Broker’s Call: Firstsource Solutions: (Reduce)

Target: ₹370

CMP: ₹360.55

Firstsource Solutions’ (FSOL) FY25 annual report provided insights into the progress made on the growth strategy encompassing the ‘One Firstsource’ framework, with focus on seven strategic levers, including organisational structure simplification and expanding multi-tower relationships with cross-selling/up-selling in potential growth accounts.

Consistent execution of this framework, coupled with initial traction in the UnBPO approach, instils confidence in the management to sustain revenue growth momentum. The management targets expanding the margin by 50-75 bps annually. FSOL has given FY26 revenue growth guidance of 12-15 per cent (including about 3 per cent inorganic contribution), and EBITM guidance of 11.25-12 per cent.

Other key takeaways from the report: net debt grew over 2x in FY25; OCF/EBITDA conversion weakened to 58 per cent; dividend payout stable at 47 per cent; steady progress across client buckets and added 43 new logos (BFSI: 18; Healthcare: 16; CMT: 8, Diverse: 1), including 12 strategic logos; won 14 large deals, including five from new logos; combined ACV of deal wins in FY25 was up 60 per cent year on year and the exit deal pipeline was 30 per cent higher; and launched relAI, a suite of GenAI-led offerings, solutions and platforms, to drive digital transformation of clients.

We retain Reduce, given the rich valuations, with TP of ₹370 at 25x June-27E EPS.

Published on July 15, 2025