Firstsource net down 38%; lowers guidance

Firstsource, the pure play business process outsourcing (BPO) firm, reported drop of a 38 per cent in net profit for the second quarter ended September 30, 2008. The company’s consolidated net income was down at Rs 28.2 crore from Rs 45.59 crore in the corresponding quarter last year.

The numbers were impacted on account of hedging and other income loss of around Rs 4.5 crore. It further had a loss of Rs 2.5 crore due to the adoption of accounting standard 30 (AS 30) that mainly affects the accounting treatment given to the outstanding foreign currency convertible bonds (FCCB) of $275 million. Had the standard not been adopted, the net profit for the quarter would have been lower by Rs 108.3 crore.

Revenue for the quarter at Rs 425 crore was up 53.8 per cent from Rs 276 crore in the same quarter last year. On a sequential basis, the company had reported a net loss of Rs 50 crore, whereas revenue was up 4.2 per cent from Rs 407.8 crore.

Firstsource revised its revenue guidance to 21 per cent in dollar terms (32 per cent in INR terms) from the original guidance of 33-38 per cent in dollar terms. Above guidance factors 3 per cent adverse impact on account of cross currency movement. The other reasons being overall market environment and longer time to close deals.

“While the business environment is challenging, we are pleased that we have been able to grow revenues and improve margins. Our existing client base is largely stable and we are increasing business with them. We believe that while the next few quarters would see relatively slower growth, the long term prospects for the BPO industry continue to be extremely compelling and will offer high long term growth opportunities,” said Ananda Mukerji, MD & CEO Firstsource.

Mukerji stated that while telecom and healthcare verticals are contributing to growth, the credit card collections business, contributes 10 per cent to the revenue, has taken some hit. The company did not add any new clients for the quarter but said that it is in the process of ramping up operations for three telecom clients. Two from UK and one in the domestic market.

Mukerji also added that seven of its top 10 clients have grown in revenue terms.

Firstsource is also setting up three centres, each with a capacity of 500 seats, in Siliguri, Jalandar and Bhubhaneshwar. It will be investing about Rs 30 crore in these centres that would cater to domestic market.

The second quarter annualised attrition (post 180 days) was 45.4 per cent as compared to 38.7 per cent in the previous quarter. This increase was largely due to ramp down of one program and movement of another to a new delivery location. Excluding this, attrition for the quarter was 39.8 per cent.