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Firstsource – Review and Recommendation – Apply

January 30, 2007

Firstsource formerly ICICI Onesource is India’s leading pure-play BPO. The BPO industry in India is expected to grow at a rate of 37% till 2010. Globally Indian companies dominate the space with a healthy 46% market share.

Firstsource currently has 10,000 employees across 20 centers. Being the market leader it has several advantages to bag large outsourcing deals. The company has consistently acquired BPO companies to establish presence in various verticals. Clientele is split between the US and Europe in equal proportions. The proceeds of the IPO will be used for expansion and debt repayment.

Firstsource IPO Details:
69.3 Million shares of which 9.3 million are offer for sale.
Price Band : Rs 54 to Rs 64
Issue Size: Rs 443 crore.
Fully diluted Equity post IPO – 41.62 crore equity shares of Rs 10 each

Financial and Valuations:
The Draft Red Herring Prospectus reports that the company had an income of Rs 549.9 crore for FY2006 and a PAT of Rs 24.7 crore. Income and profits for the first 9 months of FY 2007 are Rs 549 crore and Rs 62.3 crore. Annualising the first 9 months figures, Firsource will conservatively report a PAT of Rs 83 crore. EPS on fully diluted equity will be Rs 2.0.

At the upper band of the IPO, it quotes at a P/E multiple of 32 for FY2007E . Companies operating in the same space listed in New York are traded at a P/E multiple of 40. With Firstsource being the market leader we expect some listing gains though the stock is a good long term bet.

Retail Subscription:
Retailers have roughly around Rs 140 crore reserved. One has to apply in multiples of 100 shares. Thus a retailer can apply for a maximum of 1,500 shares @ Rs 64 each = Rs 96,000. If the retail portion of the issue is oversubscribed by more than 15 times, then the fate of investor applying for 1,500 shares will also be decided by lottery. [It will also depend on how many times the category @ Maximum is oversubscribed] Happy Investing!!!

Comments

One Response to “Firstsource – Review and Recommendation – Apply”

  1. RAGHU on February 2nd, 2007 11:03 AM

    How about Power Finance Corporation ??

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