Firstsource Solutions Ltd

Firstsource Solutions Ltd (FSL) is a Sanjiv Goenka Group owned Business Process Management (BPO) company.

• FSL operates from 45 global operation locations with over 23,000 employees
• In FY2016, 97% of revenues came from existing customers
• Main services:
○ Customer interaction management
○ Data processing and transaction processing
○ Collections management
○ Consulting and analytics
• Main industries supported
○ Healthcare - 39%
○ Telecom & Media - 37%
○ BFSI - 24%
• Revenue contribution from geography
○ US - 55%
○ UK - 38%
○ India - 6%
• FSL repaid $45 mn debt during FY15-16
• FSL acquired the BPO division of ISGN Corporation™ (“ISGN”), a leading provider of end-to-end BPM solutions to the U.S. mortgage industry. Mortgage is the second largest consumer spend segment in the U.S. after Healthcare.
ISGN Solutions, Inc. provides following outsourced services:
1. Mortgage Processing Outsourcing
2. Mortgage Servicing Outsourcing
3. Title and Settlement Services
4. Valuation Services
• BPM is seeing higher adoption of process-centric delivery, BPaaS analytics and Robotic process automation tools. BPaaS models are expected to grow four times faster than those of traditional BPM services from 2014 to 2020.

Segment Outlook

FSL addresses two segments within the healthcare vertical, the Payer market represented by the Insurance companies and the Provider market represented by hospitals, physician groups in the U.S.

The partnerships and alliances forged with companies like EBIX, Gaffey Healthcare, DCS Global, JDA Global, have helped the Company to become a full services provider in the Payer industry and complete end-to-end RCM services provider to the hospital segment.

Using consumer demographic data, customer interaction journeys across multiple channels (digital, voice, chat, email etc.), and transaction history, the Company has created analytical models to predict future interaction behaviour patterns of consumers. These models help to maximise revenue potential and reduce churn thereby delivering superior business outcomes to the clients. Analytics will continue to be a significant investment area for the Company going forward.

FSL has a product portfolio comprising of productised solutions in Customer Interaction Analytics (First Customer Intelligence), Web Chat (First Chat), Process Automation (First Smartomation), Workforce Management (First WF Suite), Complaints Management (First Resolve) and First Digital. In the healthcare provider segment, FSL has a Revenue Cycle Management product suite, comprising MRES, MPAT and MBOS.

Telecommunications and Media (T&M)
Technology developments proliferated a number of interaction channels with the consumers and now include self-help, web chat, video chat, social media and virtual-assistants apart from the traditional interaction channels of IVR, phone support, SMS, email and paper correspondence. Investing to deploy an effective Omni-channel framework reduces the overall cost to serve for telecom and media organisations. The focus will be on customer journeys across different channels, while orchestrating the customer experience across different channels in a seamless, integrated and consistent manner.

The acquisition of ISGN Solutions in the US mortgage industry marks the entry of FSL in a new market segment, thereby enabling it to expand its mortgage services portfolio across the US and UK markets. These end-to end services across the mortgage value chain require extensive industry and domain knowledge, coupled with differentiating innovative services which position the Company favourably into the higher value segments.

• Company has significant debt and would need additional debt for scaling up on the Sky project.
• There is significant client concentration - top client ~21%, top 5 ~44%
• Impact of UK based clients is uncertain due to Brexit. There may be loss due to currency fluctuations; new centers may need to be opened in non-UK Eurozone locations adding to significant capex & debt burden

DISCLOSURE: I am invested in the stock and thus an interested party.



Thanks for the detailed report. Can you please provide your views on future outlook between Firstsource, Eclerx and Allsec Tech.

Allsec and Firstsource both are Priced at nearly same P/E.

I have already provided a detailed report on Allsec in its thread. I would love to know your thought process in the analysis and growth potential of both the companies and also eclerx since they operate in a similar industry.

@Alphin Dont follow Allsec. Going through eClerx these days… but used to own eclerx a few years back and the management is very good. Their numbers are also much better than any of the peers.

Thanks abhishek for the detailed write up. I am also invested in FSL. From listening to concall I can make out two important aspects for the company

First is ISGN acquisition seems to have worked much better than management expectations.

Second is that the Sky deal is a multiyear deal with a lot of potential for the company. And FSL will be the sole vendor to Sky thru this deal. If this deal fructifies as per expectations and according to company expectations then it can be an important avenue for growth.

Contrasting to that is the ramp down of Verizon deal with was supposed to lead to lukewarm growth but in q1, ISGN and other segments seem to have made up for this rampdown.

As Abhishek mentioned, debt is there to the tune of 97 mn dollars as on June 2016.


