FSL - Firstsource Solutions Ltd. Share Price

Q&A Section Questions and Answers

1. Question: "Ritesh, a couple of questions from my side on the business side. Basically, in the healthcare segment, we have very recently heard of a lot of concerns about the government spending that was supposed to be much lower. How does that play out in terms of our overall demand environment?"

Answer: "We're monitoring the situation closely. The recent CMS proposal on Medicare Advantage rate adjustments signals margin pressure for payers, already strained by rising costs. However, this may drive more outsourcing and transformational projects, benefitting us. The TeleMedik acquisition provides a location advantage for onshore services within the U.S., further enhancing our competitive position in healthcare."

2. Question: "In the BFSI segment, what are we seeing on the mortgage business side at this point in time?"

Answer: "Our mortgage business remains stable, but we're seeing rates hover around 6.1-6.25%. A meaningful impact on refinancing requires rates nearer to 5%. We've broadened our client profile and offerings, which has helped maintain growth in both origination and servicing, even without macroeconomic support."

3. Question: "With regard to the proposed capping of credit card late payment fees, how do you see that impacting our business?"

Answer: "It's early to comment as details on implementation are pending. Currently, there's no direct impact observed in our client conversations. Our innovation in AI for collections remains strong, which is gaining traction with banks and fintechs, creating differentiation in the market."

4. Question: "Our offshoring has increased to around 43.4% in this quarter. Do you expect that to continue increasing?"

Answer: "Currently, 80% of our gross hiring is happening offshore and nearshore, signaling a trend towards more remote operations. I anticipate this ratio will continue to improve, as it's core to our operational strategy moving forward."

5. Question: "Can you share how many headcount additions were because of the PDC acquisition?"

Answer: "Approximately 300 addition to our headcount resulted from the PDC acquisition, enhancing our operational capabilities."

6. Question: "What impact do you envision from the account rationalization process, particularly in low-margin segments?"

Answer: "In Q3, we saw about a $2 million impact from ant account rationalization, which is expected to rise in Q4. Overall, this process aims to enhance our margins in the provider segment, albeit on a smaller base."

7. Question: "Could you clarify the outlook for revenue and margin improvement because of rationalizing low-growth accounts?"

Answer: "Rationalizing low-margin accounts should lead to improved margins as we focus on higher-value relationships, but the impact will be gradual. We're closely monitoring progress and expect positive outcomes in the coming quarters."

8. Question: "What will be the long-term trajectory for margins, and how do you see investments affecting this?"

Answer: "We aim for annual margin expansion of 50-75 basis points, aligning with market dynamics. While we continue investing in strategic capabilities, we believe this will not hinder our margin guidance. We're committed to maintaining our profitability trajectory, which is crucial as technology evolves."

These responses encapsulate the essence of the information shared during the Q&A, focusing on business outlook and strategy, while ensuring clarity on current challenges and future expectations.