Firstsource Solutions Ltd Management Discussions.

The following discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto. The financial statements have been prepared in compliance with the requirements of the Ind-AS. The Companys management accepts responsibility for the integrity and objectivity of these financial statements, as well as various estimates and judgments used therein. The estimates and judgments relating to the financial statements have been made on a prudent and reasonable basis. The financial statements reflect the form and substance of transactions in a true and fair manner and reasonably present the Companys state of affairs and profits for the year. Investors are cautioned that this discussion contains forward-looking statements that involve risks and uncertainties. When used in this discussion, words like will, shall, anticipate, believe, estimate, intend and expect and other similar expressions, as they relate to the Company or its business, are intended to identify such forward-looking statements.

The Company undertakes no obligations to update or revise any forwardlooking statements publicly, whether as a result of new information, future events, or otherwise. Actual results, performances, or achievements could differ materially from those expressed or implied in such statements. Factors that could cause or contribute to such differences include those described under the heading Risk Factors in the Companys prospectus filed with the Securities and Exchange Board of India (SEBI) and factors discussed elsewhere in this report. Readers are cautioned not to place undue reliance on the forward-looking statements as they speak only as of their dates. Information provided in this Management Discussion and Analysis (MD&A) pertains to Firstsource Solutions Limited and its subsidiaries (the Company), on a consolidated basis unless stated otherwise.

Global Economic Outlook

The fiscal year 2020-21 was atypical as the global economy witnessed an unprecedented decline in economic activity due to the once-in-a-century crisis unleashed by the COVID-19 pandemic.

Global growth projections continue to improve due to the growing momentum in vaccine administration, demand recovery led by fiscal stimulus measures implemented by Governments, and gradual return to normalcy. However, a resurgence of infections at the beginning of 2021, especially from new virus variants, reimposition of lockdowns, logistical challenges with vaccine distribution, and uncertainty over vaccine take- up, continue to pose concerns for the global growth outlook.

According to the International Monetary Funds (IMF) World Economic Outlook of April 2021, the global economy contracted by 3.3% in 2020 and is projected to expand by 6.0% in 2021 and 4.4% in 2022. The intensity of the recovery is expected to differ significantly across economies, depending on access to medical interventions, the effectiveness of support policies, exposure to cross-country spillovers, and structural characteristics entering the crisis.

The United States (US) economy shrank by 3.5% in 2020 and is now projected to return to its pre-covid level and grow by 6.4% in 2021. The United Kingdom contracted by 9.9% in 2020 and is estimated to expand by 5.3% in 2021. The Euro Area shrank by 6.6% in 2020 and is forecasted to rise by 4.4% in 2021. The projected outlook takes into consideration additional fiscal policy support recently announced for 2021 in some countries.

Across economies, the strong and swift steps taken by the Central banks and Governments regarding monetary, fiscal, and unconventional financial policies helped mitigate negative outcomes in 2020. Most central banks are expected to maintain their current policies until 2022. Hence, financial conditions are anticipated to remain broadly at current levels for advanced economies, and steadily improve for emerging markets and developing economies.

Industry Structure and Development

The IT-BPM industry witnessed two major shifts due to the pandemic - acceleration of digital transformation across industries and global acceptance of a hybrid operating model that is reshaping an already evolving workplace and culture.

According to NASSCOMs Strategic Review 2021 report, the global IT services spend declined by 4% in 2020 to USD 692 Billion, as the pandemic impacted demand across all industries and segments. The impact was also felt in the global IT sourcing market that witnessed a decline of 0.8% to USD 120-122 Billion.

The global IT-BPM spend is expected to bounce back in 2021, led by digitalization. The rising adoption of advanced technologies such as Cloud & Analytics, Robotics Process Automation (RPA), Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning (ML), Hyper-automation model is expected to drive growth for the industry. As organizations implement these changes, operating models are likely to shift from pure services to platform-based solutions.

The BPM industry is poised for an era of accelerated growth in an increasingly virtual world. According to the Everest Group report, the Global Business Process Management (BPM) market stood at USD 243 Billion in 2020 and is projected to grow in the range of 4-6% between 2020-2021 and 6-8% by 2025, reaching USD 336 Billion. The growth is expected to be driven by wallet-share expansion within existing segments and rising adoption in newer segments.

The BPM industry has been continuously evolving its value proposition and associated levers to meet the rapidly changing requirements of enterprises. Today, enterprises evaluate and reorganize their service provider landscape to drive cost efficiencies, enhance risk management across global operations, and digitalize their process chains. This opens up significant growth opportunities for the industry. These changes will also drive share-of-wallet expansion for BPM service providers. Currently, volumes outsourced to the BPM industry account for less than 30% of the total volumes, with the remainder managed by the enterprises themselves. These volumes are significantly lower compared to the more mature IT services industry. As the enterprises embark on their digital transformation journey, BPM service providers are likely to acquire a higher share - a key growth driver.

Firstsource is well-positioned to capitalize on these industry trends and emerging opportunities. The Companys suite of offerings and solutions across Banking and Financial Services, Healthcare, Communications, Media & Technology, and Diversified industries are designed to power well-rounded growth in the future.

Business Overview

At the beginning of the year, the pandemic created considerable business uncertainty. It disrupted business momentum and presented significant challenges to migrating work from offices to a distributed model on an unprecedented scale. The Company, led by our employees, rapidly adapted to this change and minimized the disruptions to client businesses. Our ability to remain resilient even under unprecedented circumstances, provide consistent support to our clients, secure new wins across segments, and capitalize on the macro-tailwinds in some of our businesses have fashioned FY2021 into one of the best years for the Company.

During the year, the Company generated Revenues of H 50,780 Million, representing 23.9% growth in rupee term and 17.9% in constant currency term over FY2020. Profit After Tax came in at H 3,617 Million, representing a YoY growth of 6.5% in rupee term. During the year, we recognized an exceptional charge of H 1,151 Million, towards the fair value of an equity option granted to a large customer group in our Mortgage business. Adjusting for this charge, PAT came in at H 4,499 Million, translating to a growth of 32.4% over FY2020.

Our growth framework is built around three pillars - a sharp focus on coreindustry processes, modernized offerings underpinned by our Digital First Digital Now approach, and a scalable and agile organization.

1. We have been targeting specific industries - Banking and Financial Services, Healthcare, and Communications Media and Technology. These industries are grappling with structural changes driven by technology advancements, evolving consumer preferences and regulatory policy, and more recently, macro-economic factors catalyzed by the pandemic. We intend to scale our industry-specific offerings by enhancing our domain depth and foraying into adjacent areas of growth, expanding our purpose-built platform-based solutions, and contextualizing and cross-selling the full suite of our offerings to an expanding client base.

2. As digital becomes more pervasive and deeply embedded across the value chain for most industries, we are modernizing our solutions and offerings to serve the contemporary needs of the enterprises better. Smart automation, analytics, digital operations management tool kit, and talent- skilled in new-age technologies are the building blocks of our Digital First, Digital Now strategy across our service offerings.

• Digitally Empowered Contact Center (DECC) is our revamped contact centre offering that uses a mix of in-house tools and partnerships to meet the omnichannel, on-demand needs of clients, significantly improving customer experience and satisfaction. DECC accounted for 48.3% of revenues in FY2021.

• Our Intelligent Back Office offering transforms processes, making them lean and agile by deploying a broad range of automation technologies. This, in turn, frees up human bandwidth and ingenuity to handle complex workloads and boost creativity. The Intelligent Back Office contributed to 45.1% of revenues in FY2021.

• Platforms, Automation & Analytics, which accounted for 6.6% of revenues in FY2021, focuses on building and deploying platform- based solutions designed for industry-specific interventions and opportunities.

3. To build a scalable and agile organization with the right skill sets to support our vertical and service line growth ambitions. We have been routinely investing in sales, solutions, new markets, digital capabilities, and evolving our operating model.

Firstsource is well poised to capture significant market opportunities and drive ongoing digital transformation across the verticals it operates in. In the sections below, we capture some of the key highlights of the industries we operate in, including key growth drivers.

Banking and Financial Services

2020 was a tough year for the banking and financial services sector as demand for banking services declined owing to the global health crisis. Profits for the sector were under significant pressure due to weak economic activity and extensive loan loss provisioning measures initiated by banks. Interventions by central banks and governments around the world through policy actions and fiscal stimulus helped mitigate losses for banks in the near term. Going forward, a persistent low-rate environment is expected to weigh on interest income, one of the major drivers of revenue for the industry.

The changes triggered by the pandemic have forced banks and financial institutions globally to reassess their traditional architecture and business models, revisit their strategies and plans, and focus on a more virtualized, SaaS-based, agile, digital setup. While some of the trends and investments were already in motion, the pandemic has prompted a notable acceleration. Virtualized solutions and secure work-from-home (WFH) models became a priority for business continuity. Despite the challenges, most banks effectively deployed digital solutions and exhibited exceptional agility and resilience. In the times ahead, these technologies will provide the foundation, enabling a modern customer experience, improving operational efficiency, and decreasing the cost to serve - while enhancing risk monitoring and management capabilities for the banks.

Fintech companies are now playing a larger role in the financial system and are continuously redefining the financial services paradigm. With products like Buy Now Pay Later (BNPL) that allow a consumer to split up large payments without using credit cards, Fintech companies have been able to establish themselves in the payments sector, and are now aggressively pursuing other banking products like remittances, deposits, and lending (mortgage, student, SME, and consumer). Banks and Financial Institutions are also trying to stack their technology landscape to adapt to this new trend. For incumbent banks, investment themes will be focused around digital sales and service, involving re-configuration of the branch network and alternative delivery models such as doorstep banking and contactless payments. This will lead to a rise in bank-Fintech companies collaborations, building robust omnichannel solutions that reduce friction in banking interactions and customer journeys.

Firstsource focuses across several segments, including Retail banking (customer experience, transaction processing), Mortgages (loan processing, servicing, title and valuations), Complaints and Remediation (complaints handling, fraud management), Credit cards and Fintech companies (collections) and Commercial finance (invoice factoring, risk management).

UK Retail and Commercial Banking

In 2020, the UK banking sector faced a double whammy - challenges posed by Brexit as well as the pandemic. Banks and financial institutions in the country will now need to redesign their operating and transaction structures to implement stringent regulatory approvals and compliance protocols. This would also result in restricted access to the larger EU market, significantly increasing cross-border transaction fees for these institutions.

Retail and commercial banking continues to evolve as incumbent banks and their business models face headwinds from Fintech companies. The industry is likely to witness increased consolidation with banks seeking to build, acquire or partner with Fintech companies platforms, to promote their digital strategies and remain competitive in the era of challenger banks. The focus will shift towards enhanced client experience, a key driver for acquiring and retaining customers.

Firstsource offers end-to-end solutions to these institutions across the customer lifecycle, including acquisition, account servicing, collections and retention, complaints handing and remediation, mortgage processing and invoice financing, and asset-based lending.

Collections and Recoveries

Firstsource provides debt collection and recovery services for Banks and Financial Institutions. The company offers digital collections, first and third- party collections focused around credit cards , auto loans , student loans. We made meaningful strides in the buy-now-pay-later (BNPL) segment of the industry last year.

According to the IBIS World Report, the market size of the debt collection industry in the US is projected to hit USD 13.4 Billion in 2021. As per the data released by the Federal Reserve of New York in February 2021, the supply of new credit card debt declined in 2020 as consumer spending dropped considerably due to the pandemic. Consumers paid off their preexisting debts through stimulus checks received from the Government. Total student loans stood at USD 1.56 Trillion, while auto loans stood at USD 1.37 Trillion in 2020.

