Release Date: April 28, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Firstsource Solutions Ltd (BOM:532809, Financial) achieved an annualized revenue run rate of USD1 billion, reaching this milestone four quarters ahead of their aspirational goal.
- The company reported a significant year-on-year revenue growth of 29.4% in rupee terms and 24.3% in dollar terms for Q4 FY25.
- Firstsource Solutions Ltd (BOM:532809) signed five large deals in Q4, contributing to a total of 14 large deals in FY25, the highest in the company's history.
- The company added 43 new logos in FY25, including 12 strategic logos, indicating successful expansion and client acquisition.
- Firstsource Solutions Ltd (BOM:532809) was recognized among India's top 50 best workplaces for building a culture of innovation and received several industry accolades for sustainability and technology solutions.
Negative Points
- Despite strong revenue growth, the EBIT margin for FY25 was 11.1%, which is at the lower end of the company's guided range.
- The retail and utilities business saw a 9% quarter-on-quarter decline in constant currency terms due to seasonal softness.
- Europe experienced a 3% quarter-on-quarter decline, primarily due to seasonal softness in the UK-centric retail business.
- The company's net debt increased to INR13.2 billion as of March 31, 2025, from INR6 billion a year earlier, indicating a rise in financial leverage.
- The offshore and nearshore hires made up 80% of gross additions, which, while aligning with demand shifts, may impact revenue per employee metrics.
Q & A Highlights
Q: Does Firstsource's current revenue size work in its favor in the current macro environment, and how is the overall demand environment?
A: Ritesh Idnani, CEO, explained that Firstsource's size allows it to be agile and impactful, helping it win against larger and undifferentiated players. The company is not immune to macro headwinds but is focusing on execution and leveraging its strengths. The BPM services are less linked to discretionary spend than IT services, and clients are actively pursuing cost optimization programs.
Q: How much of the FY26 guidance is inorganic, and what was the split for FY25?
A: Pankaj Kapoor, Head of Strategy, Investor Relations and ESG, stated that 3% of the FY26 guidance is inorganic, while 7% of FY25's growth was due to inorganic factors.
Q: What are the expectations for segmental margins, particularly in the CMT vertical, and which industry segments are expected to lead growth in FY26?
A: Ritesh Idnani noted that initial ramp-ups in the CMT vertical affected margins, but they are expected to stabilize. Growth is anticipated across all industry segments, with healthcare and utilities expected to lead due to their smaller base and strong pipeline.
Q: Is there any conservatism in the FY26 guidance given the strong exit pipeline?
A: Ritesh Idnani explained that the guidance is based on current business visibility without assumptions on macro variables. The transformative nature of recent deals means revenue flow will occur over several quarters, influencing the guidance.
Q: What are the expectations for staff costs and utilization rates in FY26?
A: Ritesh Idnani clarified that the BPO business model does not typically involve maintaining a bench, and staff costs are aligned with definitive orders. The shift to offshore and nearshore locations is by design, affecting revenue per employee metrics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
