Firstsource margins squeezed by wage bill

Firstsource margins squeezed by wage bill
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First Published: Sat, Apr 28 2007. 12 03 AM IST
Updated: Sat, Apr 28 2007. 12 03 AM IST
Mumbai: Business process outsourcing (BPO) firm Firstsource Solutions Ltd recorded a Rs34.91 crore net profit for the quarter ended 31 March 2007, a 60.6% year-on-year rise, even as its revenues during the quarter rose 71.22% on a year-on-year basis to Rs276.7 crore. The stock closed at Rs82.10, down 3.07%, on the Bombay Stock Exchange on a day the benchmark 30-share Sensex was down 2.25%.
The decline in net profit margin was caused by personnel costs which rose by 94.15% year-on-year to Rs149.78 crore. The firm’s headcount during the quarter rose by 25.55% according to data provided by the company. The faster rise in salary costs weighed heavily on the net profit margin.
India’s fifth-largest third-party BPO company achieved a net profit of Rs97.25 crore for the all of 2006-07, a rise of 294% from the previous year. Revenue for the company recorded a 52.8% rise to Rs839.9 crore for the same period. “Growth in profits this financial year has been on the back of high revenue growth, benefits from economies of scale and operational efficiency,” said Rajesh Subramaniam, chief financial officer, Firstsource.
Subramaniam expects future growth to come from “strong demand in all our three verticals (banking, financial services and insurance, and telecom).” He also expects growth to be powered by the health care BPO segment. In January 2007, the company acquired BPM Inc., a Delaware, US-based health care claim outsourcing company. This has helped the company grow its business in the health care vertical. The company, promoted by ICICI Bank and ICICI Strategic Investment Fund, raised Rs384 crore in a public issue in January 2007. Out of this, Rs16.4 crore has been spent on issue expenses, Rs28 crore on facilities and the rest is lying as cash balance in mutual funds and bank deposits, the company said.
“We are aiming to grow our revenues at the rate of 50% for the next three years. We expect to earn 11% to 13% of net margin for the same period,” said Ananda Mukerji, managing director and chief executive officer, Firstsource.
Attrition has been a concern for the company, which added 3,500 people in the last quarter and 6,046 people in the financial year. “We will be also moving to more tier II and III cities as the rate of attrition there is lower,” said Ananda. “We are aiming of for 10% of the total revenue mainly in the banking, insurance and telecom sector coming out of the domestic market in financial year 2007-08.”
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First Published: Sat, Apr 28 2007. 12 03 AM IST