As the economy opens up and consumer spending bounces back to pre- COVID levels, delinquencies will see a notable spike. We believe the debt collection industry can expect an increase in the supply of new debt in 2021, driving industry growth.

Digital collections is expected to drive a large part of the expected growth. It will help enhance compliance and reduce human intervention and customer handling time, accelerating the process and delivering better outcomes . Advanced technologies like analytics and AI models are also widely used to improve borrower profiling, predictions, and customizing payment plans. This, in turn will drive the adoption of self-serve digital tools and allow borrowers to repay their debt at their convenience, and avoid awkward conversations with debt-collectors.

Firstsource Digital Debt Collections platform, underpinned by our Digital First, Digital Now approach, caters to various industries, including Credit Cards, BNPL, Auto Financing, Education. It leverages diverse technologies, including automation, AI/ML and cloud-based services, through an integrated people-technology transformation framework for decoding customer interactions, lowering the cost of collections, and enhancing recovery rates.

Mortgage Market

In 2020, the mortgage industry witnessed unprecedented demand propelled by a low-interest-rate environment. Interest rates touched record-lows during the year, leading to significant growth of the originations segment. Refinance loan volumes hit a historical high with 140% YoY growth in 2020 over 2019. Mortgage debt grew by USD 486 Billion to USD 10.04 Trillion by December 2020 over 2019. Newly originated mortgage debt reached a record high of USD 1.2 Trillion, surpassing in nominal terms the volumes seen during the historic refinance boom in September 2003. However, as interest rates inch up from record lows, market momentum will decelerate in 2021. While volumes may drop compared to 2020, they will continue to remain high in 2021 with strong refinancing and purchases. According to the Mortgage Bankers Association (MBA), loan volumes are expected to be 67% higher for refinancing and 10% higher for home purchases as compared to 2019.

According to the New Normal report from the Intermediary Mortgage Lenders Association (IMLA), UK, gross mortgage lending is projected to reach 283 Billion in 2021, a 17.3% increase from last years level, with lending for house purchase being the main driver. Spending more time at home during lockdowns has led most people to reconsider their living arrangements, boosting demand for homes across the UK. The rise in demand is further aided by the stamp duty holiday and the recent introduction of the UK governments Mortgage Guarantee Scheme as part of its budget that increases the availability of 95% loan-to-value mortgage products, enabling a larger number of people to access mortgages without the requirement for higher deposits.

Much like others, the pandemic necessitated adapting to a digital environment for the mortgage industry. Lending technology accelerated significantly during the year. If interest rates continue to remain low, as widely expected, mortgage volumes will continue to stay strong in 2021 but will see a decline from 2020 levels. Growth is also likely to come from servicing as more portfolios change hands and the mortgage industry prepares for higher defaults. Success in the new normal will require adaptability, flexibility, and scalability.

Firstsource is positioned as a Leaded in Nelson Halls NEAT Evaluation for Overall Mortgage & Loan Services and Support for New Digital Business Models. The positioning reflects Firstsources focus on driving digital transformation for its clientele across the mortgage value chain. Clients value our ability to service across the mortgage value chain - Origination, Underwriting, Title, Post-closing, Servicing, and Collections - underpinned by deep domain expertise and productized solutions. Firstsource works with five of the top 15 mortgage servicers in the US, three of the top six retail banks in the UK, and four of the top 15 lenders in the US.


The covid-19 pandemic has posed unusual challenges to the healthcare industry. It creates a significant burden on an industry already grappling with multiple challenges such as a shift in patient expectations, changes in financial responsibility, growing ecosystem complexity, and increasing demands for robust health infrastructure. Hospitals, Physicians, Health Plans, and Health Services are preparing for a series of financial challenges to secure liquidity and drive profitability under high uncertainty and volatility. The entire industry is reinventing operations and reimagining business models to become more productive and flexible. The healthcare industry, in the past, has been slow to adopt digital solutions; however, the future is likely to be shaped by technology and innovation.

While the official 2020 healthcare spending data from U.S. Centers for Medicare & Medicaid Services (CMS) is still awaited, initial analysis conducted by Altarum, a Healthcare research and consulting company, indicates a decline in healthcare spending in 2020. This will be the first time the industry will witness a decline over the previous year since CMS started tracking spending data in 1960. As people deferred nonemergency procedures, spending declined for the healthcare provider ecosystem. On the other hand, direct-to-consumer healthcare surged in popularity as a primary means of accessing safe, convenient medical care. Spending on home health care and Telehealth witnessed significant growth as patients sought to avoid exposure to COVID-19. In 2021, it is expected that hospitals and health insurance firms will increasingly invest in digitalization and predictive analytics to better prepare for unanticipated challenges.

Global healthcare BPO is segmented by Payer services, represented by the Health Insurance companies and Health Plans; Provider services represented by hospitals, physician groups andother allied segments that are part of the healthcare delivery value-chain; and the Pharmaceutical and Equipment manufacturers that focus on drug and medical equipment manufacture, research and development, marketing and other nonclinical services. In the US, Firstsource works with leading brands in the Health Plans and Provider landscape, including six of the top 10 Health Plans and over 1000+ hospitals.

During the year, we rebranded our Healthcare Payer business to Health Plans and Healthcare Services (HPHS) to reflect the scope of the broader healthcare segment we serve. We also consolidated our healthcare Provider brands, MedAssist and PatientMatters under the Firstsource Provider business to reflect their close alignment with our core brand. The Company continues to invest in building its platforms and driving their adoption in the market.

Health Plans and Healthcare Services

For a large part of the last financial year, many patients deferred non-critical procedures due to COVID-19. This resulted in a lower number of claims for Health Plans and Payers, which ultimately impacted volumes for BPO service providers. As unemployment spiked during the year, enrollment in employer-sponsored and commercial plans declined, while there was an uptick in government membership. Data from 28 states showed a 15.2% increase in Medicaid enrollment from March 2020 to December 2020. The pandemic further complicated existing processes around claims coding, billing, adjudication, and increased employee workload.

Health Plans are looking to reduce the cost of care, streamline network management, improve member experience, and adopt transparent claims administration process, leading to increased outsourcing to third-party service providers. Digital solutions will be instrumental for success in the post-COVID era. Payers who have a tech-first mindset will have a strategic advantage. As regulations around sharing healthcare data ease and advancements in data analytics take place, Health Plans will increasingly leverage advanced analytics solutions to improve clinical outcomes and access to care. With the market becoming more consumer-driven, people are demanding full control over their healthcare journey. This will drive Health Plans to increase investments in technology and services to provide members a seamless experience. Moreover, many Health Plans, grappling with legacy systems, are partnering with service providers and technology vendors to overcome design and architectural challenges in integrating new solutions. Automation will also be essential as Health Plans look to achieve operational efficiency and reduce cost.

Hospitals are seeing a shift in Payer mix due to the increase in self-intake customers and Medicaid patients combined with the fall in commercial reimbursement due to high job losses. To tackle this, hospitals are switching to remote customer engagement such as Telehealth, financial counseling, and online portals for price estimations and payment plans. On the other hand, the decline in medical procedures during the year has reduced claims and resulted in more cash for Health Plans. As a result, the Company sees an increased appetite for disruptive and long-range impact solutions in this sector.

Our focus in this segment is to scale rapidly by leveraging fit-for-purpose platform-based solutions that help streamline processes and deliver underlying efficiencies. Our interventions in Digital Intake, Digitally Empowered Contact centers, Telehealth, and Remote Patient Monitoring are helping Health Plans drive enahnced efficiencies and offer more member-friendly processes.

Provider Services

2020 was one of the toughest years for Providers as the entire ecosystem was put to the test by multiple waves of COVID. The pandemic led people to defer elective procedures, impacting revenues and margins. The rise in unemployment led to a large section of the population losing their insurance, leading to higher uncompensated care cases with the hospitals. This comes on top of the challenges the industry has already been dealing with, such as razor-thin margins because of elevated claim denials, rising bad debt due to tough to collect patient balances, and increased operational costs owing partially to the lack of coordination between multiple clinical and revenue cycle platforms.

Telehealth took center stage during the pandemic as Providers sought to develop clear strategies to enable virtual care. Many Providers looking to build adequate infrastructure for seamless patient/doctor interactions turned to third-party providers for support. According to the IBISWorld report, the Telehealth Services market in the US stood at USD 3.5 Billion in 2021, registering a growth of 14.6% per year on average between 2016 and 2021. It is expected to grow at a CAGR of 31.2% between 2020 and 2025. Federal funding for Medicare and Medicaid is estimated to rise in 2021 and beyond, creating potential growth opportunities for the industry.

Consumerism in the healthcare industry is on the rise. Patients demand reliable and quality services at competitive prices. CMSs Hospital Price Transparency Rule, which went into force on January 1, 2021, will further push the envelope of healthcare consumerism. Hospitals will need to provide easy-to-read price estimates for 300 services, allowing patients to access the best rates. Industry experts believe that this rule will benefit patients as well as Providers as patients with a clear estimate of their financial obligations are more likely to pay their dues on time. However, many Providers face challenges in complying with the CMS guidelines because of limited staff, lack of proper tools, and the burden of managing the ongoing COVID-19 outbreak. As a result, they are increasingly seeking help from outsourcing service providers to create consumer-friendly platforms in compliance with CMS guidelines.

Healthcare Providers are also struggling with managing the self-pay component of their revenue. As per Statista, on average US out-ofpocket health care payments in 2019 were about $1,184 per capita. Total US Out-of-Pocket Health Spending is expected to grow at 5% CAGR between 2018-2025 to reach about US$540 BN". Historically, Providers have focused on insurance claims processing and are not equipped to directly collect from consumers. As a result, they are partnering with third- party IT-BPM providers to implement solutions to help with collections. These IT-BPM providers are increasingly deploying scalable solutions and leveraging analytics models to predict consumers propensity to pay and identify the right mode and time of communication to engage the consumer.

As the Provider ecosystem navigates multi-pronged complexities - including complying with Price Transparency Rule, offering quality care at competitive prices, tackling rising patient out-of-pocket expenses, and moving towards a value-based care system - Partnering with third parties will be key to success. Firstsources full-service revenue cycle solutions spanning eligibility, enrollment, business office management and recovery, blend technology with the human touch to simplify the financial experience for patients. They help prevent denials, improve collection velocity, increase net collections, reduce accounts receivable days, and improve customer experience, helping Providers build a strong Revenue Cycle Management (RCM) practice.

During the year, Firstsource acquired PatientMatters, a Healthcare Revenue Cycle Management (RCM) solutions provider. PatientMatters unifies disparate registration, bill estimation, and financial services with intelligent workflows and eligibility services, improving revenue realization for hospitals. The acquisition complements Firstsources Provider Business through market expansion and provides SaaS capabilities to address front- end patient responsibility in the Healthcare RCM industry. This, along with Firstsources proprietary patient engagement solutions such as MFocussm and MGagementsm, will equip Providers with a comprehensive platform- based solution that simplifies the end-to-end patient financial experience.

Communications, Media and Technology

As people were confined to their houses due to lockdowns and physical distancing norms, their social lives shifted online, and entertainment consumption increased rapidly, especially within the home-based segments such as online gaming and over-the-top (OTT) services. This led to increased adoption of entertainment subscriptions. A Kantar report highlighted that more than 6 Million new video streaming subscriptions were purchased in the UK during February-April 2020. According to Deloitte, in the US, each subscriber averages four video streaming, two music streaming, and three gaming services paid subscriptions. Traditionally, spend on TV and video was considered discretionary. However, as consumer behaviour evolves, more and more users are viewing TV and video as non-discretionary spend. Consequently, they are taking more control of their media consumption and driving new trends, which in turn is leading to the emergence of new business models. Customer churn is also a big challenge for CMT companies. As per the same Deloitte report, streaming video services faced 37% customer churn between October 2020 to February 2021.

