Firstsource to shun non-profitable clients to boost revenue

MUMBAI: BPO firm Firstsource Solutions today said it is looking at strengthening its revenues this year by eliminating non-profitable clients.

The company, which posted 41.6 per cent jump in net profit at Rs 41.04 crore for the June quarter, is looking at consolidating its topline and increasing margins.

"Fundamentally, this year will be devoted to consolidation of topline. There are some accounts which are not profitable. There will be rationalisation of such customers. There will be a focus on costs and margins," Firstsource Solutions Chairman Sanjiv Goenka told reporters here.

Revenues will get consolidated with better quality accounts and thus, bottomline will also grow, he added. "FY15 onwards we will again see a ramp up in revenues," Goenka said.

Revenues rose 6.5 per cent to Rs 719.12 crore for the reported quarter compared to Rs 675.170 crore in the corresponding period last year.

Last year, RP-Sanjiv Goenka Group had acquired 49.5 per cent stake in Firstsource through a wholly-owned subsidiary of CESC Limited in a Rs 400 crore deal.

It further acquired 7.36 per cent through an open offer, taking its total shareholding to 56.86 per cent.

Asked about the verticals which could see non-profitable clients being weeded out, MD and CEO Rajesh Subramaniam declined to name the clients, but said, "There are non-profitable clients who will either be converted to profitable or we will have to exit."

He said the company did an EBIDTA of 8.2 per cent in Q1 last year and this year, it's 11.2 per cent in Q1.

"So, you can get a sense that we will be north of 12-12.5 per cent in EBIDTA, which is a clear 200-250 bps improvement over last year," he added.

The company gave a wage hike of 8-10 per cent to its employees in India, while for onshore employees it was 1.5-3 per cent.

"Since we have a 12-month hedging cycle...we hedge on the basis of how we manage our customers, business and profit and loss account. So, the impact on profitability because of exchange is muted," he said.

Thanks to attrition, the absolute impact of wage hikes over the year is 3-4 per cent and the forex is muted, Subramaniam said.

The employee strength of the company stood at 31,623 as on June 30, 2013, a reduction of 249 employees in the quarter.

It had 20,671 employees in India, while 10,952 people were located outside of India.

The annualised attrition in offshore business (India and Philippines) was 52.7 per cent, while that in offshore (US and Europe) and domestic (India and Sri Lanka) stood at 39.9 per cent and 101.3 per cent, respectively.

The company's net debt at the end of the reported quarter stood at USD 167 million.

Asked if the company was looking at acquisitions, Subramaniam said it would look at small-ticket acquisitions in areas like analytics, which would be funded through operating cash flows.

On the demand environment, he said the healthcare sector in the US and BFSI in the UK market is doing well.

The US and Canada contributed 45.8 per cent of the firm's revenues, followed by the UK with 34.5 per cent, India 10.5 per cent and 9.2 per cent from the rest of world, as on June 30, 2013.

As on June 30, 2013, Firstsource derived 45.4 per cent of its revenues from Telecom & Media segment, 31.5 per cent from Healthcare and 22.4 per cent from BFSI.

The company has also appointed Stephanie Wilson as the executive vice president (operations) for the European region.

Wilson joins Firstsource from Telepresence and she has also worked with TSYS Managed Services and Convergys.