2 min read.Updated: 06 May 2015, 01:17 AM ISTManish Basu
There are a few acquisition opportunities under evaluation, said chairman Sanjiv Goenka, whose eponymous group took control of Firstsource from its founder, ICICI Bank Ltd, in October 2012
Kolkata: Call centre operator Firstsource Solutions Ltd is looking to expand its operations through acquisitions after two-and-a-half years of consolidation under new management.
There are a few acquisition opportunities under evaluation, said chairman Sanjiv Goenka, whose eponymous group took control of Firstsource from its founder, ICICI Bank Ltd, in October 2012.
Having repaid loans and shored up profit margins, the company is financially stronger now, and so it is time to pursue growth, Goenka said but declined to share details of potential targets.
When the firm came into the RP-Sanjiv Goenka Group, it had at least ₹ 2,200 crore in debt. It has pared it to $85 million, or around ₹ 530 crore, according to Goenka. More loans—at least $45 million—are to be repaid in fiscal year 2015-16, and some will be refinanced to take advantage of an upgrade in credit ratings from A- to A. These, in turn, will make the firm more profitable, he said.
Under the RP-Sanjiv Goenka Group’s control, Firstsource’s operating margin has jumped five percentage points to 13.2% at the end of fiscal year 2014-15 from October 2012. The firm has also shed manpower—from 28,000 in October 2012 to 25,000 now. No further rationalization of the workforce is immediately required, according to Goenka.
The firm has around $30 million, or ₹ 190 crore, in cash, and a “comfortable" debt-equity ratio of 0.3. It has the resources to snap up competitors, but won’t borrow “aggressively", according to Goenka. The acquisitions, if they materialize, will take place over the next few months, he added.
Firstsource on Tuesday reported a net profit of ₹ 62.31 crore in the March quarter, up 5.9% from a year ago, as the company cut costs and continued to “weed out low margin clients" and improve profitability. However, revenue for the quarter declined 8.9% year-on-year to ₹ 734.38 crore .
The company took a decision that it would not pursue revenue growth at the cost of profitability, Goenka said, adding that there are still some low-margin clients with whom rates are being renegotiated. Previously, the company had entered into contracts to provide services to large clients at unviable rates. Some of these contracts led to losses.
For the full year, revenue declined 2.3% from the previous year to ₹ 3,034.65 crore but net profit grew 21.4% to ₹ 234.31 crore. The profit growth, according to Goenka, was slightly ahead of the industry average.
Firstsource was a timely acquisition by the RP-Sanjiv Goenka Group, said Rajesh Agarwal, head of research at Kolkata-based brokerage Eastern Financiers. That the firm has turned around is evident from the seven-fold rise in its market capitalization since the Goenkas took control. “It is quite logical that Firstsource is now looking to expand to hedge against uncertainties in its existing lines of business," Agarwal said.
Firstsource currently provides services to four industries: media, telecommunications, financial services and healthcare. Its biggest client is telecom giant Sky UK.
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