With the banking and financial services (BFSI) segment now bringing in a fourth of Firstsource’s revenues, it is not surprising that the firm will not be able to deliver what it had promised. So, a roughly 36 per cent revenue target for 2008-09, in dollar terms, has now been pared to around 21 per cent. The growth in rupee terms would of course be higher; though in the September 2008 quarter, it was a disappointing 4 per cent q-o-q despite a huge depreciation in the currency. Revenues in 2008-09 will not be comparable with the Rs 1,240 crore reported in 2007-08 because Firstsource acquired US-based MedAssist in 2007-08.
The company’s operating margins too could be under pressure and may not hit the15 per cent reported in 2007-08, partly because it is incurring costs on setting up new centres. That means the BPO player’s net profit for the year could grow at a slower pace than the 35 per cent achieved in 2007-08 when it reported a bottom line of Rs 131.5 crore; again the numbers will not be comparable.
Also, the net profit for 2008-09 will not reflect the company’s notional foreign exchange losses because it has changed its accounting policy. From the September 2008 quarter, the notional foreign exchange losses will be transferred to the translational reserve account and will not be not routed through the profit and loss account. In the June 2008 quarter, the firm reported a loss of Rs 50 crore while in the September quarter, the firm posted a net profit of Rs 28.28 crore.The notional forex loss in the September quarter was Rs 108.3 crore.
Around 40 per cent of Firstsource’s revenues are now derived from the healthcare segment, which is relatively less cyclical. A good part of the growth in the current year will be driven by this segment which was strengthened with the acquisition of MedAssist. However, some of this could be offset by the weakness in the BFSI space given the continuing global financial crisis.