Internet consumption grew during 2020. Top cable and wireline phone providers in the US added around 4.9 Million broadband internet subscribers during the year. In Europe and the UK, the demand for faster internet services grew rapidly during the pandemic. It is expected that, by 2026, the penetration of high-speed fibre will more than double to reach 202 Million houses. Data usage on mobile also continued to grow during the pandemic. As the penetration of 5G increases, mobile video consumption is expected to increase further. Simultaneously, new apps and platforms that offer mobile AR, VR, and mixed reality experiences are expected to emerge. 5G could also have a significant impact on content creation. COVID-19 has already prompted several production houses to shoot movies and shows virtually. With the roll-out of 5G and subsequent improvement in infrastructure and technology, virtual products might increase, especially for immersive content such as AR and VR. This is further expected to add to the number of apps/services available for users to choose from and subscribe to. People will take some time to adapt to external consumption in the postpandemic world due to the psychological overhang of the pandemic. As the customer churn and acquisition cycle become more complicated, the industry will need to focus on understanding customer needs and behavior and create services to retain and attract customers. Customized content and recommendations and flexible pricing models will be crucial to captivating customers. Building a long-term customer relationship will depend on the ability to provide a seamless customer experience across delivery channels and devices. As content proliferation and fragmentation increases rapidly, the only way to succeed in the market is to increase the subscription base.

Firstsource has been a strategic partner to top CMT players in the industry. We help clients develop and implement omnichannel customer management solutions and leverage our Digitally Empowered Contact Center (DECC) to provide end-to-end customer experience management services aimed at increasing new subscriptions and renewals - all while keeping acquisition costs low.


The utility industry is experiencing rapid digital transformation across the world in part due to the disruption caused by the pandemic. Some of the other factors impacting the industry are progressive regulatory reforms, intensifying competition, tech-savvy consumers, demand for sustainable and green initiatives, stringent compliance requirements, and the increased adoption of newer technologies such as smart grid, smart metering and automation.

In todays demand-driven environment, utilities are deploying new business models focused on two main principles, co-opetition and cocreation. They are now looking to partner with technology vendors to provide digital solutions to thrive in the long run. As part of this approach, they are targeting the adoption of digital technologies such as Robotics Process Automation (RPA), Augmented and Virtual Reality (AR/VR), Internet of Things (IoT), Big Data Analytics, Artificial Intelligence, Chatbots, Digital Twin, drone technology and cloud-based solutions to facilitate digital transformation, safeguard business continuity, boost operational efficiency, and enhance customer experience. With work-from-home becoming the new normal, utility companies face dramatic shifts in demand and workforce management challenges. The need of the hour is to combine next-gen technologies and their implementation across the value chain to balance demand and supply challenges.

The UK utility sector is confronting a unique set of challenges. Decarbonizing operations and remaining resilient during a pandemic are major concerns. The UK government is going ahead with its Green Industrial Revolution plan. In 2021, it is expected to come out with more regulatory announcements to achieve its aims to make the country NetZero by the set deadline. With a muted second COVID wave and new lockdowns, the ongoing smart meter rollouts could face some installation challenges. Despite being resilient amidst the pandemic, UK utilities supply activities might suffer as consumers face increased financial difficulties and struggle to pay their bills.

The emerging challenges discussed above necessitate solutions based on scalable operating models, agile, automation, and revamped customer experience strategies. Firstsources Digitally Empowered Contact Centre (DECC) reduces cost and improves the customer experience at every stage by combining a distributed workforce with an omnichannel customer-engagement model powered by Intelligent Automation (IA) and cloud-based platforms.


The BPM services market is growing rapidly and continues to be highly competitive. The Company faces a different set of competitors in each of its business units and expects the competition to intensify. Several of the Companys international competitors are setting up operations in India. Further, many of the Companys international competitors with existing operations in India are expanding their operations to fortify their delivery strategy.

In the Healthcare business, the Company primarily competes with:

• Large global IT companies such as NTT Data, HP, CSC, IBM, Accenture;

• BPM divisions of IT companies located in India, including Wipro and Cognizant;

• Healthcare-focused Revenue Cycle Management (RCM) companies located in the US such as Parallon, Navigant Cymetrix, R1 RCM, Change, Cardon (MedData-MedNAX), and Conifer group;

• Healthcare-focused offshore BPM providers, particularly in India, such as Sutherland Global, Conduent, HGS, Exela Technologies;

• Large global consulting groups such as PWC (RCM service and consulting).

In the BFS business segment the Company primarily competes with:

• Large UK-based BPM companies such as Capita and Serco;

• Large global IT companies located in the US and Europe such as IBM, Accenture, Dell, Xerox, HP, and Capgemini;

• Large global diversified Receivable Management and Collections companies such as Convergys;

• Credit Card Collection / recovery-focused companies such as iQOR, GC Services, Alltran, Client Services, NCI, Alliance One, Radius, and Teleperformance;

• Mortgage-focused companies, largely in the UK and the US, such as Sutherland, TCS, Infosys, Wipro, and Accenture;

• BFS focused offshore BPM providers, particularly in India, such as Genpact, WNS, EXL;

• BPM divisions of IT companies located in India, including TCS, Infosys, Wipro, HCL;

• Captive operations of our clients.

In Media & Utility business, the Company primarily competes with:

Large global BPM companies such as Convergys, Sitel, TeleTech, Sykes, Conduit, Transcom, and Accenture;

• Media and Utilities focused onshore BPM providers, particularly in the UK such as Serco, Capita, Web-Help;

• BPM divisions of IT companies located in India, including HCL, Tech Mahindra, Infosys, Wipro, and Concentrix.


Building and sustaining a purpose driven organization is at the core of what the Human Resources team does at Firstsource. To achieve this vision, we have a business-aligned HR team supported by globally aligned centers of excellence that act as a strategic business partner. Together, the team has designed new processes, implemented new technologies, and launched new initiatives to engage a growing organization and bring our values to life.

Early in FY 21, we refreshed our values - from ASPIRE to REACCH (Risktaking, Execution Excellence, Agility, Customer First, Credibility and Humaneness). The Values underscore the core behaviors needed by all our colleagues across our footprints to make alive our growth aspirations fueled by Digital first, Digital now. Our leadership team led the values refresh from the front. REACCH, our values are being integrated across our talent processes and are being reinforced through leadership actions and our ways of working. Our response to COVID 19, was a true reflection of our value Humanness and how colleagues came together to support each other and the communities.


In March 2020, with the outbreak of the COVID-19 crisis across the globe, we needed to respond with agility, supporting our employees and their safety ahead of everything and reaching out to our communities.

Throughout the pandemic, our leaders teams engaged with colleagues across the globe to understand whats needed to enable them. Business continuity was essential not only from a customer interest but also for employees to feel continuity and safety. We deployed thousands of employees to a remote working environment within days. Cutting-edge hybrid infrastructure and deployment of remote management platforms were put in place to run our delivery centers and provide seamless customer experience.

As organization transitioned to a Work from home environment, we continued to emphasize on our connectedness through the launch of "Its My Week" campaign. Every week the organization shared employee stories of courage, compassion, resilience, teamwork and more. Through the 500+ stories shared, employees felt connected, supported, and shared a sense of unity as we all weathered the pandemic together.

Once the organization settled into the "new normal" COVID-19 environment, the HR team worked to ensure the safety, effectiveness, and engagement of employees. As a part of staff continued to work in the office to provide essential services to clients, we implemented health screenings and practices safety norms to a safe working environment and built trust with our employees. For employees that transitioned to work from home, policies were established across our footprints to create standards for working remotely. In addition, we invested in building effective virtual and remote experiences for our people across the employee lifecycle. These included upskilling our managers to remote manage teams, developing mobile-friendly e-learnings, and implementing gamified and video interfaces for onboarding and ongoing communication. These initiatives and more facilitated a productive, virtual-friendly and consistent experience for our employees and customers.


Despite challenging economic times, Firstsource outperformed its competitors and grew 23.9% from its last fiscal year. HR contributed to Firstsources growth story by bringing a net additional 6,647 talented Firstsourcers into the organization in FY21.

Attracting great talent, delivering a superior candidate experience, and bringing the right people on-board continues to be a key focus year-on- year. We seek out people who challenge themselves to be exceptional— and champion that spirit in others. Our Employee Value Proposition - Aspire. Achieve. Advance. - fosters a sense of purpose, bringing out the best in people, supporting their goals, and allowing them to find deep meaning in their work.

Following the launch of Taleo - our online Applicant Tracking System - in FY 20 in the US and the UK, we launched Taleo for India and Philippines in FY 21, completing our goal towards a comprehensive, global recruitment management system. The launch of Taleo was combined with introducing additional global modules like Onboarding iRefer (our Referral Program); Wings Within (our Internal Mobility Program), and a customized reporting module. These enhancements have improved the overall experience for both our internal team and our prospective employees.

The year also saw the launch of Aspiring Minds - an Al-powered talent assessment platform. The platform, integrated with Taleo, provides a comprehensive suite of assessments to evaluate cognitive, behavioral, functional and language capabilities; and helps us assess talent without biases. This has helped to optimize our current screening processes, deliver an engaging candidate experience powered by technology and bring the right talent to our organization.

In Q3 of FY 21 we also launched Recruitment Contact Center (RCC) initiative to provide an all-inclusive solution for managing day-to-day recruitment activities in a more structured and automated manner. The integrated solution will enable our talent acquisition team to make, record, store and report all candidate interactions across multiple channels such as outbound calls, inbound calls, SMS, email, and chat.


This year we revamped our onboarding process to meet the needs of a virtual working environment.

We launched a hi- touch virtually run onboarding program called "Step Aboard" which ensures people are poised to succeed in their roles.

The program helps new joinees familiarize themselves with the tools and technologies needed to operate in a virtual working environment and also understand the values and culture of the organization. The program spans across 6 months, starting with a Day 1 induction and followed by regular connects to engage with the employee.


Firstsource has a multi-generational and multi-cultural global workforce. With talent engagement and retention being a business imperative for leaders at all levels, we have created an inclusive setting with custom built programs that drive flexibility, creativity and purpose for our empowered workforce.

FitSource: Our holistic wellness program, Fitsource, focuses on physical health, mental health, social wellbeing and financial wellbeing. We believe different factors play into wellness and offer employees the resources they need to succeeding every aspect through a range of programs. We encourage Firstsourcers across the globe to connect and share best practices and support each other through virtual collaboration. In response to the pandemic we stepped up the wellness initiatives, dedicating Wednesday to wellness and hosted a number of events including training, seminars and online activities that focused on mental, physical and financial wellbeing for Firstsourcers. As a part of the Wellness Wednesday initiative, 30+ wellbeing sessions were conducted by health experts and are now accessible anytime on our learning management system. On average, 150+ employees joined the live sessions and 16,000+ employees have accessed the recorded sessions.

This past year we also expanded the mental health first aid training to the US and Philippines. Originally started in the UK, the Mental Health First Aider program trains employees on how to help a person through a mental health crisis. Like traditional first aid, mental health first aid does not teach people to treat or diagnose mental health or substance use conditions. Instead, the training teaches people how to offer initial support until appropriate professional help is received or until the crisis resolves. To date we have approximately 130 Mental Health First Aiders across the globe.