Some other important points:

Ranked 6th by NASSCOM in the BPM space in India in 2016

Verizon ramped down, which resulted in the high attrition rate in the current quarter

SkyTV deal -

  • FSL is now the sole for UK based SkyTV’s core businesses. FSL will take over the competitor’s business and all future growth would be the exclusive to FSL.
  • A total of 1000-1100 employees are to be transferred to FSL. About 200 of them would move in 1-Sep-16 and the remaining on 1-Mar-17.
  • FSL will need to invest 20 mn GBP ($26-27 mn) in the next 3 years for this contract.
  • Sky can be a major reference client for FSL for future deals
  • Sky currently generates about $22mn per quarter in revenues for FSL. This deal will add about 40-45% revenues

ISGN acquisition -

  • This division will be significantly EPS & margin accretive. Probably OPM would be 1% higher than existing.
  • Expectation is that this division will clock $30-35 mn per year (Q1 they have clocked $9-9.5 mn)


  • Net long term debt is $97mn. FSL expects to end the year at around $65 mn of net debt.


  • Full year tax rate is expected to be close to 17%. Tax rate has gone up primarily to the ISGN acquisition, as ISGN operates at the max tax bracket in US (40%) and operates through STPIs in India. FSL is moving the teams to SEZ to reduce tax impact marginally.

Thanks @hitesh2710 for the idea.


FSL chart shows an interesting pattern. If one joins the major tops since 2010 it provides a trendline as shown on the attached weekly line chart. The stock price managed to breach the trendline in July 2016 but fell down from 52-53 levels and now seems to be consolidating.

please find the chart attached.


FSL’s IPO price was 64 in 2007. Still significantly below offer price :slight_smile: I don’t know technicals well, but there may be some supply at those levels, (if it gets there).

Thanks @basumallick for initiating this thread, I have been on the backseat for quite some time to do the same as i am new to Investing and this Forum.

Couple of questions in mind:
From my research, Goenka companies have the record to not pass on the benefits to share holders, what is your view on this?
They have recently picked up stake in Pune IPL franchise, will this have any affect on the overall Goenka companies?

Few points to add:
FSL has recently invested in Bangalore based Analytics company “NanoBi”, Looking for more acquisitions in the space.
Consistently paying back debt for the past couple of years.

I am a newbee so plz bear with my questions,

Disclosure: Invested

Goenkas have not been known to be a very investor friendly group in the past. So, that is a key monitorable in FSL. But as a business FSL, as you also point out, seems to be doing the right thing in terms of systematic debt reduction. They are also doing timely and seemingly value accretive acquisitions. So, let’s see how it works out. The valuation does provide some margin of safety.


great post sir!
would you mind to throw some light on the negative free cash flows?

many thanks,
Dr. Tarun Deep Singh

STEINBERG INDIA EMERGING OPPORTUNITIES FUND LIMITED exited the stock in June 2016 qtr. This is an information only, collected from ratestar, the link


Voice BPO is getting rapidly automated. Chatbots are replacing BPO agents. No wonder pure play BPOs have not been able to scale.

On EV/EBIDA basis this is trading close to Wipro, L&T Infotech, Mindtree etc

@basumallick, @hitesh2710
hgs is also in the same space (pureplay bpo) and it is also doing good. how do you compare firstsource with hgs.


I have invested a few months back in FSL in small quantity to track the stock. Decrease in interest cost due to regular reduction of Debt thus add to eps and bring back the company in right track with prudent management of Sanjeeb Goenka is positive for investment. Major negative is huge capital base and perception about the RPG group.

Hi @basumallick,
Thanks for starting this thread. Definitely it looks like there are some positive developments for the company.
However CEO’s remuneration is concerning me. It is around 6 cr (4.2 cr salary + 1.8 cr stock options). This is somewhat higher when we take it into account that they have not been distributing dividends and also company is having around $97 mn debt.
Please provide your thoughts on it.


Firstsource has been doing the right things as has been mentioned in the above posts.

  1. Reduction in debt is a big positive.
  2. Rajesh the CEO has done an excellent job in turning around the company. The company is now focused on profitability and any new business has to meet the profitability threshold. Regarding his salary, this is a global industry and you need to pay competitive salaries to retain talent. A little under a $1 million salary for almost half a billion dollars revenue in my opinion is reasonable especially when the CEO is delivering. However, he is the key person running the show and hence exposure to key man risk.
  3. They have been hiring senior/ seasoned professionals at the top level and the mandate is clearly to hire the best talent that they can. This will show results in a few years.
  4. The acquisitions esp in the US has raised the profile of the company and they are now attracting good sales talent in the company. This is a positive and will hopefully lead to better sales performance.
  5. The Sanjiv Goenka group had acquired this company to move away from the regulated sectors. We can always question the past track record of the group with regards to sharing the benefits with the minority shareholders. However, i think that this risk is low as it is unlikely as Sanjiv Goenka is equally interested in the market value of the company. This is one of his few acquisitions and he is interested in making it successful to cement his reputation as a person who can also operate in unregulated industries.

Disc- Exposed to the stock


Debt reduction plan is intact for Firstsource.

Firstsource Solutions Ltd has informed BSE that Firstsource Group USA, Inc, a
wholly owned subsidiary of the Company has successfully made its Sixth
quarterly repayment of USD 11.25 million on its outstanding debt on
September 30, 2016.

With this, the company’s subsidiary repaid USD 67.5 million of debt so far, since June 2015.

Disc. Not invested. Tracking.

