This stock in Rakesh Jhunjhunwala portfolio zooms 100% in 6 months

Shares of Firstsource Solutions (FSL) were up 4% at Rs 78.95 per share, trading at their highest level since January 10, 2008. In past six months, FSL has outperformed the market by surging 101% as compared to 8% rise in the S&P BSE Sensex.

Ace investor Rakesh Jhunjhunwala holds 20 million or 2.91% stake in FSL as of March 31, 2018, the shareholding pattern data shows. Rakesh Jhunjhunwala hiked his holding in the company by 0.2 percentage points or by 1.5 million equity shares between October 2017 and March 2018, data shows.

FSL, an RP‐Sanjiv Goenka Group company, is a leading global provider of customised Business Process Management (BPM) services to the healthcare, telecom & media and banking & financial services industries. The company’s clients include Fortune 500 and FTSE 100 companies.

FSL had reported highest ever consolidated net profit of Rs 3.26 billion for the year ended March 2018 (FY18), a growth of 17% over the previous financial year. The board had recommended a maiden dividend of 15% (Rs 1.50 per share).

“During the year we have practically deleveraged the company on the back of improved cash flow generation and financial strength. Declaring a maiden dividend is a major milestone for the company,” Sanjiv Goenka, Chairman, RP‐Sanjiv Goenka Group and Firstsource Solutions said while announcing results.

The company declared Rs 1.5 dividend a share and signaled around 40% payout for FY19. Management believes it can outpace FY19 industry revenue growth, guiding to around 9% y/y revenue growth with 60-80bp margin expansion.

“Firstsource is looking to be (LT) debt free by Q2 FY19 (in Q4 FY18 net debt was $ 27.4 million) and has signalled a high, around 40%, payout ratio for FY19. The balance will be used for M&As/sky payments. Goodwill continues to depress its business RoE. With a around 9% earnings CAGR, reflecting a 14% PBT CAGR depressed by a higher tax rate, and a dividend payout of Rs 2.5/share by FY20, Firstsource should trade at 13x FY20e PE, reflecting a 3.3% dividend yield,” analysts at Anand Rathi Share and Stock Brokers said in company update.

At 01:28 pm; FSL was trading 3% higher at Rs 78.25 on the BSE, as compared to 1.26% rise in the S&P BSE Sensex. A combined 7.5 million shares changed hands on the counter on the BSE and NSE so far.

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