Add firstsource solutions ltd For Target Rs. 250 By Emkay Global Financial Services Ltd
Firstsource (FSOL) delivered a mixed performance in Q4. Revenue grew 3.3% QoQ to USD283mn (3% CC), below our estimates; it also missed implied growth guidance, largely due to delayed regulatory approval in the UK collections deal and deferrals in Medicare Advantage program impacting the payer segment. EBITM expanded by 20bps QoQ to 12.2%, marking the 6 th consecutive quarter of margin expansion and in line with our estimates. FSOL signed four large deals (each with ACV exceeding USD5mn) and added 11 new logos in Q4 (including six strategic logos), with 17 large deals signed in FY26 vs 14 in FY25. The management has guided for FY27 CC revenue growth of 10-13% (implying CQGR of 1.9-3.0%), with ~2-2.5% contribution from PDC and TeleMedik, and EBITM of 12.25-12.75% for FY27, targeting 14-15% over the next 3-4Y. The outlook is supported by strong momentum, robust pipeline, and early commercial traction of FSOL’s ‘Intelligence That Operates’ strategy; growth is expected to be evenly distributed across quarters, driven by healthy deal conversion (~50% strategic accounts in the last 18M, scaling up to USD5mn) and strong client relationships. We cut FY27/28E EPS by ~1%, factoring in the Q4 performance. We retain ADD and our TP of Rs250, at 16x Mar-28E EPS.
Results summary
Revenue grew 3.3% QoQ to USD283mn (3% CC), below our estimate of USD288mn. EBITM expanded by 20bps QoQ to 12.2%, in line with our estimate. Net profit came in at Rs2.1bn, slightly below our estimate of Rs2.2bn due to higher net interest cost. The company added 11 new logos (of which 6 are strategic) and won 4 large deals in Q4. Headcount declined 1.3% QoQ to 36,205. What we like: Strong deal intake/pipeline, and healthy cash conversion (~78% OCF/EBITDA). What we do not like: Revenue miss, softness in Diverse Industries and CMT.
BFS and Healthcare lead growth in Q4; broad-based momentum in NA
Revenue growth was led by BFS (5% QoQ CC) and Healthcare (10%), and partially offset by decline in Diverse Industries (-8%) and CMT (-4%). Among geographies, North America (NA) grew 4% QoQ in CC terms, while EMEA was flat sequentially.
Repositioning toward an AI-led operating model
FSOL has repositioned itself around ‘Intelligence That Operates,’ a full-stack model delivering end-to-end agentic systems with outcome accountability, bridging pure-tech platforms and traditional BPO models. Clients are redesigning their operating models for AI, shifting from isolated automation projects to AI?first operating constructs. Commercially, the focus is shifting from seat-based pricing to outcome-based models (early traction seen in a US collections platform win using per-interaction pricing). The company is witnessing increase in productivity, with revenue per employee up 12% over two years, and further gains expected as agentic operations scale, driving a widening divergence between revenue growth and headcount expansion.
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