Review of Firstsource Solutions second quarter results

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Firstsource Solutions Ltd. posted 0.2% quarter-on-quarter growth in constant exchange rates (our estimate: 2.0%) due to an 8.3% quarter-on-quarter decline in banking and services financials due to deterioration and a weaker than expected macro environment of high interest rates and inflation, negatively affecting collection and refinancing volumes.

The guidance for FY23 was further lowered to -2% -0% YoY growth in CC terms, from 2-4% CC in Q1, due to the deteriorating macro environment.

On an organic basis and excluding acquisition, the forecast is 12 to 14% CC growth. Operating profit margin edged up 48 basis points quarter-on-quarter to 8.4% (our estimate: 9.3%) due to weak revenues.

For FY23, Firstsource Solutions management guided OPM margins in the 9-9.5% range, from 10% to 10.5%, as expressed in the first quarter of FY23 .

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