Firstsource Solution shares rise 4%; JM Financial sees 13% upside

JM Financial Institutional Securities is upbeat on the company's strong turnaround under CEO Ritesh Idnani (appointed August 2023).

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JM Financial has initiated coverage on Firstsource Solutions, a diversified pure-play Business Process Outsourcing (BPO) service provider, with an ‘Add’ rating and a target price of ₹370, which implies a target of 13.4 per cent from Monday’s close at ₹326.15 per share. JM Financial expects a 13 per cent USD revenue compound annual growth rate (CAGR) and 200 basis points (bps) Earnings before interest and tax (EBIT) margin expansion over FY25–28E.

 

The brokerage is upbeat on the company’s strong turnaround under CEO Ritesh Idnani (appointed August 2023). Despite past challenges of siloed acquisitions, mortgage weakness, client offshoring, and GenAI threats, Firstsource has staged a revival driven by its “One Firstsource” strategy—focusing on account-led cross-sell, portfolio adjacencies, brand amplification, and tech partnerships to embed AI in offerings.

 

At 9:30 AM, Firstsource Solutions' share price was trading 1.79 per cent higher at ₹332 per share. Intra-day, the stock gained 4.3 per cent, touching the day’s high at ₹340.4 per share. In comparison, the BSE Sensex was up 0.28 per cent at 80,587.82

 

Year-to-date (Y-T-D), Firstsource Solutions shares rose 5 per cent, as compared to Sensex’s rise of 5 per cent.   CATCH STOCK MARKET LIVE UPDATES TODAY

Why is JM Financial upbeat on Firstsource Solution?

GenAI: From threat to growth driver

While GenAI was initially perceived as the biggest risk to the BPO industry due to its ability to automate repetitive tasks and compress revenues, BPO firms have so far outpaced IT services in growth since ChatGPT’s launch.

 

Firstsource has embraced AI through technology partnerships and platforms, shifting to outcome-based pricing while passing productivity benefits to clients. This move, JM notes, has widened their technology arbitrage versus clients’ in-house BPO teams, driving higher outsourcing. Outsourcing penetration in BPO is up 120 basis points (bps) over 2021- 24. New use cases, e.g., data annotation, is helping too.

One Firstsource strategy

Firstsource Solution CEO Ritesh’s ‘One Firstsource strategy’ addressed structural, cyclical, and technological risks faced by the company. The strategy revamping included assigning dedicated client partners to identify white spaces and proactively build a transformative deal pipeline. 

 

He set up a war room for new must-have logos and hired a Chief Digital & AI officer, who helped onboard 50 tech partners – from hyperscalers to start-ups. Its expansion into adjacencies has reduced macro-sensitivity and broken down silos across verticals.

Strong growth momentum

Firstsource Solutions reported its highest-ever annual contract value (ACV) in FY24, comfortably surpassed by 60 per cent in FY25. The average size of large deals rose by 40 per cent, aided by a $50 million BPaaS win.

 

Management has guided for 10–12 per cent organic constant-currency growth in FY26, following 15 per cent in FY25, while margins are expected to improve as earlier sales and leadership investments taper down.