How Sanjiv Goenka is slowly turning around Firstsource

Firstsource Solutions Ltd, the ailing BPO picked up last year by the RP-Sanjiv Goenka Group, has recovered partly through a mix of equity infusion, reduction of debt and elimination of unprofitable clients. The company aims to reduce its debt to equity levels to 1:1 by FY 15-16, Firstsource Solutions chairman Sanjiv Goenka said on Friday in Mumbai.

"We have reduced cost and pared debt, channelled some part of the cash flow into servicing the very high cost debt to achieve this," Goenka said at an event in Mumbai's suburban Malad.

To reduce costs, the company has turned to leasing of BPO space for seats and other infrastructure rather than investing in it, Goenka said. Normally, a BPO firm would invest in its own office space. The company had a total headcount of 27,666 for the fiscal year 2014.

It saw its headcount reduce by 4,200 employees. It has shut down two centres in India, in Coimbatore and Vashi, Navi Mumbai, and opened a centre in Phillipines. Goenka did not divulge whether more centres would be opened in the south-east Asian nation, though he did stress that there would be no further closures in India.

The company hopes for positive developments in the US with 'Obamacare', the new The Patient Protection and Affordable Care Act and expects new verticals in its clients such as retail, Goenka said.

Goenka said Firstsource is investing in analytics as a future revenue stream, and is in the process of picking up small stakes in firms. These firms would then develop analytics for Firstsource in a model that is 'almost proprietary'. "They would develop these solutions almost exclusively for us," said Goenka, without elaborating further.

Firstsource was bought over by Goenka last year after its debt ballooned to Rs 2,200 crore, and unprofitable clients dragged down margins. Current debt levels stand at $125 million (Rs 751 crore). The company was established as a downstream BPO by ICICI Bank, and has had mixed fortunes till the strategic investment made by Goenka in 2012-13.

According to a release from the company, revenues were at Rs 3,105.9 crore for the year ended March 2014, a growth of 10.2 per cent over corresponding period of the previous year.

Profit after tax was at Rs 193 crore for the year ended March 2014, up 31.6 per cent over the corresponding period of the previous year.

Operating Earnings Before Interest and Tax (EBIT) were at Rs 286.4 crore for the year ended March 2014, up 49.8 per cent over the corresponding period of the previous year.

For the quarter ended March 2014, Firstsource declared revenues of Rs 796.2 crore, up 11.7 per cent compared to Rs 712.5 crore for the quarter ended March 2013. Profit after tax of Rs 58.8 crore was up  46.4 per cent compared to Rs 40.2 crore for the same quarter last year. Operating EBIT (earnings before interest and tax) for quarter ending March 2014 was at Rs. 80.8 crore, up 31.8 per cent compared to Rs. 61.3 crore for the quarter ended March 2013, the release said.