 "This RP-Sanjiv Goenka Group stock hit record high; zoomed 215% in 18 months")
Shares of Firstsource Solutions (FSL) hit an all-time high of Rs 361.65, as they rallied 15 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes. The stock of RP - Sanjiv Goenka Group surpassed its previous high of Rs 346.50 touched on October 17, 2024. In the past 18 months, it has skyrocketed 215 per cent from a level of Rs 114.80.
At 01:32 pm; FSL was trading 13 per cent higher at Rs 354.70, as compared to 0.24 per cent rise in the BSE Sensex. The average trading volumes at the counter jumped nearly five times. A combined 17.24 million equity shares representing 2.5 per cent of total equity of FSL changed hands on the NSE and BSE.
FSL is a specialized global business process services partner, providing transformational solutions and services spanning the customer lifecycle across healthcare, banking and financial services (BFS), communications, media and technology (CMT), and other diverse industries.
On Tuesday, October 22, FSL announced its investment in building its own domain-centric large language model (LLM) specific to the mortgage process. Developed under its Firstsource relAI suite, the investment leverages the company’s deep domain expertise to tailor-make sector specific AI-driven services and platform offerings.
The LLM significantly reduces the cycle time for pre-qualification and formal loan applications, creating a seamless digital end-to-end journey for loan application and fulfillment.
Last month, FSL announced a collaboration with Microsoft to deliver cutting-edge digital transformation services to clients worldwide. Using the power of Microsoft Azure OpenAI Service, Firstsource aims to enhance its service offerings, driving innovation and efficiency across various industries.
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Under this new initiative, FSL will utilize Azure OpenAI Service, Azure AI Search, and Azure AI Language to provide generative AI powered solutions and business platforms that unlock the full potential of enterprise data. These solutions will offer a multi-modal, multi-channel search experience, significantly improving effectiveness and personalization for businesses, FSL said.
Meanwhile, during the first three months (April to June) of fiscal 2025 (Q1FY25), FSL’s revenues grew by a healthy 17 per cent year-on-year (YoY), largely stemming from an improved growth in business from the US market (26 per cent).
The company has expanded its focus in the healthcare segment with a recent acquisition (May’24) of Quintessence Business Solutions and Services Pvt. Ltd to enhance its presence in revenue cycle management (RCM). FSL aims to gain share in the healthcare market from the traditional RCM players, taking a tech led offshore centric approach and its acquisition of QBSS is in line with that strategy. Further, the company also announced the acquisition of Ascensos Limited (Ascensos), on September 23, 2024, a UK based provider of BPM services for the retail, consumer, and e-commerce verticals with a turnover size of Rs 715 crore in FY23.
According to Crisil Ratings, overall, revenues are expected to grow by 12-14 per cent in fiscal 2025 through an expected pick up in deal wins and new customer additions in its verticals supported amid a waning impact of the slowdown. While growth has remained strong in Q1FY25, the sustenance of the same through the remaining quarters and full year shall remain monitorable. Operating margins in Q1FY25 stood at 15.1 per cent and is estimated to remain at 15-16 per cent with a gradual improvement of 50-75 bps over the medium term through several efficiency measures by the management, the rating agency said in its rationale.
The management has identified 24 margin levers such as offshoring/rightshoring, increasing span of control and consolidation of onsite delivery locations. These efforts would ultimately converge margins in the range of 14-15 per cent over the next 3-4 years, said analysts at ICICI Securities in their Q1FY25 result update.
Accordingly, the brokerage firm said they have baked in earnings before interest tax (EBIT) margins of 11.5 per cent, 12.3 per cent and 13.1 per cent for FY25/FY26/27E. Healthy revenue growth coupled with margins expansion to drive 24.7 per cent earnings compounded annual growth rate (CAGR) over FY24-27E.
With improved revenue visibility over the medium term, analysts have introduced FY27E estimates & accordingly baked in 14.9 per cent CAGR in revenues over FY24-27E to $1,160 million. FSL is well placed to sustain its medium and long-term growth momentum driven by client acquisition, structural changes, GenAI and margin enhancement initiatives, the brokerage firm said. The stock has achieved the ICICI Securities’ target price of Rs 360.