First Source Solutions Overview
First Source Solutions is a business process outsourcing company. It is owned by RP Sanjeev Goenka Group. It has client present from different verticals. The operations are well spread across different countries and different business areas. Below is the snap shot of the operations as per the company website.
- Financial Services
- Utilities and Healthcare
Along with these business verticals it is also spread in US and Europe. This cross location presence gives it comfort of being able to withstand financial issue or legislation issue in any one country. Impact will be there but it will not be pronounced.
First Source is leading Business process outsourcing company of India. It has good parentage in form of RP Sanjeev Goenka Group. So there is no question of management as management pedigree is well established.
Business Process Outsourcing revenue is impact great deal with INR depreciation. If dollar becomes stronger then the company will get benefited. The whole BPO industry (Business Process Outsourcing company) was based on cost benefit.
The same task if performed in US or Europe costs more than what is costs in India. As India offers cheap labor. Though in recent years new countries are giving stiff competition to India. Also some of these business processes are getting automated as well.
These are two major challenges this industry will face in future. With this note lets see how First Source Solutions have performed over the years.
First Source Solutions Stock Performance
Lets us see how well this company has performed on exchanges. As I mentioned above the stock prices have correlation with Foreign market mainly US. Most of the outsourcing industry is dependent on US.
After 2008 and 2009 Companies have tried to diversify their presence and actively looking for Clients out side US. This has lessen the impact so some extend. Now companies have client from Europe and Canada as well.
If you see closely the company made debut on Exchanges at 80. It did move upwards and touched 90 mark. But since then it has moved down and crashed below 20 levels. The company till year 2017 traded in range of 15 to 40 levels.
Recently the company jumped to 80 odd levels . Note this 80 odd levels is the price at which company got listed one decade ago. So if you have applied for IPO for the company then you have not made and money in this period.
The only relief for the investors is regular dividend this company has paid. Note the dividend rate is quite good. So any one who has invested below 20 levels have made profit. This again established the fact that buying a stock at right price is more important.
People have made money in First Source only if they bought at right levels. If you have not bought it at right levels then you have not made any money in fact you have lost money.
First Source Solutions My Opinion
The ace investor Rakesh Jhunjhunwala has stake in First Source Solutions. The management pedigree is also good. This two factors give comfort about the company.
But I am not bullish on Outsourcing industry of India. Indian outsourcing industry has matured and it is offering value to the client. But cost benefit is still the major player.
Nowadays many business process like Customer Support is getting automated. You have bots which respond based on the query of customer. These bots are cost effective (one time investment) and can work 24*7 without any issues or error. Similarly many back office tasks are also getting automated.
This automation drive is the biggest threat to Indian outsourcing industry not just First Source Solutions.The second challenge is from Countries like Philippines which have started offering low cost benefit.
Personally I am not convinced that Business Process Outsourcing Industry will grow at rate it grew in past. Now it is time to retain the work it has acquired so far. if a sector works on Retaining and not losing mode then the prices will not increase.