FirstWorld: Our global digital internal communication platform, FirstWorld captures all updates about Firstsource and Firstsourcers. Transparent, effective and regular communication is the key focus. This is delivered through "Lets talk" sessions and Open Houses anchored by our CEO and the Leadership team.

Lifecycle and Annual Global Employee Surveys: Employee surveys are our formal employee feedback mechanism and have been serving as key inputs into our people practices over the years. Lifecyle surveys occur during integration at the recruitment, onboarding, 30-day, 90 day and 180 day milestones of a new hire. The annual Global Employee Survey is conducted once a year for employees who have been with Firstsource for at least 6 months. In addition, FirstConnect, a global platform for grievance resolution aims to better resolve and track employee concerns, feedback, or grievances in a timely and effective manner.

First Reward: At Firstsource, we foster a culture of coming to work with a spring in the step, passion for what you do, and the desire to keep growing and ensure that successful efforts are always recognized and rewarded. To help build a culture that keeps everyone happy and engaged, we launched FirstReward, our reward and recognition tool in partnership with Vantage Circle. This tool enables Firstsourcers across the globe to reward positive behaviors and achievements at the workplace.

This tool provided immediate recognition in the form of monetary and non-monetary awards by peers, subordinates, supervisors and leaders. Post the successful launch of FirstReward in 2019, several initiatives and enhancements have been made to improve the overall employee experience and the uptake of the rewarding culture within the organization. The 24,000 appreciations and 20,000+ monetary rewards being given through the tool is a testimony to the fact that we are on the right course.

Global Leadership Awards: The Global Leadership Awards is a platform to recognize and celebrate the achievements of Firstsourcers across all geographies, business units and functions, and to drive behaviors that are aligned to the mission of the organization. The five Individual awards include: Customer Champion; Engagement Champion; Innovation Champion; Learning Champion; Salesperson of the Year and Value Role Model. The two Team awards include: Excellence in Business Delivery and Excellence in Supporting Business Delivery. With every passing year, the endeavor has been to ensure that the felicitation ceremony for these prestigious awards, is par excellence. This years event was particularly special and first-of-its-kind for two reasons; first, it was fully virtual and second, it was conducted globally. The overwhelmingly positive feedback received from the winners and leaders is a testimony to the success of the event. We will be planning the FY 2022 awards ceremony in a similar virtual fashion, making full use of technology, and upping the game in terms of engaging the audiences, the nominees, and the winners.


Performance Enhancement Process

Achieve. Collaborate. Enhance -ACE, that aims at focusing on employees as a whole, and not just on productivity or goals. Continuing our journey to transform our process from performance management to performance enhancement, in FY2020, positive impact areas have been:

• More structured goal cascade resulting in more aligned goals;

• A 30% increase in ongoing performance dialogues for regular feedback;

• Better performance enhancement training for people managers. Talent Management

Through our Talent Management program, we ensure we set no limits to where an individuals career can go, and they can discover opportunities and customize their career journey accordingly. Structured talent reviews were conducted for close to 2,000 employees in the Executive & above cadre. A thorough discussion with key stakeholders was conducted covering individual performance and potential, flight risk and retention actions if any, succession plans and promotion recommendations. Business criticality and readiness for higher roles were validated to prioritize growth and retention of top talent.

Compensation and Benefits

When people thrive, we thrive. Our Total Rewards strategy goes above and beyond in offering benefits programs aligned to the Firstsource Employee Value Proposition. Our focus on offering industry aligned wellbeing benefits continued during the pandemic year. Specifically, in India we reviewed our employee wellness policies like Term Life insurance and Group Hospitalization policy and made changes to provide additional support to our employees.

In FY 2021 we focused on changing the Long Term Incentive strategy by offering stake to the leadership team in the companys success in order to drive high ambition and commitment to superlative achievement. This was achieved by implementing the revised ESOP scheme. The scheme aims to provide options to the leadership team at a discounted price allowing wealth creation opportunities which meaningfully contributes to the Total compensation package in-line with the market practices.

As a proactive investment to contain attrition, a company-wide annual compensation revision was administered in January 2021 with harmonized design principles across the company.


We understand that staying abreast of rapidly changing skill sets and domain knowledge is tough in a digital world that continues to morph by the minute. The Firstsource Academy leverages digital platforms and partnerships with globally recognized learning partners to offer on- demand, outcome-based learning - at your fingertips. The academy offers more than 160 different programs through to role-based learning curriculum to enhance domain, compliance and leadership skills with a Digital First approach at its core.

In FY2021, the Academy served employees in the following manner:

1) 4,000+ Managers offered learning opportunity with a participation completion rate of 93%

a. Jetset is our flagship program for Team Leader development. It has been aligned more sharply to evolving operational needs, and rooted in on our new operational competency framework that builds readiness for not just current but larger roles and responsibilities. The program scaled aggressively in 2021 across all businesses;

b. The Academy introduced a new catalogue of Microlearning and Power Capsules as part of the overall Firstsource Academy Catalogue. A total of 11 Power Capsules were introduced as a part of our Virtual Classroom Training offering. These 3-hour Virtual Classroom courses are available for executives and above in the organization. 2,000 employees participated;

c. The Academy also saw a greater move into the space of self- paced learning through e-learning and targeted online offerings from our e-learning partners Skillsoft, Udemy, Blinkist and HBR (Harvard Business Review): These partners offered micro learning through articles published in the space of leadership, digital and more. A total of 2,800+ employees availed this learning opportunity;

d. Our flagship Future Ready Learning (FRL) program has a multi-pronged approach to build digital readiness. This year we continued education and upskilling of target groups of Firstsourcers on Artificial Intelligence, Big Data, Machine Learning and emerging technologies and digital knowhow.

Over 400+ managers and leaders globally engaged through this learning offering.

2) 25,000+ unique employees have participated across a learning opportunity offered by Talent Development

a. Learn@Home: In the wake of the COVID-19 Pandemic, the global lockdown led to a certain population unable to carry out their roles. To ensure continuous learning and development during this period the Academy led the learn@home initiative for CM Offshore India and HC - Onshore. The focus was to help employee develop skills in the space of Future Readiness, Personal and Professional over a period of 30 Days. A total of 1,678 Associates, 199 Supervisors and 25 Managers were in scope. The overall project had a 98% completion rate;

b. Virtual Training Skills: In order to enable the organization to transition into Virtual Training, the Academy rolled out "Virtual Training Master Train the Trainer" and "Virtual Train the Trainer" Programs globally. Over 42 Master Trainers were created globally who in turn trained over 400 trainers across geographies. The purpose of these rollouts was to enable the trainer to deliver new hire training through world class virtual training facilitation skills;

c. Virtual Training Skills for New Hire Orientation: Over 101 New Hire Leads globally were upskilled on facilitation skills in the space of Virtual Orientation;

d. Know Your Business (KYB): A series of business-based webinars facilitated by leaders across the organization were introduced with the goal of helping employees better understand Firstsources various businesses and the organizations Digital First, Digital Now (DFDN) Philosophy. A Total of 6 KYB sessions with 900 participants were conducted. This initiative will continue in FY 2021 with the goal to expand to Corporate business units;

e. Automation League: To expand the DFDN mentality across the organization, the academy team partnered with our Digital team to develop the Automation League program in which employees learn to become Citizen Developers and can create BOTS to create efficiencies in their day-to-day roles. The first Cohort of 100 saw 72 Graduates with 100+ BOTS developed. This is being extended over 2021;

f. RPA : Robotic Process Automation e-learning module was rolled out last year in partnership with the process excellence team with the aim of giving employees an understanding on Automation and its importance in the market, and the principles of identifying automation opportunities. The module was contextualized to business at Firstsource and covered Associates to DGMs with a total of 10000+ unique participants;

g. Talent Development in partnership with Community Reach launched the "Job Readiness" initiative for over 27+ underprivileged students. The objective was to equip these final year engineering students on various functional skills such as interviewing , problem solving and creative thinking skills, along with a focus on mental health and psychological well-being. There were 4 virtual sessions that were facilitated by Talent Development with an average participant rating of 4.5.


As part of Firstsources purpose-driven mission, we are committed to making an impact in the communities in which we work. One of the ways the organization does this, is by providing career opportunities to the disadvantaged and disenfranchised. Our goal is to hire 10,000 Impact Workers over the next four years. We will accomplish this with our location and sourcing strategy:

• Location - Firstsources location strategy includes Tier 3 locations that will provide mutually beneficial advantages to both the community and Firstsource. By establishing operations in these locations, Firstsource is able to provide employment opportunities to economically depressed areas with high unemployment rates. In turn, Firstsource is able to onboard resources at lower cost than our metropolitan locations and provide training and career development opportunities that retains a dedicated workforce. Currently, 12% of our population strength is from Tier 3 locations.

• Sourcing - Firstsource currently partners with impact-focused recruitment agencies, government and social organizations and pure-play impact sourcing organizations to attract and hire Impact Workers across our locations. In FY 2021, Firstsource hired 575 through these organizations such as RuralShores in India, Business in the Community in the UK, and New Dawn Outreach in the US. As our organization grows, we will also seek out partnerships with NGOs to further expand our Impact Sourcing footprint.


In March 2021, Firstsource officially launched its Inclusion and Diversity (I&D) program. While inclusive behavior has always been a cornerstone of our culture, the launch of our I&D program focuses on building truly inclusive teams where people of diverse backgrounds, ideas, and mindsets are welcomed to belong and grow together igniting innovation and inspiring more effective solutions. Our I&D strategy will be driven through four strategic pillars:

• Talent - Attracting, engaging and integrating diverse talent in the organization;

• Workplace - Enabling inclusion through thoughtfully crafted inclusive policies, practices and benefits;

• Capability - Strengthening awareness, cultural intelligence and managerial capability towards building an inclusive mindset;

• Community & Culture - Fostering a sense of belonging through employee affinity groups, external networks, and partnerships.

To ensure our I&D vision is fully realized, a formal governance structure has been developed. The governance team will set goals, track progress and measure success throughout the year. The governance team is comprised of:

• I&D Studio - Enterprise leaders from across the organization who are responsible for the alignment of the I&D strategy with overall business objectives and accountability for results;

• I&D Advocate team - Subject matter experts who are responsible for providing frameworks, action plans, driving execution, adoption, and change. This team will partner closely with the I&D Studio, Affinity Groups, cluster and center heads, and employee cohorts to accelerate realization of our I&D vision;

• Affinity Groups - Employee-led, employer-recognized safe spaces that bring together employees with a shared interest or goal to promote inclusion and diversity at the workplace. Affinity groups follow appropriate internal procedures for driving their programs and communication and assist in championing the organizational I&D strategy. Affinity group members come together as a collective voice to co-create solutions for common barriers faced by the group, have access to group-specific resources and development opportunities and provide group-specific expertise and insights to the I&D Advocate team.


US: FY 2021 was a year of tremendous growth in the US. As of March 31, 2021 we added a net increase of 1,562 employees which includes 150 employees in our Provider business acquired from PatientMatters, LLC. The majority of our new hires, however, came from our Mortgage business. To help integrate employees more seamlessly and increase our hire to start conversion rate, we implemented a Welcome Team in Mortgage dedicated to shepherding employees from offer acceptance to new hire orientation. As a result, we reduced our dropout rate from 16% to under 5%.

While recruiting and on boarding employees at a scale not previously experienced in the geography, the teams learned to navigate new processes in both our office and remote work environments due to COVID-19. We also worked internally to align our talent acquisition and HR teams in the US to provide consistent, seamless and efficient support to our growing business. While the different business and business needs will remain unique, our unified HR model will enable us to strengthen our overall employee value proposition in the US by aligning our practices, benefits, policies to support and scale our organization.

