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After Firstsource turnaround, Sanjiv Goenka eyes more IT cos

Saturday, 26 July 2014 - 12:00am IST | Place: Kolkata | Agency: dna

After turning around outsourcing company Firstsource Solutions within a year of its buyout, its new owner Sanjiv Goenka is looking at more acquisitions in the ITeS space.

For Goenka, who, till October 2012 knew only about running energy, manufacturing and retail and then came as a white knight just before Firstsource was about to default on its foreign currency convertible bonds, the acquisition and subsequent turnaround through restructuring and fund infusion has given him the confidence to go for second phase of growth in the ITeS sector through inorganic growth.

"We will definitely go for acquisitions over a period of time. Before that we need to go a little longer on this path, maybe another two quarters. We will do; its only a question of time," Goenka, chairman of Firstsource, said.

Sanjiv Goenka Group, via his flagship firm CESC Ltd, acquired a controlling stake in loss-making and highly indebted Firstsource for Rs 640 crore in 2012.

Since then the BPO firm has been able to prune its debt significantly from a level of $215 million at the time of the takeover to about $114 million now, bringing down debt equity ratio to 0.3:1 as compared with 1.5:1 at the time of the acquisition, Goenka said.

Since July 2013, Firstsource is under obligation to pay back principal of $11.25 million and interest payment of $11 million a year for the next four years, the latest being paid off on June 30.

"With surplus cash of about Rs 160 crore in the banks, we are contemplating accelerated repayment and are in talks with both domestic as well as foreign lenders including the FCCB holders," Goenka said.

Apart from the financial side, Firstsource has also improved operating parameters like bringing down the average number of days debtors remain outstanding from 51 days at the time of the takeover to 34 days now and improved operating margin by 400 bps from 8.5% to 11.5% over this period.

It has also gone for "geographical realignment" of its establishments across the globe, moving to low- cost bases including closing down delivery office in Manila and shifting it to Cebu within Philippines while a new centre at Kentucky in the US was opened.

Firstsource as of March had 46 global delivery centres across India, the US, the UK, Philippines and Sri Lanka.

"The acquisition was described as a horrible investment by our group and the shares were beaten down in the stock market. Turning around the company has not been easy. But now I feel vindicated and working at next level of value addition for our clients. In 2013-14, we have saved almost $7 million by managing unwanted costs," Goenka said at a press conference.

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