Firstsource Solutions Ltd

Dear Shareholders, I'd like to start with a heartfelt thank you for your continued support toward Firstsource over the course of the years, especially FY24. It will not be a stretch to say that FY24 has been an eventful year for Firstsource.

The pace of change

In FY24, we witnessed a remarkable pace of change that is likely to be a benchmark for the future. While many macro factors have impacted the business process management industry, none have had the continued and permanent impact of the rapid and disruptive technological advancements, particularly in automation, artificial intelligence (AI), and machine learning. These developments have presented both significant challenges and substantial opportunities. Opportunities, that I am extremely proud to share, Firstsource has maximized its advantage on. Our outcome-led deep domain specialist expertise, and cutting-edge tech, data, and analytics capabilities have enabled us to leverage these to our advantage and build significant competitive di_erentiation. Delighting in our ability to disrupt, we've provided innovative solutions, earning us recognition as trusted advisors guiding clients through uncertainty. Our results and robust pipeline testify to the trust and capability we've built.

Performance

We experienced notable growth in FY24, with revenue increasing by 5.2% year-on-year to reach I 63.4 billion. This achievement reflects our commitment to strategic initiatives and market adaptability. Our operating profit saw a significant rise of 23.6% over the previous fiscal year, reaching I 7.0 billion, resulting in EBIT margin of 11%, reflecting disciplined cost management, operational e_ciency, and the resilience of our business model.

Our net profit amounted to I 5.1 billion, indicating strong financial health and stability. Furthermore, our highest-ever deal wins in FY24 signify robust demand, successful client engagements and instil confidence in our ability to sustain this positive momentum moving forward. We also expanded our workforce significantly, adding 4,922 employees in FY24, to support our growing operations and service delivery capabilities.

In line with our commitment to rewarding our shareholders, we have allocated 35% or I 3.50 per share as a dividend. Our consistent dividend policy highlights our commitment to shareholder value and reflects our confidence in the stability of our earnings. We believe this approach rewards our shareholders for their investment and strengthens their trust in our company's long-term growth potential and strategy.

Deep-domain and consolidation of strengths

We remain singular in our strategic intent – to be an inch wide and a mile deep. Our investments, be it capital allocation, people, or technology decisions, continue to be reflective of this razor-sharp focus. Our recent acquisition of Quintessence Business Solutions (QBSS) is aligned with that focus, enabling the strategic capabilities Firstsource has been pursuing toward growth and expansion. QBSS allows us to leverage tremendous human and technological resources to o_er a truly best-in-class, technology-led end-to-end RCM capability to organizations of all sizes and compositions. We expect our combined competencies to be highly synergistic, bringing unmatched solutions and significant benefits to both, our clients and our organization.

To ensure our strategic intent is aligned across the organization we have also defined an internal strategy – One Firstsource – that ensures the consolidation of our strengths and amplifies our capabilities as we go to market. This framework of One Firstsource is building a new way of working for our people, empowering and enabling them to realize their fierce ambitions for Firstsource and optimizing opportunities through the simplification of our structure for agility; active exploration of cross-sell and up-sell opportunities; amplification of our brand; integration of technology into all aspects of our operations; improvement of margins; enhancement of the employee experience; and expansion of our capabilities by identifying new markets, competencies, and adjacent opportunities.

Leadership that will take us forward

The crux of the success of our strategy has been our people, and we have taken keen steps to build a strong, empowered leadership that can translate intent into action for collective growth. We have also built more robust policies and processes to significantly reduce attrition (16.4% YoY from FY 2022-23), attract top talent across capabilities and roles, and build a business that sustains strongly in the future.

Sustainable growth

Our intent to grow significantly is not limited to profit. We are committed to growing our influence in protecting our planet. Deeply aligned with the RPSG Group's intent toward generating value and sustainability, Firstsource has excelled at building not just a sustainable business, but extending that sustainability to its community, environment, and people. We are committed to a healthy gender ratio and currently women make up 46% of our workforce. In our dedication to advancing employee skills, we invested I 278.76 million and allocated 980,000 training hours towards development and compliance training. Additionally, we dedicated I 9.9 million and 31,500 training hours to the growth and development of our managers and leadership team. Firstsource evaluates all new suppliers on the ESG criteria.