ASIA: Asia had a laser focus on recruitment and engagement in FY21. Over the fiscal year, we added net of 4,839 employees in India. Recruitment was done remotely using multiple channels of sourcing. Online assessments and video interviews were launched, and a remote training environment was set up as well. Once onboard, lifestyle conducive shift rosters, on demand flexibility, real time management of digital workforce and BOTS enabled our employees to fulfill our commitments to customers. In addition, engagement of our employees kept the spirit of our mission alive. Engagement with employees was multifold using different themes. The key theme during the pandemic was wellness with special focus on mental wellbeing. Additionally, online learning management solutions, rewards and recognition, performance enhancement process, and CSR were amplified to cater to the hybrid working model.

UK: When the pandemic hit in March 2020 we entered into unchartered grounds, our main priority was the safety and protection of employment for all Firstsourcers. We worked with clients on business continuity and enabled home working over a short period of time. Where we experienced call volume reduction, we swiftly implemented the Furlough scheme supported by the government to protect long term employment. We claimed just over GBP 5 Million via the scheme. In addition, we had capacity to reduce the seating to 40/50% in the connect centers ensuring that all the relevant social distancing and hygiene measures were in place. Communication was imperative during the phase as we had a combination of inhouse, at home, hybrid and Furloughed Firstsourcers, we introduced weekly updates from each general manager that went to all employees and put in place care-call scheme for those that had taken ill or were classified as vulnerable due to underlying health conditions.


The authorised share capital of the Company is H 8,720.00 Million with 872 Million Equity shares of H 10 each. The paid up share capital as of March 31,2021 stands at H 6,960.99 Million compared to H 6,938.27 Million as of March 31, 2020.

The increase in equity share capital of H 22.72 Million is on account of allotment of 2,272,436 shares to employees as stock options.

The Other equity of the Company increased from H 20,715.55 Million to H 21,031.88 Million. The details of increase in Reserves and surplus by H 316.33 Million are as below:

Increase on account of:
Profit for the year less appropriation 3,771.48
Premium received on shares issued during the year 97.20
Employee stock option reserve 163.67
Decrease on account of:
Dividend (Net) (2,037.69)
Treasury shares (652.81)
Effective portion of cash flow hedges (215.81)
Exchange Difference on consolidation of nonintegral subsidiaries/entities (650.93)
Special Economic Zone re-investment reserve (158.78)
Net Increase/(Decrease) in Reserves and surplus 316.33


Minority interest is created on account of 74% consolidation of Firstsource Dialog Solutions (Private) Limited, Sri Lanka.

Minority interest as of March 31, 2021 is H 5.39 Million as compared to H 5.88 Million as of March 31,2020.


Secured long-term borrowings represent finance lease obligation. Unsecured long-term borrowings represent loan from banks and nonbanking financial companies.

Unsecured long-term borrowings outstanding as of March 31,2021 were H 845.52 Million as compared to H 27.76 Million as of March 31,2020. The net increase was majorly on account of unsecured loan taken from Bank.


Deferred tax liabilities as of March 31, 2021 were H 469.98 Million as compared to H 734.95 Million as of March 31,2020. This is due to deferred tax additions through business combination.


Lease liabilities for the company as of March 31, 2021 were H 5,898.43 Million and for March 31,2020 were H 5,123.15 Million. The increase is on account of new premises taken on lease.


Provision for Employee Benefits represents provision for gratuity and compensated absences liability to employees based on actuarial valuation done by an independent actuary. These provisions as of March 31, 2021 were H 746.52 Million as compared to H 487.28 Million in March 31, 2020. The increase in short term provisions from last year is due to increase in provision for compensated absences.


Short-term borrowings as of March 31, 2021 were H 4,367.13 Million as compared to H 8,341.42 Million as of March 31,2020. The movement is on account of repayment of loan H 3,974.29 Million.


Trade payables as of March 31, 2021 were H 2,788.03 Million as compared to H 952.81 Million as of March 31, 2020.


Other current financial liabilities as of March 31, 2021 were H 2,865.54 Million as compared to H 1,828.07 Million as of March 31, 2020. The increase in other financial liabilities is on account of increase in employee benefit payable and increase in current maturities of long term borrowings.


Other current liabilities as of March 31, 2021 were H 2,136.54 Million as compared to H 655.99 Million as of March 31, 2020. The increase in other current liabilities is on account of Value added tax and advance from customers.


Goodwill as of March 31, 2021 was H 21,947.63 Million as compared to H 22,323.56 Million as of March 31,2020.

The decrease in goodwill during the year was H 375.93 Million. This decrease was due to restatement of non-integral foreign subsidiaries at year end exchange rate offset by increase in goodwill on account of acquisition of PatientMatters LLC and its subsidiaries of H 359.57 Million.


The net block of tangible assets, intangible assets and capital work- in progress amounting to H 2,895.01 Million as of March 31, 2021 as compared to H 1,912.08 Million as of March 31, 2020, resulted in a net increase of the assets to the extent of H 982.93 Million.

This is majorly due to net additions of H 1,860.26 Million and by upward exchange rate impact of H 34.41 Million and depreciation charge for the year amounting to H 911.74 Million.


Right of use assets of the company was H 5,132.94 Million on March 31, 2021 and H 4,472.92 Million on March 31,2020. The net increase is due to new premises taken on lease of H 1,794.76 Million offset by depreciation charge for the year amounting to H 1,151.78 Million.


The investments of the company represent non-current investments of H 117.38 Million and current investments of H 825.70 Million as on March 31, 2021 as compared to H 122.09 Million and H Nil respectively as on March 31, 2020.


Deferred Tax assets of the company as of March 31,2021 were H 2,691.89 Million as compared to H 2,511.30 Million as of March 31, 2020. This increase majorly is on account of MAT credit created during the year H 161.24 Million, decrease in deferred tax liability on cash flow hedges H 29.35 Million, offset by decrease in property, plant and equipment H 31.03 Million.


Income Tax assets of the company as of March 31, 2021 were H 822.49 Million as compared to H 783.64 Million as of March 31,2020.


The other non-current assets of the company as of March 31,2021 were H 1,792.18 Million as compared to H 1,976.90 Million as of March 31, 2020. This decrease is due to decrease in non-current portion of deferred contract cost and unexpired rebate from customer offset by increase in capital advances during the year.


Trade receivables amount to H 5,767.38 Million (net of provision for doubtful debts amounting to H 186.46 Million) as of March 31, 2021 as compared to H 5,567.18 Million (net of provision for doubtful debts amounting to H 216.23 Million) as of March 31, 2020. These debtors are considered good and realisable. The need for provisions is assessed based on various factors including collectability of specific dues, risk perceptions of the industry in which the customer operates and general economic factors which could affect the Companys ability to settle claims. Provisions are generally made for all debtors outstanding for more than 180 days as also for others, depending on the managements perception of the risk.

Debtors days as of March 31, 2021 (calculated based on per-day sales in the year) were 42 days, as compared to 50 days as of March 31, 2020. The Company constantly focuses on reducing its receivables period by improving its collection efforts.


Cash balance represents balance in cash with the Company to meet its petty cash expenditures. The bank balances in India include both Rupee accounts and foreign currency accounts. The bank balances in overseas current accounts are maintained to meet the expenditure of the overseas subsidiaries and branches. The cash and bank balance as of March 31, 2021 was H 1,373.34 Million as compared to H 1,907.49 Million as of March 31, 2020. This decrease in cash was due to cash used in payment of dividend, investing activities and other financing activities offset by cash generated from operating activities.


Other Financial Assets as of March 31, 2021 were H 2,814.85 Million as compared to H 2,158.28 Million as of March 31, 2020. The increase in these assets was on account of increase in unbilled revenue offset by decrease in MTM on foreign currency forward contracts.


The other current assets of the Company as of March 31, 2021 were H 1,531.60 Million as compared to H 1,410.29 Million as of March 31,2020. This increase is due to increase in prepaid expenses.


The table below sets forth, for the periods indicated, certain income and expense items for the Companys consolidated operations:

Particulars FY2021 FY2020
Rs.Million % of income Rs.Million % of income
Income from services 50,326.87 - 40,501.92 -
Other operating income 452.93 - 484.22 -
Revenue from operations 50,779.80 100% 40,986.14 100%
Personnel cost 34,672.28 68.3% 27,735.33 67.7%
Other expenses 8,065.47 15.9% 6,961.93 17.0%
Operating EBITDA (Earnings before Interest, Tax and Depreciation) 8,042.05 15.8% 6,288.88 15.3%
Depreciation and amortisation 2,063.52 4.0% 1,852.00 4.5%
Operating EBIT (Earnings before Interest and Tax) 5,978.53 11.8% 4,436.88 10.8%
Finance charges 522.30 1.0% 583.21 1.4%
Share in net (profit) / loss of associate - (0.01)
Other income 12.66 0.0% 88.43 0.2%
Profit before exceptional item and tax 5,468.89 10.8% 3,942.11 9.6%
Exceptional item 1,150.55 2.3% - -
Profit before tax 4,318.34 8.5% 3,942.11 9.6%
Provision for taxation
- Current tax expense (including MAT) 619.59 1.2% 282.35 0.7%
- Deferred tax charge 81.98 0.2% 262.91 0.6%
Profit after tax before minority interest 3,616.77 7.1% 3,396.85 8.3%
Minority interest (0.09) 0.0% (0.01) 0.0%
Profit after tax 3,616.86 7.1% 3,396.86 8.3%


Income from Services

Income from services increased by 24.26% to H 50,326.87 Million in FY2021 from H 40,501.92 Million in FY2020. The Company attributes this increase in its income from services to new business from existing clients and addition of few new clients. The average exchange rate for consolidation of subsidiaries for USD and GBP in FY2021 was H 74.11 per USD and H 96.87 per GBP as compared to H 70.86 per USD and H 90.10 per GBP in FY2020.


The Company serves clients for Banking and Financial Services, Healthcare, Communication, Media and Technology and Diverse Industries. Clients from Banking and Financial Services accounted for 52% (FY2020: 41%), clients from Healthcare accounted for 27% (FY2020: 33%), clients from Communication, Media and Technology accounted for 19% (FY2020: 23%), clients from Diverse Industries accounted for 2% (FY2020: 3%) of the income from services in FY2021.

The following table gives a segment-wise breakdown of the income from services for the corresponding periods:

Amount (Rs. Million)

FY2021 FY2020
Business Segment
Banking and Financial Services 26,109.21 16,418.06
Healthcare 13,354.35 13,310.56
Communication, Media and Technology 9,704.75 9,493.90
Diverse Industries 1,158.56 1,279.40
Total 50,326.87 40,501.92


The Company serves clients in North America, UK and India. Clients from North America accounted for 68% (FY2020: 62%), clients from UK accounted for 31% (FY2020: 37%), clients from India accounted for 1% (FY2020: 1%). The following table gives a segment wise breakdown of the income from services for the corresponding periods:

Amount (Rs. Million)

FY2021 FY2020
UK 15,530.43 15,025.12
US 34,175.46 24,907.59
ASIA 620.98 569.21
Total 50,326.87 40,501.92


The following table shows the Companys client concentration by presenting income from the top client and top five clients as a percentage of its income from services for the periods indicated:

Amount (Rs.Million)

Particulars FY2021 FY2020
Amount % Amount %
Client concentration to revenues
Top Client 8,251.04 16% 8,534.38 21%
Top 5 customers 20,681.48 41% 16,660.22 41%
All clients 50,326.87 100% 40,501.92 100%

In FY2021, the Company had top client accounting for 16% of the income from services compared to top client accounting for 21% of its income from services in FY2020.

