Firstsource Solutions, the $500-million business process outsourcing company and part of the RP-Sanjiv Goenka Group, is confident of achieving an operating profit margin of 14-15% from FY15 driven by the US healthcare market and stronger overall demand. in an interview with PP Thimmaya, Firstsource managing director and CEO Rajesh Subramaniam said the turnaround has begun with the company getting measured by its customers for generating value and not just lowering costs. Edited excerpts:
How is the turnaround playing out for Firstsource?
We are working into our clients’ black box, that is, dealing with their customers. We are not in support functions but are helping them to drive revenues and create a different level of understanding about their customers.
Earlier, it was a cost play but today it is driven lot more by value. We are measured on what is our clients’ customers experiences. It has moved from input management to measuring on the output.
Today, one is measured on what is the revenue that is earned by our customers or what is the revenue we protect. We are measured on metrics like net promoter score, customer satisfaction, retaining customers. We are being embedded in the overall strategy of our customers. For example, my top customer was $1 million in 2002 and today it is $100 million. This has been part of our turnaround and this transition is helping.
How are business verticals performing for Firstsource?
We are closely embedded with our clients with all their customer-facing functions, which are all retail businesses. We are feeling extremely good about healthcare and know exactly how much investments are needed. The collections business in financial services and Indian domestic business is stressed, which is about $100 million, but the other $400 million, comprising of healthcare, telecom and media, will drive growth. This has been part of our turnaround after the FCCB issue, where in the first year we emerged with consolidation and in the second we shrunk by getting rid of unprofitable clients.
From the fourth quarter of FY14, we will see a different trajectory. We will end FY14 with a operating margin of 12-12.2%. From FY15, we expect to be in the 14-15% Ebitda margin range.
How will Ebitda margins improve for the company?
The Ebitda margins will expand by another 200 basis points and we have enough runway. We have a lot of levers here to increase margins, which will be lot of offshore growth coming