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We hosted FSOL’s CEO Ritesh Idnani and its senior management team, for NDR in Mumbai. Key takeaways: 1) Mr Idnani gave details about his growth strategy encompassing the ‘One Firstsource’ framework that focuses on 7 strategic initiatives, including simplification of organizational structure — North America divided into 3 industry units of BFS, Healthcare, and CMT & others; Europe to remain a geographical business unit. The framework also aligns FSOL’s services portfolio into 5 capability areas — collections, customer experience, consulting, trust & safety, and data & analytics. Mgmt believes steadfast execution per the framework will drive top-quartile revenue growth, with margin improvement. CEO plans sharing specific growth aspirations by end-FY24. 2) Mgmt remains confident about achieving 0-2% growth in FY24 and operating at 11-11.5% EBITM. 3) Overall BPO market size is ~USD300bn, of which Customer Experience (CX) comprises 25-30%. FSOL derives ~53% of revenue from CX. Only ~27% of the CX market is outsourced, thus offering a huge opportunity. We maintain BUY, with TP of Rs190, at 18x its Sep-25E EPS.

Firstsource Solutions: Financial Snapshot (Consolidated)

New framework execution to drive top-quartile growth with margin uptick

Mr Idnani shared his growth strategy encompassing the ‘One Firstsource’ framework, with focus on seven strategic initiatives: i) simplify organizational structure – establish clear accountability and ensure faster decision-making. The refined organization will have North America aligned along 3 industrial verticals (BFS, healthcare and CMT), while Europe will remain a geographical business unit. ‘One Firstsource’ also aligns the services portfolio into five capability areas – mature services like collections and customer experience; and emerging & fast-growing services like consulting, trust & safety, and data & analytics; ii) increase cross-selling and upselling initiatives to gain wallet share; iii) expand capabilities into adjacent areas; iv) amplify the Firstsource brand by strengthening relationships with analysts/advisors and across the partnership ecosystem. FSOL has hired a leader to manage partnerships. It is also strengthening its offerings using partnerships with startups, which have IP but lack distribution; FSOL has a client base and distribution network but lacks IP; v) bring in technology in all its operations; vi) elevate employee experience; vii) improve profitability – margin levers include offshore shift, employee pyramid, span of control, optimizing delivery infrastructure. The uncertain macro environment is impelling enterprises to shift to a playbook that is a combination of growth and efficiency, along with accelerated developments in GenAI, likely to create market opportunities that FSOL plans to tap into

Cross sell/upsell to gain wallet share and more predictable growth

FSOL has over 150 clients, including 18 F500 and 3 FTSE 100 companies. Mgmt sees good potential in cross-sell/up-sell, on which it can effectively capitalize; it plans setting up dedicated teams for potential large accounts. Each team to have a client partner with clear ownership to identify white spaces, develop a structured account plan, take proactive proposals to clients, and work with them to develop a pipeline of large transformational opportunities for driving cross-sell/up-sell. It is investing in scaling its consulting practice to act as a ‘tip of the spear’ for increasing size of the sales funnel. FSOL focuses on building adjacencies across current offerings to maximize wallet share and strengthen footprint in Eastern Europe, South Africa, and Latin America for nearshore/offshore delivery capabilities.

FirstSense AI — Proprietary framework to accelerate AI deployment

FSOL launched FirstSense AI, a proprietary framework to accelerate clients’ AI deployment, while developing a sandbox ecosystem for clients to experiment and evaluate AI frameworks. It has a library of over 100 use cases across industry verticals, and has completed over 25 POCs, of which many have advanced to the production pilot stage; e.g., FSOL uses email automation after call summarization, quality automation, and copilots for healthcare claims processing & mortgage underwriting.

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