The Company derives a significant portion of its income from a limited number of large clients. In FY2021, the Company had 20 clients contributing individually over H 500 Million each in annual revenues as compared to 13 in FY2020. In FY2021 and 2020, income from the Companys five largest clients amounted to H 20,681.48 Million and H 16,660.22 Million respectively, accounting for 41% and 41% of its income from services respectively. Although the Company continues to increase and diversify its client base, it expects that a significant portion of its income will continue to be contributed by a limited number of large clients in the near future.


Other operating income/ (expense) of H 452.93 Million in FY2021 (FY2020: H 484.22 Million) includes exchange gain of on restatement and settlement of debtor balances and related gain / (loss) on forward/ option contracts as these transactions relate to the operations of the Company.


The Companys revenue from operations increased by 23.90% to H 50,779.80 Million in FY2021 from H 40,986.14 Million in FY2020 in rupee terms and grew by 17.9% in constant currency terms.


Personnel costs

Personnel costs increased by 25.01% to H 34,672.28 Million in FY2021 from H 27,735.33 Million in FY2020, with the number of employees increasing to 28,004 as of March 31, 2021 from 21,203 as of March 31, 2020. As on March 31,2021, 11,715 employees were employed outside India and 16,289 employed in India as compared to 9,753 employees outside India and 11,450 employees in India as at end of FY2020. The increase in cost is attributed to increase in number of employees across the globe and annual increments.

Operating Costs

Operating costs for FY2021 amounted to 15.9% of the income for that period, as compared to 17.0% of income in FY2020. Operating costs increased to H 8,065.47 Million in FY2021 from H 6,961.93 Million in FY2020. This increase is majorly due to increment in operating expenses with high variability.


As a result of the continuing operations, operating EBITDA increased by H 1,753.17 Million to H 8,042.05 Million in FY2021 from H 6,288.88 Million in FY2020. Operating EBITDA in FY2021 is 15.8% of income as compared to 15.3% in FY2020.


Depreciation costs for FY2021 amounted to 4.0% of the income for that period, as compared to 4.5% in FY2020. Depreciation increased year-on- year by H 2,063.52 Million in FY2021 from H 1,852.00 Million in FY2020.


Operating Earnings before Interest and Tax (EBIT) increased by H 1,541.65 Million to H 5,978.53 Million in FY2021 from H 4,436.88 Million in FY2020. Operating EBIT in FY2021 is 11.8% compared to 10.8% in FY2020.


Finance cost for FY2021 amounted to 1.0% of income for that period, as compared to 1.4% of income in FY2020. Finance charges decreased to H 522.30 Million in FY2021 from H 583.21 Million in FY2020.


Other income decreased to H 12.66 Million in FY2021 from H 88.43 Million in FY2020. The components of other income in FY2021 were profit from the sale/redemption of current investments of H 18.99 Million, loss on sale of fixed assets of H 3.82 Million, interest income of H 6.98 Million, other miscellaneous income, net of H (22.35) Million and foreign exchange gain of H 12.86 Million.


The Company, through its subsidiary viz, Sourcepoint Inc. (Sourcepoint), has a strategic partnership agreement with a leading mortgages business group (Counterparty) under which Sourcepoint will be a preferred vendor for business process management services. As per the terms of the agreement, in exchange of the revenues realized through the Counterparty by Sourcepoint, the Counterparty would be entitled to an option to purchase a proportion of the equity of Sourcepoint at a fair value as on the date of grant. The agreement entitles the Counterparty to seek a buyback of its equity from Sourcepoint under certain circumstances.

As at 31 March 2021, the fair value of the liability of the option has increased considerably on account of significant increase in the valuation of Sourcepoint. Also, the Counterpartys entitlement to option has increased basis the revenues realized by Sourcepoint, as per the terms of the agreement. The Counterparty is also negotiating for an early exercise of its entitlement. As a result, an amount of H 1,150.55 Million has been charged to the Statement of Profit and Loss for the year ended 31 March 2021. This has been classified as an exceptional item.


Profit before tax increased to H 4,318.34 Million in FY2021 from a profit before tax of H 3,942.11 Million in FY2020. Profit before tax in FY2021 was 8.5% of the income, as compared to 9.6% of the income in FY2020.


Provision for taxation increased to H 701.57 Million in FY2021, from H 545.26 Million in FY2020 due to increase in profit. Income tax expense comprises of current tax, net change in the deferred tax assets and liabilities in the applicable FY period and minimum alternate tax credit. Current tax expense comprises tax on income from operations in India and foreign tax jurisdictions. The Company had the benefit of tax-holiday under Section 10AA under the Special Economic Zone scheme, since few of the centres in India are in Special Economic Zone Current tax expense amounted to H 619.59 Million in FY2021 as compared to H 282.35 Million in FY2020, and deferred tax charge of H 81.98 Million in FY2021 compared to a deferred tax charge of H 262.91 Million in FY2020.


As a result of the foregoing, profit after tax before minority interest increased to H 3,616.77 Million for FY2021 from profit after tax before minority interest of H 3,396.85 Million in FY2020.


Minority interest is H (0.09) Million in FY2021 as compared to H (0.01) Million in FY2020.


As a result of the foregoing, profit after tax to H 3,616.86 Million in FY2021 from profit after tax of H 3,396.86 Million in FY2020. Profit after tax in FY2021 was 7.1% of the income, as compared to 8.3% of the income in FY2020.


The Company needs cash to fund the technology and infrastructure requirements in its operation centres, to fund its working capital needs, to pay interest and taxes, to fund acquisitions and for other general corporate purposes. The Company funds these capital requirements through variety of sources, including cash from operations, short and long-term lines of credit and issuances of share capital. As of March 31, 2021, the Company had cash and cash equivalents of H 1,373.34 Million. This represents cash and balances with banks in India and abroad.

The Companys summarised statement of consolidated cash flows is set forth below:

Amount (Rs. Million)

FY2021 FY2020
Net Cash flow from Operating activities 9,755.67 4,104.04
Net Cash flow (used in) / generated from Investing Activities (3,496.18) 143.22
Net Cash flow used in Financing Activities (6,886.90) (2,768.02)
Cash and cash equivalents at the beginning of the year 1,907.49 473.84
Foreign exchange gain/ (loss) on translating Cash and cash equivalents 36.08 (60.85)
Earmarked Balances with Banks 57.18 15.26
Cash and cash equivalents at the end of the year 1,373.34 1,907.49

* Earmarked balances with banks represent unclaimed dividend and unspent amount of Corporate Social Responsibility CCSR).


Net cash generated from the Companys operating activities in FY2021 amounted to H 9,755.67 Million. This consisted of net profit before tax of H 4,318.34 Million and a net upward adjustment of H 3,239.97 Million relating to various non-cash items and non-operating items including depreciation of H 2,063.52 Million; net increase in working capital of H 2,895.45 Million; and income taxes paid of H 698.09 Million. The working capital change was due to increase in trade receivables of H 144.50 Million, increase in loans and advances by H 625.91 Million and increase in liabilities and provisions by H 3,665.86 Million.

Net cash generated from the Companys operating activities in FY2020 amounted to H 4,104.04 Million. This consisted of net profit before tax of H 3,942.11 Million and a net upward adjustment of H 2,051.01 Million relating to various non-cash items and non-operating items including depreciation of H 1,852.00 Million; net decrease in working capital of H 1,353.89 Million; and income taxes paid of H 535.19 Million. The working capital change was due to increase in trade receivables of H 1,574.29 Million, increase in loans and advances by H 410.63 Million and increase in liabilities and provisions by H 631.03 Million.


In FY2021, the Company used H 3,496.18 Million of cash from its investing activities. These investing activities included capital expenditure of H 1,730.97 Million, including fixed assets purchased and replaced in connection with the Companys operation centres in the UK, the US and India and H 950.00 Million for acquisition of PatientMatters LLC and its subsidiaries and net purchase of money and debt market mutual funds amounting to H 806.71 Million.

In FY2020, the Company generated H 143.22 Million of cash from its investing activities. These investing activities included capital expenditure of H 947.63 Million, including fixed assets purchased and replaced in connection with the Companys operation centres in the UK, the US and India, net sale of money and debt market mutual funds amounting to H 1,277.14 Million.


In FY2021, net cash used in financing activities amounted to H 6,886.90 Million. This comprised of repayment of long term borrowings of H 94.28 Million, proceeds from short term borrowings of H 4,199.97 Million and proceeds from issuance of equity shares of H 82.15 Million, The Company paid interest of H 514.28 Million, purchase of treasury shares of H 652.81 Million. During the year, the company also paid dividend of H 2,037.69 Million to its shareholders and repaid lease liability of H 1,091.93 Million.

In FY2020, net cash used in financing activities amounted to H 2,768.02 Million. This comprised of repayment of long term borrowings of H 111.81 Million, proceeds from short term borrowings of H 2,605.66 Million and proceeds from issuance of equity shares of H 76.68 Million, The Company paid interest of H 584.49 Million, purchase of treasury shares of H 89.35. During the year, the company also paid dividend of H 3,762.03 Million to its shareholders and repaid lease liability of H 936.11 Million.


The Company funds its short-term working capital requirements through cash flow from operations, working capital overdraft facilities with commercial banks, medium-term borrowings from banks and other commercial financial institutions. As of March 31,2021, the Company had cash and bank balances of H 1,373.34 Million as compared to H 1,907.49 Million as of March 31,2020.


Ratios FY2021 FY2020
Debtors Turnover 8.73 7.3
Current Ratio 0.9 0.8
Debt Equity Ratio 0.2 0.3
Interest Coverage 9.3 7.8
Operating EBITDA 15.8% 15.3%
Operating EBIT 11.8% 10.8%
Net Profit Margin 7.1% 8.3%

Table presents key financial ratios, as applicable, for Firstsource Solutions Limited. The change in Debt to Equity ratio is significant, as defined under the amended SEBI (LODR) Regulations i.e. over 25% compared to previous year. This is on account of reduction of debt leading to lower interest expense, coupled with improved operational efficiency.


Our responsible and sustainable business approach is rooted in what matters to our wide range of stakeholders. The Corporate Responsibility team sets the strategic direction for meeting our commitment to society and supports the integration and implementation of programmes and nonfinancial reporting throughout the company. We have started monitoring key data and parameters that are central to the environmental, social and governance (ESG) performance and the impact on the company.

As a demonstration of this, the details below give you a summary of environmental, social and governance data across Firstsources global operations. This brings together key metrics that can be found across our reporting segments, to give our stakeholders the information that matters to them.