Our_top 20 critical vendors, based on business value and accounting for 75% of total procurement spend, are annually assessed for their health and safety practices, environmental impact, human rights, sexual harassment policies, and issues related to child labor, forced or involuntary labor, and working conditions of value chain partners. Recognitions such as the Level 3 Disability Confident Leader in the UK and various industry awards highlight our e_orts in fostering a diverse and inclusive workplace and strengthening ties with our clients. With over 15,507 hours of volunteering, we have impacted 48,370 lives and spent a total of I 11 mn on CSR projects.

Our commitment to ESG has led to our induction into the Dow Jones Sustainability Index with a 96^th percentile and an ESG & CSA score of 62 each in our first year of participation. Additionally, we have been recognized as a "Sustainability Yearbook Member" in the S&P Global Sustainability Yearbook 2024.

We are proud to be a signatory to the United Nations Global Compact. The Carbon Disclosure Project (CDP) has recognized our commitment to sustainability through our score of ‘C' in the Climate Change category. Additionally, CDP has acknowledged our e_orts in responsibly engaging our suppliers, with a rating of ‘B-'. Furthermore, we are pleased to have received a Bronze rating from EcoVadis, reflecting our dedication to sustainable business practices.

Making it happen across stakeholders

Across the RPSG Group, we are encouraging the ethos and practice of making things happen, bringing on board people who will drive action, and encouraging behavior that translates ideas into actuality. I am impressed with the agility and commitment with which Firstsource is actively demonstrating this ethos, living it daily, in everything they do. I am entirely confident in Firstsource's sound strategy, leadership, and commitment to ambitious long-term goals to drive a positive impact for each of us associated with it.

Dear Shareholders,

FY24 has been quite an eventful year globally with significant macro and technology discontinuities. The macro discontinuities have led enterprise clients to focus extensively on a growth and e_ciency playbook, while technology discontinuities have resulted from the significant advancements in the field of generative AI.

This year has also been a transformative year for Firstsource as we redoubled our e_orts to take advantage of the opportunities due to the discontinuities. We refreshed our strategy, revamped our organizational structure, and accelerated our growth momentum while navigating an uncertain macroeconomic environment and structural shifts in the technology landscape. I am pleased to report that we finished FY24 with the highest-ever deal wins, improved margins, and healthy cash flows. While change takes time, we have settled well into the new ways of working and remain laser-focused on fulfilling our customers' needs and making Firstsource a great place to work for our employees.

One Firstsource – our strategic blueprint

Over the past nine months, I have interacted extensively with our employees and customers. I have found each colleague passionate and committed to delivering the desired outcomes for our customers. They, indeed, are our superpower. At every delivery location I have visited, I am inspired by the incredible deep domain-oriented work we deliver in our chosen industry verticals – banking and financial services, healthcare, communications media tech and diversified industries comprising primarily energy and utilities. This observation has been further validated by the many clients I met, who have a deep appreciation for our understanding of their operating environment and the value we can o_er them. Just last month, we were awarded ‘The Most Collaborative Team of the Year' by one of our most strategic clients with whom we have had a relationship for 20+ years. We were also awarded ‘The Most Innovative Partner of the Year' by another long-standing client. I am so proud of the seniority, depth, and duration of our relationships with our clients, some of whom are among the largest players globally in their respective verticals. Importantly, despite our long-standing relationships, we are still under-penetrated in several of our large accounts, and I see significant opportunities to expand our portfolio in these accounts. These di_erentiators position us well in the current environment. Today, macro shifts pressure enterprises to move from a growth playbook to a growth and e_ciency playbook. Concurrently, accelerated developments in Generative AI and applied AI hold tremendous potential for transformative business impact. I believe the discontinuities caused by these shifts will lead to divergent growth among players. I am confident that Firstsource has the right scale and strengths to leverage these shifts to gain market share and achieve top-quartile revenue growth with concurrent margin expansion over the medium term. The_One Firstsource framework defines our blueprint towards realizing these objectives. It covers seven strategic_imperatives.

