Firstsource Solutions Limited

Vipul Khanna

Managing Director & Chief Executive Officer

Dinesh Jain

President and Chief Financial Officer

Ankur Maheshwari

Head Investor Relations

1.8%

take a deep dive on how the quarter panned out. Quick Snapshot of the Quarter Revenues grew by 1.8% year-on-year in constant currency terms and came in at Rs.14,882 million or $187 million. Organic

Rs.14,882 million

shot of the Quarter Revenues grew by 1.8% year-on-year in constant currency terms and came in at Rs.14,882 million or $187 million. Organic revenue excluding the impact of mortgage decline, grew by 12.8% year-on-

187 million

Revenues grew by 1.8% year-on-year in constant currency terms and came in at Rs.14,882 million or $187 million. Organic revenue excluding the impact of mortgage decline, grew by 12.8% year-on-year in constant

12.8%

14,882 million or $187 million. Organic revenue excluding the impact of mortgage decline, grew by 12.8% year-on-year in constant currency terms and; Operating margins were at 8.4%; EPS degrew by 6.

8.4%

e decline, grew by 12.8% year-on-year in constant currency terms and; Operating margins were at 8.4%; EPS degrew by 6.1% year-on-year and came in at Rs.1.84. Since we last spoke the overall macro

6.1%

8% year-on-year in constant currency terms and; Operating margins were at 8.4%; EPS degrew by 6.1% year-on-year and came in at Rs.1.84. Since we last spoke the overall macro environment has furthe

Rs.1.84

rency terms and; Operating margins were at 8.4%; EPS degrew by 6.1% year-on-year and came in at Rs.1.84. Since we last spoke the overall macro environment has further deteriorated. The pace of fed acti

0%

ess adversely. Considering these movement, we are aligning our growth outlook to a range of -2 to 0% in constant currency for this quarter. The impact of these factor is also flowing through the mar

9%

etted against the benefits of our cost action we now expect operating margins to be in the range of 9% to 9.5% for FY2023. The guidance adjustment is primarily due to additional pressure on our mortga

9.5%

against the benefits of our cost action we now expect operating margins to be in the range of 9% to 9.5% for FY2023. The guidance adjustment is primarily due to additional pressure on our mortgage busin

12%

s been strong and will continue to remain so in the medium to long term. This is validated by the 12% to 15% growth we expect this year excluding mortgage and in fact from last year’s acquisitions.

15%

strong and will continue to remain so in the medium to long term. This is validated by the 12% to 15% growth we expect this year excluding mortgage and in fact from last year’s acquisitions. Second

“Considering these headwinds netted against the benefits of our cost action we now expect operating margins to be in the range of 9% to 9.5% for FY2023.”

“The guidance adjustment is primarily due to additional pressure on our mortgage business the unique situation in the collections market and some deal delays in our healthcare business.”

“We will discuss the rational for this change of guidance as we walk through the industry segment.”

“This is validated by the 12% to 15% growth we expect this year excluding mortgage and in fact from last year’s acquisitions.”

“The actions taken are yielding results and we expect to achieve a normalized operating margin by Q4 of this year.”

“I will expand on this strategy a little bit at the close of my remarks.”

“Total home sales outlook for the medium term while off from their 2021 peak is likely to be about 10% higher from 2024 onwards compared to the 2011 to 2020 annual average.”

“We continue to believe this will be a strong growth driver once origination volumes improve from the current low.”

“© Firstsource Solutions Limited 3 While the Stonehill Group acquisition has also been impacted by the adverse market condition and will miss its earn out target the quality control and due diligence services segment is starting to find its footing with the increase in capital market transactions in the industry.”

“It extends our target market, and we are pleased with the cross sell wins thus far.”