• EPC certified building [IN**] [UK**]

• STP in all buildings [IN**] [PH**]

• ISO 14001 and 45001 [IN**] [UK*]

• ISO 50001 [UK*]


• Installation of sensor taps to minimise water wastage [IN*] [PH**] [UK*] [US**]

• Usage of eco- friendly housekeeping consumable such as bio chemicals for waterless urinals [IN*] [PH**]

• Water Consumption Monitoring per floor basis or for premises [IN**]

• Treated water usage in gardening, flushing & HVAC cooling tower [IN**] [PH*]

• Rainwater harvesting [IN**]


• Eco friendly chemicals being used in HK operations [IN*] [PH**] [UK**]

Ambient air quality monitoring, Ambient noise testing and Water testing [IN*] water testing [PH**] [UK*]

• Safe disposal of sanitary Napkins at centres through Napkin disposal machines or safe collections for environment friendly disposal [IN*] [PH**] [UK**] [US**]

• Use of environment friendly Housekeeping Chemicals [IN*] [PH**] [UK**] [US**]

• Monitoring of department wise paper consumptions [IN**] [PH**] [UK**]

• Use of R-134 refrigerant gas & restriction on use of Ozone depleting gases in HVAC System [IN*] [PH*] [UK*] [US**]

• Purchase of Green Renewable Power from Solar / Wind parks [UK**]

• No usage of pesticides in Gardening activities [IN**] [PH**] [UK**] [US**]

• Usage of Eco-Friendly Dustbin Liners [IN**] [PH**] [UK**]


• Deployment of PUC compliant vehicles in transport [IN ]

• Carpooling & common car & bus facility for employees from nearest Metro or railway station or pick up point [IN**]

• Installation of high-quality energy efficient Jet hand dryers [IN*] [UK**] [US*]

• Motion sensor-based lighting system [IN**] [UK**] [US*]

• Energy efficient AC/PAC for secured areas [IN*] [PH*] [UK**] [US*]

• Energy efficient UPS and LED lighting [IN*] [PH**] [UK**] [US*]

• HVAC Chiller- R134 green gas [IN*] [PH*] [UK**] [US*]

• Air curtains to control cooling leakage and better energy efficiency [US*]

• Use of VFDs for AHUs [IN**] [US*]

Use of Automated Environment control system for cooling & air circulation to maintain at optimum level [IN**] [PH**] [UK**] [US*]


• Eco-friendly fogging activity to control surface contamination against microbes

• Automated temperature checks, mandatory social distancing and wearing of masks

• Regular cleaning of filters and ambient temperature maintained 2 degrees more than the normal set temperature

• Use of Chemical Spillage kit in centre to quickly arrest any chemical or oil spillage [IN**] [PH**] [UK**]


• Segregation of dry and wet waste [IN*] [PH**] [UK**] [US*]

• E-Waste disposal through government approved vendors [IN*] [PH**] [UK**] [US*]

• Hazardous waste disposal though authorised recyclers [IN*] [PH**] [UK**] [US*]

• Bio Waste Disposal as per regulatory requirements [IN**] [UK**] [US**]

Disposal of paper waste separately with environment friendly paper recyclers [US**]

• Measurement & monitoring of food wastage in canteens [US*]

• Discarding Plastic Plates & Plastic spoons in cafeteria [No usage of plastic] [PH**] [UK**]

• OWC (Organic Waste Convertor) in operation to process food/ wet waste Lamination of old and broken tabletop furniture to enhance durability

• Purchase of refurbished furniture and minimise new procurement of wood-based products [UK*]


1) * Implemented at majority of locations

2) ** Implemented at key locations

3) The short codes represent the implementation in the following countries:

a. IN is India

b. US is USA

c. UK is United Kingdom

d. PH is Philippines


Risk Management report describes Enterprise wide risk management philosophy, structure and practices in the Company. Readers are cautioned that risk related information outlined here is for information purposes only.

This report contains forward-looking statements, about risks and uncertainties affecting our business objectives. Our business model is subject to the uncertainties that could cause results to differ materially from those reflected in the forward-looking statements. Readers are requested to exercise their own judgment in assessing the risks associated with the Company and review all the factors discussed elsewhere in this annual report.

In Todays dynamic business environment, Organisations are faced with multiple risks and thus creating and sustaining the value for our stakeholders requires robust governance and a strong risk management function.


The Company has defined its roles and responsibilities across the organisation and stakeholders to ensure accountability, expectation setting and clear reporting lines.

Level Roles and Responsibilities
Board of Directors • Approve key business objectives and create a mechanism to ensure that the executive management effectively manages risks impacting the business
Audit Committee • Provides oversight on the internal control environment and review of the independent assurance activities performed by the internal auditors
• Reviews proper resourcing of the internal Audit team
Risk Management Committee • To assist the Board in overseeing the responsibilities with regard to the identification, evaluation and mitigation of Strategic , Macro Economic/ Political/ Environmental and Operational Risks
Risk Steering Committee & MISF • To ensure the implementation of and compliance with the objectives set out in the ERM policy
• To provide oversight on companys Information Security program and practice and ensure implementation of and compliance with the objectives set out in various Information security / data privacy / cyber security policies
Business Heads/ Function Heads • Own and manage risks at business unit level - that may arise from time to time - in consultation with the Risk Committee and abide by the Companys risk policies
Risk Management Team • Identifies, assesses, mitigates and monitors risks through risk registers, risk model mapping and continuous engagement with business heads developing mitigation strategies and publishing risk dashboards
Compliance • Drives comprehensive regulatory and contractual compliance management processes, reports exceptions and creates awareness about such obligations
• Additionally, compliance drives standards of corporate governance through global ethics, anti-fraud, antimoney laundering and anti-bribery frameworks
Legal • Safeguards organizational interests covering contract documentation, litigation management and advisory
Internal Audit • Provides independent and objective assurance on the controls to the Board and Audit Committee and enables sharing of best practices across geographies, businesses and functions


Firstsources Risk Management framework is designed and implemented on the basis of COSO Framework (Committee of Sponsoring Organizations) which is a globally accepted and recognised framework that provides guidance and thought leadership on enterprise risk management and internal controls. Enterprise Risk Management at Firstsource seeks to minimize the adverse impact of risks on key business objectives and enables the Company to leverage market opportunities effectively. These risks are continuously tracked with the help of Key Risk Indicators (KRIs) defined by the risk management team and risk owners.


Your Company has defined a robust risk management process encompassing:

I. Risk identification;

II. Risk assessment;

III. Risk response;

IV. Monitoring and reporting.

The risks are identified across the defined risk categories and monitoring levels, taking into consideration the business objectives. The stakeholders with clearly defined roles and responsibilities at various levels take up the response, remediation, monitoring, tracking, reporting and review at defined periodicities.


The risk landscape in the current business environment and evolving regulatory frameworks is changing dynamically with Cyber Security, Fraud Detection and Prevention, Information Security, Data Privacy and Business Continuity featuring prominently. To effectively mitigate these emerging risks; a focused strategy is prepared around Information Risk Management.


The Companys key business risks and their mitigation measures include:

Risks Risk Description
A. Strategic Risks
Growth risk The Company has revenue concentration on few big clients, with primary business in the US and the UK geography. Hence, any sort of economic slowdown/downturn in these economies and industries may affect the Companys business.
Increasing technology disruptions and digitization trends made it imperative to invent and adapt digital technologies. Improper adaption could impact the Companys ability to grow.
The services provided by the Company in healthcare industry are relatively less prone to any economic or recessionary cycles. However, the customer management business is a relatively low margin business and is more prone to economic variations. Hence, any technology disruption could see shrinkage in volumes and can have an adverse impact on growth.
Further, from the Pandemic perspective, any significant slowdown at any of the top clients may adversely impact companys overall growth objectives.
The Companys continued focus in creating Digital Business practices has enabled it to offer differentiated productized services across industry segments. These services based on Digitization, Robotics, Artificial Intelligence & Data Analytics and other Technology enabled solutions that enables the Company to retain and grow its wallet share with its clients and also win new logos. The Company has also ramped up efforts for new relationships in new age economy businesses and won first few logos which will further diversify the revenue and industry concentration.
Country risk The Company has a global footprint with operations in multiple geographies with intermediate or operating subsidiaries and branches, incorporated in India, the US, the UK and the Philippines. Consequently, the Company is exposed to various geo political and regulatory risks which are beyond the Companys control.
The Company has local management teams in all its operating countries and they understand the country specific operating nuances. The Company has also invested significantly in creating a management structure in these geographies and has a well-diversified geographic spread to mitigate these risks.
B. Industry and Macro Economic Risks
Protectionist/ Localization sentiments in developed countries The trend of Protectionism/ localization being followed by most matured economies may continue. The response to this rising protectionism has been the increase in legislation aimed at protecting domestic industries and jobs. The issue of companies offshoring services to organizations operating in other countries, such as India, has increasingly become a sensitive topic of intense political discussion in these countries. In the US, there has been anti-offshoring legislations aimed at making offshore outsourcing prohibitive or less attractive.
Also, the trade war conflicts emerging between major economies like the US and China is likely to impact global business sentiments adversely.
Since beginning, the Company has recognised this and developed operational capabilities across the globe. In the process, the Company has successfully transformed itself from an offshore BPM Player to a multi shore BPM player, with significant local operational presence in the US and the UK, which has helped in winning more business in those geographies. The Company derives a majority of its revenues from onshore services.
Revenue Share % FY 18 FY 19 FY 20 FY 21
Offshore 21.2 % 19.8% 24.1% 28%
Onshore* (*includes India domestic business) 78.8 % 80.2% 75.9% 72%

Today, the Company has 20 operation centers with 5,708 employees in the US and 7 operations centers with 5,519 employees in the UK. The Company is one of the largest employers in the UK BPM sector.

