Deal pipeline strong; hold cash worth Rs 150cr: Firstsource

In an interview to CNBC-TV18 Sanjiv Goenka, Chairman, Firstsource Solutions said that the company’s currently holds cash worth Rs 150 crore and he sees very strong Q4 in terms of cash flows.

Firstsource reported 24.5 percent jump in profit after tax (PAT) in this quarter compared to Q2 last year and its revenues stood at Rs 790 crore.

Further, he informed that the company has an obligation to repay USD 44.5 million of debt every year, which works out to  nearly USD 11.1-11.2 million every quarter.

“We are bang on schedule on that and cash flows have been positive. We are looking at the prospect of prepaying if we can. We are looking at the cost associated if any,” he added.

Meanwhile, the company’s deal pipeline is pretty strong at above USD 350 million, he added.

Also Read: Aiming for industry growth level in FY15, says Wipro management

Below is the edited transcript of Sanjiv Goenka’s interview with CNBC-TV18

Q: Firstsource Solutions has been consolidating and going back on the growth recovery path. What is your expectation how FY14 will look like in terms of the revenues as well as on the margin front?

A: The first half of FY14 would be reflective of what FY14 would eventually look. This quarter we had 24.5 percent jump in our profit after tax (PAT) compared to Q2 last year and revenues stand at Rs 790 crore. So, overall it has been a decent performance; it’s been a performance of consolidation and growth combined. We would expect to see this trend going on for the next two quarters for sure.

Q: You have repaid some debt this quarter so what does your current debt stand at and what are your debt paring plans going forward?

A: We have an obligation to pay USD 44.5 million of debt every year, which is roughly USD 11.1-11.2 million of debt every quarter. We are bang on schedule on that and cash flows have been positive. We are looking at the prospect of prepaying if we can. We are looking at the cost associated if any.

Q: Is there a possibility you can prepay anything in FY14 or its going to happen only in FY15?

A: It will be FY15.

Q: How much could you prepay it by given the cash generation?

A: There is significantly positive cash generation. We expect Q4 of ’14 to be very strong in terms of cash flows. Therefore you could see a possibility of prepayments in FY15.

Q: What were the deals like, the big deals that you signed this quarter and what is the pipeline now looking like?

A: The pipeline is pretty strong. It is above USD 350 million. We converted about USD 33 million of the pipeline into deals this quarter.

Q: Whenever we have last spoken to you about the company you have always indicated that FY14 is going to be a year of consolidation with a focus on profitability. Were you managed to increase your margins, EBITDA margins has come to about 11.3 percent. How much further could we expect margins to improve in the remaining two quarters and even in FY15; your target level of margin and by when.

A: This represents 3.1 percent increase in EBIT margins which is significant. In the last quarter, you will see another jump in margins. I wouldn’t like to put a number to it yet, but it would certainly be better than this quarter for sure.

Q: You said that the cash flows have been improving. Could you tell us per quarter what the run rate on the cash flows have been like and particularly in Q4 which is going to be the big quarter, what could we expect?

A: Cash flows have been strong. I can say that today we sit on Rs 150 crore of cash and cash equivalence after having repaid all debts on due dates.