Nomura maintains 'Neutral' on Firstsource Solutions with Rs 200 target amid progress in co's 'One Firstsource' strategy

Nomura said that Firstsource's net debt of Rs 600 crore in FY24 is primarily allocated for working capital requirements.

Nomura has maintained its 'Neutral' rating on Firstsource Solutions, setting a target price of Rs 200. The investment firm acknowledged significant progress made on the company's 'One Firstsource' strategy.

The strategy emphasises account mining and expanding capabilities. Key imperatives of the strategy include speed-to-market, clear accountability, and improved market visibility.

On June 20, shares of Firstsource snapped a three-day losing streak and closed 1.7 percent higher at Rs 202. The stock has gained 10 percent in the past six months.

Firstsource aspires to achieve a $1 billion revenue run rate by the Q4 FY26. The company also aims to achieve a 15 percent EBIT margin in the medium term, said Nomura.

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While Firstsource does not have a formal dividend policy, it has consistently paid out 45-50 percent of its profit after tax (PAT) to shareholders, Nomura pointed out.

The company has implemented a stock incentive program for its senior leadership team. A stock incentive program is a compensation plan that offers employees, typically senior executives and key management, the opportunity to acquire company stock. The program aims to align the interests of employees with those of the company's shareholders by making a portion of their compensation dependent on the company's performance.

Nomura said that Firstsource's net debt of Rs 600 crore in FY24 is primarily allocated for working capital requirements. The company's merger and acquisition (M&A) strategy is primarily centred on capability building rather than revenue accretion.

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