Q2 Results:

Y-o-Y growth of 12.3%
EBIT of Rs 965 million
Up Y-o-Y by 28.3%
PAT (profit after tax) of Rs 713 million
Up Y-o-Y by 21.5%

Kolkata, October 27, 2016: Firstsource Solutions Limited (NSE:FSL, BSE:532809), a global provider of customized Business Process Management (BPM) services and a RP-Sanjiv Goenka Group company,
reported its consolidated financial results for the quarter ended September 2016 according to Indian Accounting Standards (IND AS).

Highlights for the Quarter ended September 30, 2016:

Revenues of Rs 8,844 million is up by 12.3% Y-o-Y compared to Rs 7,878 million for the quarter ended September 2015.Operating EBIT (earnings before interest and tax) of Rs 965 million is up by 28.3% Y-o-Y compared to Rs 752 million for the quarter ended September 2015.PAT (profit after tax) of Rs 713 million is up by 21.5% Y-o-Y compared to Rs 587 million for the quarter ended September 2015.Cash position is at Rs 1,220 million.For the quarter ended September 30, 2016, Firstsource derived 55.1% revenues from the US, 38.1% from UK and 6.8% from Rest of World, including India.For the quarter ended September 30, 2016, Firstsource derived 34.5% revenues from Healthcare, 29.8% from Telecom & Media and 35.5% from
BFSI.For the quarter ended September 30, 2016, Firstsource derived 51.3% revenues from Customer Management, 31.9% from Healthcare, 10.9% from Collections and 5.9% from the Domestic business.As of September 30, 2016, Firstsource has 48 centers, compared to 47 as on June 30, 2016. Added 2 centers (one in India and one in UK) while shutdown one center in India.Employee strength is 24,910 as of September 30, 2016, addition of 762 employees in the quarter.Q2 annualized attrition (post 180 days):
Offshore (India and Philippines) – 43.7% compared to 50.1% in Q1 FY17Onshore (US and Europe) – 49.9% compared to 49.3% in Q1 FY17Domestic (India and Sri Lanka) – 71.7% compared to 76.8% in Q1 FY17

Business Highlights for Q2 FY 2016-17


Firstsource announced a 10-year contract extension worth USD 40 million with one of its largest Healthcare clients in the US. The company will deliver claims adjudication and customer service from two
of its US locationsThe consolidation activity of Sky’s partner network has commenced following the signing of a 10 year strategic partnership between Firstsource Solutions and Sky UK. As a result of this, transition of
Operations to Firstsource is in progress. Firstsource Solutions and BBC Worldwide signed a contract to provide ‘bespoke digital customer support’ for BBC’s newly-launched BBC Store ‘buy-to-keep’ programming services

Business Wins

Won additional contracts in the quarter for the Customer Management, Healthcare, Collections and Mortgage business with existing and new clients.

Debt Repayment

Firstsource Group USA, wholly-owned subsidiary of Firstsource
Solutions successfully made the quarterly principal repayment of USD
11.25million on its outstanding debt on September 30, 2016.

Rewards & Recognitions

Received the Gold Award jointly with NOW TV in the ‘Technology and Telecoms’ category and Silver Award in partnership with giffgaff in the ‘Engaging Customers Online’ categories at the UK Customer Experience
Awards, 2016Dual-award win at the Asia Pacific HRM Congress Awards, 2016 in the categories – Organisation with Innovative HR Practices and Young HR ProfessionalWon three awards at the Asia’s Best Employer Brand Awards, 2016 in the categories- Best B-school recruiting programme, Organisation with
Innovative HR Practices and Best HR Strategy in line with BusinessRanked #6 and #18 by NASSCOM in the Annual Rankings for the ‘Top 10 BPM Exporters’ and ‘Top 20 IT-BPM Employers’ in India for 2016,
respectivelyISGN Solutions, a FSL company mentioned as a ‘High Performer’ amongst industry peers in HfS Blueprint Report: Mortgage As-A-Service 2016

Sanjiv Goenka, Chairman, RP-Sanjiv Goenka Group and Firstsource Solutions said, “The second quarter results for Firstsource are consistent with our expectations. We had few wins from clients in the
quarter. Moving forward, we will continue to maintain our growth and invest in our solutions portfolio that will provide value to clients and stakeholders.”



I think the markets are spooked by the possibility of forex problems in view of Pound devaluation due to brexit. Some details of forex hedges given along with q2 fy 17 presentaion. (seems a lot of GBP hedge is covered for next 12 months and close to 60% for next 12-14 months.)

Foreign Exchange Hedges

• Outstanding FX hedges at $50 million for USD and £62 million for GBP

  • Next 12 months: 59% coverage for USD at INR 70.6 levels, 82% coverage for GBP at
    INR 109.7 levels, 25% coverage for GBP at PHP 68.6 levels
  • Next 12 – 24 months: 39% coverage for USD rates at INR 73.8 levels and 65% coverage
    for GBP at INR 107.9 levels
  • Next 24 – 36 months: 30% coverage for GBP at INR 102.6 levels

This is a big deal and speaks very well for the technical & delivery capability of the company.