Strong deal momentum supports FY27 outlook…
About the stock: Firstsource Solutions (FSL) provides business process services to BFSI, communication, media, tech & healthcare. It has 200+ global clients, including several Fortune-500 & FTSE-100 companies. Q4FY26 & FY26 Performance: Revenues came at US$ 283 mn, up 3.3% QoQ/ 13.2% YoY (3% QoQ & 11.6% YoY in CC terms). EBIT margins 12.2%, was up ~30 bps QoQ. Reported PAT at ₹205.2 crore, was up 70.6% QoQ/27.7% YoY. For FY26, revenue stood at US$ 1,081 mn, up 13.6% YoY CC. EBIT margins at 11.7% was up ~70 bps YoY while PAT came in at ₹674.4 crore, up 13.5% YoY.
Investment Rationale
• Strong deal pipeline supports sustained growth visibility: FSL reported FY26 revenue growth of 13.6% YoY CC & Q4 growth of 11.6% YoY CC, driven by BFSI & healthcare and Telemedik & PDC acquisitions (~2.6% contribution). Notably, a delayed US healthcare payer deal and UK collections deal are expected to ramp up from Q1FY27. The company added 11 new logos during the quarter, including 6 strategic clients with potential annual revenue run-rate exceeding US$5 mn each, while also winning 4 large deals. Management has guided for 10–13% CC growth in FY27 (organic 7.5-10.5%, excluding TeleMedik contribution of 2-2.5%), supported by a record deal pipeline of over US$1 bn, ramp-up of delayed UK BFS collections programs and scaling of healthcare transformation engagements. Accordingly, we expect US$ revenue to grow at 10.3% CAGR over FY26–28E.
• Margin expansion and M&A strengthen medium-term outlook: FSL reported EBIT margins expansion in both Q4 and FY26 supported by operational efficiencies and improved business mix. Management has guided for further margin expansion to 12.25–12.75% in FY27, aided by operating leverage and AI-driven productivity gains. Additionally, the Telemedik acquisition strengthens FSL’s nearshore healthcare capabilities in Puerto Rico and enhances its payer-provider positioning, while management remains open to further acquisitions to expand capabilities and support long-term growth. We have baked in EBIT margins of 12.4%/12.6% for FY27E/FY28E.
• AI-led operating model expands addressable opportunity: FSL is witnessing increasing demand for AI-led transformation, workflow orchestration and outcome-based delivery models under its “Intelligence that Operates” strategy. Management highlighted that enterprises are increasingly seeking partners capable of combining domain expertise, AI agents & operational accountability, positioning FSL favourably in the evolving outsourcing landscape. FSL is already embedding AI across customer lifecycle management, collections & healthcare operations, which is driving higher wallet share opportunities and strengthening strategic client relationships across BFSI and healthcare verticals.
Rating and Target Price
• Given the strong pipeline and healthy guidance, we upgrade to BUY, with revised target price of ₹290; valuing it at 18x P/E on FY28E EPS.