Simplify the organization: We have streamlined the organization structure to remove overlaps, establish clear accountability, and ensure faster decision-making. Our refined organization design realigns North America along three verticals—BFS, Healthcare, and CMT—while Europe remains a geographical BU. We have also aligned our services portfolio into five capability areas that include our mature services, such as collections and CX, as well as emerging services, such as consulting, trust and safety, and data and analytics.

Cross-sell/up-sell into existing accounts: We have set up dedicated teams for a defined set of strategic accounts where we see significant headroom for growth. Each team has an identified client partner with clear ownership to explore white spaces, develop a structured account plan, take proactive proposals to clients, and work with them to develop a pipeline of large transformational opportunities. We have also expanded our go-to-market team by almost a third, and that investment is yielding results for us.

Expand capabilities: We are building adjacencies across our services portfolio to maximize our wallet share. We are also investing in scaling our consulting practice to act as a tip of the spear in increasing the size of our sales funnel. During FY24, we set up our o_ce in Melbourne to target the Australian and New Zealand markets. We are also actively strengthening our footprints in South Africa, Central, and Latin America, for nearshore delivery capabilities.

Amplify the Firstsource brand: We have stepped up our engagements with industry analysts and advisors, which is reflected in a growing recognition of our leadership in the chosen markets. Our new brand positioning, ‘We Make It Happen,' reflects the reinvigoration in our go-to-market strategy, which is now more direct, proactive, and laser-focused on solving a client's business challenges by combining our domain centric teams with cutting-edge tech, data, and analytics.

Technology in everything we do: We are infusing our existing frameworks and platforms with the latest technologies to improve their relevance and attractiveness in the marketplace. We are also taking technology-led propositions to disrupt incumbents with a large manpower-centric execution model in our target set of new logos. We have expanded our partner ecosystem and are actively leveraging them to improve our catchment of opportunities in the market.

Elevate employee experience: We are committed to making Firstsource an employer of choice. There is heightened employee engagement and a strong emphasis on internal talent development. We have also improved the onboarding experience of new hires. This concentrated e_ort led to a remarkable double-digit reduction in attrition in FY24. Improve profitability: Even as we invest in expanding our sales footprint and execution capabilities, we are focusing concurrently on driving cost optimization and productivity gains We intend to keep our margins stable during the investment phase and grow them by 50-75 bps each year after that.

FY24 business performance

FY24 was a story of two halves for us. While our revenues were largely flat in the first half, we saw a visible growth acceleration in the second half. Our revenue growth during the last two quarters of the year was 3.4% and 4.2%, respectively, in constant currency terms, among the highest in the industry. We added 41 new logos in FY24, at an average deal size over 60% higher than last year. Our FY24 results also reflect the deep trust our clients have in us. During the year, we extended our contract with our top client, as their primary outsourcing partner for another ten years. Another of our long-standing clients, one of the top five banks in the UK, expanded the relationship by selecting us for a large transformational program, making it one of the largest deal wins for Firstsource in the last five years. While these are two headline examples, we have been gaining new business at an accelerated pace across our clients. Overall, we reported revenues of I 63.4 billion, up 5% YoY. Our operating margin was 11.0%, an increase of 160 bps over FY23. Our net profit was I 5.1 billion. Our e_orts to reinvigorate our sales organization are yielding results. We had at least one large deal win in the last three quarters and still ended the year with one of the highest deal pipelines. I am also convinced that our focus on being a specialist, deep domain BPO provider, which is technology & AI-led and drives outcomes for our enterprise clients, contributes to the increased traction and wins in the marketplace.

Being very specific about where we want to play and not trying to be everything to everyone is allowing clients to trust us with their most - pressing business challenges, and we feel privileged to have the opportunity to act as trusted advisors to them.

Our FY24 performance reflects the dedication of our 27,940 employees to constantly and consistently drive outcomes for our clients. I thank each one of them. I am also thankful to our clients and partners for their trust in us, my leadership team for their commitment to executing the One Firstsource framework, and the Board of Directors for their guidance.

It has been a wonderful start to what I see as an exciting journey. As I look ahead to FY25 and beyond, I am confident of our e_orts to lay the foundation for predictable, sustainable, and profitable growth.