Pandemic Risk due to Natural/ Manmade disasters The COVID-19 has brought unprecedented uncertainty across the globe (including all places of business our Company and clients operate in). While the company has quickly adopted to alternate business continuity scenario (Remote Working), the uncertainly still prevails regarding the timelines of resuming to the normal work conditions. Additionally, few clients still continue to prefer for Work from Office resources due to their regulatory requirements. This will continue to evolve and further stabilize as Hybrid work model in the coming year as well.
The BMP industry is highly people and technology centric, and any delay in providing agreed operational services due to pandemic as well as any other natural or man-made disasters like earthquake, floods, tsunami, fire, bomb blasts and terrorist attacks, among others, can immediately affect the Companys operations.
As such disasters are uncontrollable beyond an extent. The Company implements robust disaster and business continuity strategies during such unforeseen events. Such strategies can help to bring down the effect of these events to some extent on the Companys operations. While, the WFH (Work From Home) has stabilized very well in terms of required infrastructure and technological support, The management is in continuous engagement with all the clients to ascertain their business plan and scenarios for FY 2022 and accordingly will devise the strategy of Hybrid Work Model to mitigate the impact. The shift in focus towards "Digital First Digital Now" will continue to create newer opportunities and Company has already FY 2022 plan in place to get new business in this area (with existing as well as potential new clients)
Long selling cycle The Company has a long selling cycle that ranges from months to multiple years for its BPM services and requires significant investment of capital, resources and time by both clients and the Company. Further, due to Pandemic, the decision process at existing / prospective clients has slowed down due to reprioritization. This leads to the risk of delays, over which the Company has little or no control.
The Company has robust marketing, sales and business development teams across geographies with an aggressive transition methodology that helps transition new wins fairly quickly into service delivery mode. Most of the contracts with existing clients are on long-term-basis, which ensures sustainable and scalable business from such clients.
Highly competitive environment The market for BPM services has become highly competitive over the years. These competitors include third party pure-pla/ BPM providers based largely in India and the Philippines, local/onshore BPM providers in the US and UK, BPM divisions of global IT companies and in-house captives of potential clients.
The Company understands that it needs to retain and grow its leadership position in the industry. To maintain this competitive edge, the Company makes significant investments in strengthening domain capabilities, digital capabilities, process excellence, operations, innovation and a robust transformation framework. This year Company has further invested in developing DECC (Digitally Empowered Contact Centre) offerings. These will help to create strong differentiators for the Company vis-a-vis competition, aiding non-linear growth in revenues and margins.
Volatility in the US Interest Rates and Economic uncertainty The interest rate cycle in the US is indicating a continued low interest rate regime next year also. Further, the effects of various government stimulus provided during pandemic situation will continue and may lead to an inflationary scenario. These changes will have the potential to impact the Mortgage and financial services collections business unit volumes and such impact is likely to have an adverse effect on the Companys revenues.
C. Financial Risks
Currency volatility The volatility in the exchange rate between INR and GBP; INR and USD has continued in recent years, and these currencies may continue to fluctuate significantly in the future as well.
The Companys operating results will continue to be impacted by fluctuations in these exchange rates.
The Company has a dedicated treasury function and an internal foreign exchange risk management policy of proactively hedging exposures. As per the internal guidelines, the Company has been judiciously hedging its net exposures on a regular basis through forward cover contracts and other suitable products.
Revenue concentration risk The Company relies on relatively small number of clients for a large proportion of its income, and loss/discontinuance of any of these clients could adversely affect its revenue and profitability. The Companys top client accounted for 16.4% of its income from services and top five clients accounted for 41.0% of its income from services in FY 2021. Furthermore, major events affecting the Companys clients, such as bankruptcy, change of management, mergers and acquisitions, change in their business model or regulatory factors could adversely impact its business. Moreover, the Companys revenue is highly dependent on clients concentrated in a few industries, as well as clients located primarily in North America and UK / Europe. The impact of pandemic on Economic slowdown or other factors that affect these industries or the macro-economic environment in these countries could adversely impact the Companys business.
The Company constantly strives to mitigate the risk of client concentration through very long term contracts with key clients in order to provide stability to its revenues.
During FY21, as income from services, the Company derived 19% from Communications, Telecom and Media vertical, 27% from Healthcare vertical and 51% income from the BFSI vertical. Geography wise, USA contributed 49% of income, followed by 28% from India and 23% from the UK geographies.
The management believes that it has a well balanced mix of clients and industries, and going forward, shall continue to assess, evaluate and address the risk of any over dependency.
Pricing risk Many of the Companys contracts are long-term in nature and consequently, the pricing is negotiated, based on prevailing conditions at the time the contract was agreed upon. With the rising trend of salaries, additional cost pressure due to pandemic impact, the Company may find it difficult to serve the client at the negotiated price in the future. Increase in employee costs, without corresponding increases in pricing or productivity related improvements would adversely affect the profitability.
Alternatively, if the Company is unable to price its contracts as competitively as possible, it may lose business opportunities which shall result in lower revenue growth.
The Company addresses this risk through various methods including managing the employee pyramid through voluntary and involuntary attritions, automating many processes, leveraging technology, infrastructure realignment / consolidation. Keeping abreast of market conditions to study the impact on client businesses and analysis of technological advancements that impact consumer behavior are some of the measures that help to improve and favorably position the services provided by the Company to mitigate pricing risks to an extent.
Customer credit risk This risk is the possible inability to collect from clients or delays in the collection of the Companys dues. While, this was not impacted in current year despite pandemic, the pressure will continue in FY 2022 due to adverse impact on the overall liquidity situation and clients business undergoing challenges, among others. This could have an impact on the Companys cash receivables and the Company may be required to enhance its short-term line of credit temporarily, to continue its operations.
The Company addresses this risk through a well-defined governance mechanism to ensure adequate liquidity and solvency.
Expiry of certain tax benefits available in India The Special Economic Zones Act, 2005, or the SEZ legislation, has introduced an Income Tax holiday scheme for operations established in designated special economic zones or SEZs. The tax exemption for SEZ units is 100% of export profits for the first five years, 50% of export profits for the next five years and 50% exempt subject to fulfilling other conditions. These tax benefits are available only for the specified period of time and post their expiry, there may be an impact on the tax incidence for the Company.
The Company has operation center in SEZ in Bangalore and Chennai, and will continue to ascertain the impact of the same in overall location strategy.
Compliance with multiple "Financial Reporting" standards The Company operates through legal entities in multiple countries and is subject to various standards and principles for accounting and reporting. Any material change in the standards will impact the Companys financial reporting.
Further, the Company uses financial leverage to ensure optimum solvency. Timely borrowing, repayment and raising funds at the right cost are important aspects of financial management, which would otherwise lead to adverse impact on profitability and solvency.
The Company has implemented a robust Internal Financial Controls framework that helps in mitigating these risks.
D. Operations Risks
Non-renewal of key client contracts The Company continues to maintain existing accounts and acquire new clients. It is the Companys constant endeavor to try to grow existing client businesses, as well as add new clients to its portfolio. The contracts with clients are of varying duration, and between one upto ten years. Once the term expires, contracts are tendered through a procurement process. Non-renewal may significantly affect the Companys revenues.
The Company recognises that providing excellent services and constant value enhancement is critical to ensuring a high chance of contractual renewal at the expiry of the term. The Companys sales and CRM teams constantly strive to enhance their relationships with the key stakeholders to favorably position the Companys services.
Cyber Security / Data Privacy Risk As part of the services offered to its clients, the Company handles confidential data and proprietary information. Any leakage of this information has an adverse impact on the Companys reputation. In addition, GDPR (Global Data Protection Regulation) which governs the possession, processing, movement and storage of data/information of EU citizens. In India, similar law around Data Protection is expected to be effective this fiscal. The entire regime continues to evolve and may require heightened governance around the same. This potential risk has further increased due to Remote Working scenario this year which will continue in fiscal FY 2022 also.
The company also faces heightened Cyber Security risk with regards to the possible attacks on data center and technology infrastructure.
The Company addresses this risk through a very strong and robust Information and Data Security, Privacy and Cyber Security framework and processes process that is applicable to all its offices and employees. Various operation centers are ISO 27001 certified, which is an international standard for Information Security Management System (ISMS). Additionally, many processes are certified with HIPPA, HITRUST, SOC2 certifications. Audits are conducted on a periodic basis and any non-conformance observed is fixed immediately. The Company adopts a zero tolerance policy towards non-compliance wiht this framework.
Risks to operational errors, frauds and internal noncompliances of policies and procedures The Company has internal policies, procedures and norms for operational activities, process compliance and controls. These norms are specified in order to achieve various control objectives and to prevent frauds and errors. Non-adherence to such internal policies, procedures and norms can therefore lead to operational errors, frauds and internal non-compliance.
The Company has strong internal controls in order to check compliances to policies and procedures which are operated by various levels of management. Further, these controls are also subject to risk-based internal audits by an independent internal audit team, which helps in the timely identification and remediation of gaps.
Reputational risks The clients of the Company are big and reputed corporates. The Companys loss of reputation can adversely affect its operations and contractibility. Being a public company, we are scrutinized by many constituents including the media.
In past we have not been impacted by any event which can jeopardize our reputation. Our well managed operations do not expose our employees and clients to any major risks. Also, our communications set up is always proactive in managing minor situations that may arise.
Legal risks The Company has long term contracts with its customers and services under these contracts are delivered from several offices across the US, the UK, India and the Philippines geographies. In addition, to deliver on the various service level commitments, the Company also needs to ensure compliance with applicable laws and regulations in those geographies, including but not limited to employment, tax and environmental laws.
Additionally, the Company needs to safeguard its own Intellectual Properties against infringement and ensure compliance with third party licenses which are used in its day-to-day business.
The Company has a legal team in place which apart from advising and ensuring documentary safeguarding, closely works with business and support functions to enable compliance with contractual and/or regulatory requirements.
E. Human Resources Risks
Risk related to attrition The BPM industry relies heavily on knowledge management and skilled talent supply. The number of opportunities available in the market, changing needs of a multi-generational workforce and limited supply of employable talent poses a great challenge to retain a talented workforce and maintain consistency in performance. The Company strives to continuously strengthen its internal processes to retain critical people and create a war-chest of talent.
The Company has put in place the following measures to mitigate the risks around attrition and attrition costs:
• Enhancing and developing skills of the middle management
• Focusing on capability building by providing and developing effective training academies and supporting employee development programs
• Carving structured and strong career paths and providing opportunities for growth by way of job enlargements, enrichment of responsibilities and internal job movements
• Effective Reward & Recognition programmes that celebrate successes and efforts
Risk related ability to recruit employees at a large scale and manage inflationary wage costs The success of a BPM organisation depends on its ability to attract and retain employees at large scale with right skill sets and experience to meet the organizational goals. With talent shortages and intense competition for skilled individuals, the demand for qualified employees will continue to increase and is expected to remain high. Wage inflation and replacement costs not only bear a potential risk but also result in higher personnel expenses and training costs.
The Company has developed innovative recruitment channels and practices to mitigate these risks, which include:
• Strong employee referral programs, which contribute to more than one third of the overall hiring requirements;
• Establishing Firstsource as an employer of choice and participating in several career events in order to strengthen the Firstsource brand and getting access to talent;
• Affiliations with colleges at Graduate and Undergraduate level to be the preferred employer in tier 2 and 3 cities.
Risk related to leadership team & succession planning The leadership team drives the Companys vision, mission and inculcates values within the Company to meet its goals. The Companys business continuity, client relations, employee engagement gets affected, in case there is a change in the leadership or if a key resource leaves.
Our integrated approach to Talent Management ensures that the Company has the desired leadership and management capability to meet the demands of the business. The integrated approach comprises of the following:
• A total rewards philosophy, which ensures that the compensation is in-line with the market standards and it attracts and retains the right talent and rewards high performance.
• Succession planning for business critical roles and people growth opportunities in line with their career aspirations.
Risk of Unethical business practices / Mis-conduct The BPM industry is people centric with a large employee base across culture and geographies. It also has client drive incentive programs in many businesses, which may lead to acts of potential misconduct cases and resultant client or reputational issues.
The company has well defined Code of Conduct which every employee is trained on and certifies to comply with. The company also has a robust Whistle blowing mechanism which enables employees to report any misconduct case, which is independently investigated and remediated. The Company also runs a variety of training / refresher programs throughout the year. Additionally, the company also has a very strong background check verification program (for employees) and due diligence process (for Vendor/Third party) appointment stage.
The Company demonstrates zero tolerance towards the cases of any unethical business practice or misconduct.
F. Compliance
Compliance & regulatory risks in various geographies As the Company has grown in size, geographic presence and customer base, exposure to various regulatory and compliance risks has also increased. The Company has a relatively high proportion of regulated businesses in the overall portfolio which enhances the regulatory risk. The Companys operations and clients are spread across multiple geographies and are governed by various regulations and government guidelines. Breach of any of these regulatory provisions can attract regulatory inspection, notices, penalty, and revocation of permits or licenses, among others.
The Company has implemented a robust Regulatory & Contractual Compliance framework to identify, assess, monitor, control, and report compliance status with respect to laws and regulations specific to the country, it operates in, and the client specific work in a consistent manner, for its businesses across the globe.
The framework ensures that compliance ownerships are aligned, responsible personnel are aware, compliance status is reported and necessary actions are taken to comply. All laws and regulations are verified for applicability, detailed at the provision level and tracked for compliance at the function and location level.
G. Technology
Advent of disruptive technologies The overall business environment continues to witness emerging disruptive technologies. However, clients are seeking to cut additional back-office costs due to continued budget pressures, while suppliers are trying to create additional services and the associated revenues. Technologies such as Cloud Computing, Artificial Intelligence, Data Analytics software, Social Media platforms and Process Automation software are being used in the BPM industry to enable businesses to lower costs and be more effective.
BPM companies are moving fast to offer additional value-add services through technology enablement, partnerships and alliances.
The Company has developed a wide suite of Digital Solutions across areas of Robotic Process Automation, Digital and Analytics as part of its Productization initiatives. A combination of domain and process expertise with best-inbreed technology is helping the Company in pursuing significant opportunities.