Vipul Khanna

26

Shradha

12

Moderator

8

Mohit Jain

8

Manik Taneja

6

Dinesh Jain

4

Dipesh Mehta

3

Chirag Kachhadiya

3

Ankur Maheshwari

1

Moderate

1

Ankur Maheshwari

Thank you Faizan. Welcome everyone and thank you for joining us for this quarter ended September 2022 earnings call for Firstsource. On this call, Mr. Vipul Khanna, MD and CEO and Mr. Dinesh Jain, CFO will provide an overview of the company’s performance followed by Q&A. Do note that the results, fact sheet and the presentation have been emailed to you and you can view this on our website www.firstsource.com. Before we begin the call, please note that some of the matters we will discuss on this call including our business outlook are forward looking and as such are subject to known and unknown risks. These uncertainties and risks are included, but not limited to what we have mentioned in our prospectus filed with SEBI and subsequent annual report that are available on our website. With that said, I now turn the call over to Mr. Vipul Khanna to begin the proceedings.

Vipul Khanna

Thank you Ankur. Good evening, everyone. Welcome and thank you for joining us today. Hope you are able to find some quality time during Deepavali festivities. Let us take a deep dive on how the quarter panned out. Quick Snapshot of the Quarter Revenues grew by 1.8% year-on-year in constant currency terms and came in at Rs.14,882 million or $187 million. Organic revenue excluding the impact of mortgage decline, grew by 12.8% year-on-year in constant currency terms and; Operating margins were at 8.4%; EPS degrew by 6.1% year-on-year and came in at Rs.1.84. Since we last spoke the overall macro environment has further deteriorated. The pace of fed action on interest rates has been much faster than the expected and continue to impact parts of our business adversely. Considering these movement, we are aligning our growth outlook to a range of -2 to 0% in constant currency for this quarter. The impact of these factor is also flowing through the margins. Considering these headwinds netted aga

Dinesh Jain

Thanks Vipul. Let me just walk you through some of the financial highlights. Revenue for the Q2 came in at Rs.14,882 million, or $187 million. This implies a year-on-year growth of 4.2% in rupee terms and 1.8% in constant currency terms. On the margin front operating margin came in at Rs.1,254 million or 8.4% of the revenue for the quarter. It implies a year-on-year margin decline of 411 basis points. As we mentioned earlier, we have been driving several tracks across the organization on direct cost, operations cost, support cost as well as on physical and tech infra-alignment to help expand the margins. © Firstsource Solutions Limited 6 Profit after tax came in at Rs.1,294 million or 8.7% of the revenue for the Q2 FY2023, a year-on-year margin decline of 76 basis points. In this quarter, we have a gain of Rs.578.6 million in other income relating to the fair value of the liabilities for the variable consideration linked to the revenue performance on acquisition done in FY2022. These l

Moderate

Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Manik Taneja from JM Financial. Please go ahead.

Manik Taneja

Thank you for the opportunity. I had a couple. The first one was a book keeping question if you could help us understand what was the contribution of mortgage revenues in the current quarter and the second question was basically just wanted to get your thoughts as to the fact that while we are seeing some of your global competition and global peers continue with their beat and raise phenomena why are we struggling on a relative basis and if it is a portfolio issue does this underperformance continue into the next year as well given there are concerns about macro recession leading to economic environment? Thank you.

Vipul Khanna

So, mortgage this quarter was about somewhere between Rs.24 million to Rs.25 million so that is the mortgage number about 13% of the overall business. On the other question of relative to market obviously as I have said, we expect this year excluding mortgage and excluding impact of acquisitions purely organic excluding mortgage we expect growth of 12% to 15% this year. As far as next year is concerned, structurally we expect headwinds should kind of ease out right especially what we have seen in mortgage, the portfolio will be reduced significantly as we go into the next year. Collections should be in a different place than what has been this year and all the © Firstsource Solutions Limited 7 growth investments in adjacent areas that should start to line up so I think that is kind of my commentary in terms of next year but I do believe that if we kind of negate out the impact of mortgage decline this year we have had good healthy growth of 12% to 15%.