📌 At a Glance
Firstsource is the OG BPO that quietly turned into a ₹26,000 crore IT stock. It’s not building SaaS unicorns or throwing ChatGPT at everything — but it’s compounding earnings, improving margins, and delivering a clean 87% return in one year. So, is this India’s Wipro for the underdogs — or another high-P/E trap?
🧾 1. What Does Firstsource Do — And Why Should You Care?
Firstsource = Outsourced Everything
- Parent company: RP-Sanjiv Goenka Group (yep, same as CESC, Phillips Carbon)
- Core biz = Business Process Management (BPM):
- 💳 Banking & Financial Services
- 🩺 Healthcare
- 📞 Customer experience / contact centers
- 💻 Tech-enabled back-end services
They’re the people behind that “sir, may I place you on hold?” voice — but in a suit, with AI tools.
Now operating in over 50 countries, they’ve got serious scale. But is scale the same as edge?
📈 2. Financials: Slow, Steady, and Suddenly Fast?
🧮 FY25 Snapshot (Consolidated)
| Metric | Value (₹ Cr) |
|---|---|
| Revenue | 7,980 |
| Net Profit | 594 |
| OPM % | 15% |
| ROCE | 14.8% |
| ROE | 15.1% |
| Dividend Payout | 47% |
| EPS | ₹8.41 |
| P/E | 44.8 |
🔋 TTM Sales Growth: 26%
🤏 TTM PAT Growth: 14%
🧮 Other Income: negligible (no funny business)
So, yes — it’s a slow-burn BPM-as-a-Service story. But with clean numbers.
🧮 3. Fair Value: Should You Dial in at ₹372?
Let’s do the math:
- EPS = ₹8.41
- Sector P/E Range: 20x (value BPO) – 30x (growth BPO)
🎯 Fair Value = ₹170 – ₹250
📉 CMP = ₹372 → You’re paying 40–60% premium over sector average.
🧠 4. What’s Driving the Stock?
✅ Turnaround in healthcare BPM margins
✅ BFSI volume recovery in US and UK
✅ More digital process outsourcing deals (RPA, automation)
✅ EBITDA up 2.6x in 3 years
✅ Promoter stake solid at 53.66%
Also: the street is desperately trying to rotate into midcap tech. Firstsource is a midcap IT substitute with just enough “AI dressing.”
🧱 5. How It Stacks Up vs Peers
| Company | P/E | ROCE (%) | Revenue (₹ Cr) | EPS (₹) |
|---|---|---|---|---|
| Firstsource | 44.8 | 14.8 | 7,980 | 8.41 |
| eClerx | 31.5 | 29.0 | 3,593 | 83.3 |
| Hinduja Global | — | 2.9 | 4,644 | — |
| One Point One | 40.7 | 15.2 | 266 | 0.65 |
So Firstsource is bigger, cleaner — but expensive vs eClerx. Also, eClerx prints 2x ROCE.
⚠️ 6. Red Flags You Can’t Miss
- 📞 Still a people-heavy business — no moat in client stickiness
- 🧮 P/E of 44.8 on modest growth = dangerous if momentum stops
- 🤖 “Digital first” but no proprietary AI/IP → it’s tech-led services, not tech products
- 💸 Debt jumped from ₹1,533 Cr to ₹2,569 Cr in FY25 — partly for infra and lease liabilities
If growth slows, valuation re-rating could be brutal.
🧃 7. TL;DR: Is Firstsource a Secret Tech Stock or a Valuation Mirage?
- 🟢 ₹594 Cr profit on ₹8,000 Cr revenue is not small
- 🟢 15% margins, 15% ROE = textbook decent
- 🟢 1.08% dividend yield and 47% payout = healthy cash discipline
- 🔴 But… trading at 45x earnings while peers are at 20–30x
🎯 Our Fair Value Range = ₹170 – ₹250
You’re not buying cheap here — you’re paying for momentum, not fundamentals.
📞 Final Verdict:
Firstsource is the Airtel of BPO — trusted, reliable, cash-positive… but expensive AF right now.
Unless there’s a big AI pivot or mega deal coming up, maybe wait for a correction before you “press 1 to buy.”
✍️ Written by Prashant | 📅 19 June 2025
Tags: Firstsource Solutions, BPM stocks India, BPO companies, RP Sanjiv Goenka group, midcap tech alternatives, fair value analysis, AI outsourcing, EduInvesting stock roast, IT sector comparison
