of ours, [ because of COVID ] was to go bankrupt or if a large client was to suddenly decide they want to pull all the work to in-source. Then we would suffer that kind of impact. Having said all of that, as Kapil said, we believe the work we do is very high quality and provides outstanding value to clients. So usually, there is not that business case for them to move work from us to some other vendor. But there were 2 or 3 events that happened in the 2016 to '19 period, again, driven largely by corporate events like M&A that created that outcome for us, which can happen from time to time, and it's not something that we have visibility into.
Thank you, Nikhil. [Operator Instructions]. We have a question from the line of Sandeep Shah. Sandeep, please go ahead.
Yes. Couple in your remarks, you said we are, as of now, applying Gen AI more on the digital operation and customer operations. It could also have an impact in terms of what we do on the financial service operations, that's [ main ], right? Or you don't foresee much of the impact on that side. because what we do could also be impacted through Gen AI in the financial services in that look?
So you're right, Sandeep. And what we are also seeing is clients also in terms of the POCs, what the impact would be, having discretionary budgets in terms of to work on pilots, POCs to really see where the impact would be, what's the opportunity is, whether, and mostly, like I said, it will be on enhancing experience, innovation and so on and so forth. So yes, more than an impact, I see it as an opportunity. And with financial services clients also, though the majority of traction we are seeing currently is in the 2 spaces that I mentioned earlier.
So as there are no further questions, I would hand over the floor to the management for closing comments.
Thank you, Asha. Thank you, everyone, for joining the call today, and we'll see you next quarter. Thanks a lot.
Thank you. Thank you, everyone.