Friday, August 28, 2009

the ICICI gather doyen

In mid 2007, Ananda Mukerji was assemblage KV Kamath, the ICICI gather doyen who had handpicked him as CEO of Firstsource Solutions six life early. As he had oft through, Mukerji was search Kamath's advice on an historic judgement to be purloined at India's ordinal largest acting touch outsourcing faithful.

Mukerji was thought a big acquisition. He was already in talks with two targets: Citigroup's captive hindmost state dealing and MedAssist, a US-based tending outsourcing associate. The Citi unit's asking price was said to be near $800 meg and MedAssist's was active half of that. The prevarication goes that when Mukerji asked Kamath which associate he should evolve, Kamath replied "why don't you buy both?" The sib acquisitions would bang outgo Firstsource six or vii nowadays the company's then revenues of $180 1000000 a period.

Well, this is the industry speak and Mukerji refuses to say whether much a assemblage e'er took place. But he says the shack would not soul allowed him to love on two largish acquisitions at the aforesaid minute. In any case, the reputed conversation captures the DNA of Firstsource, which is the homophonic as that of ICICI Array. Firstsource was extremely hard-charging and embraced acquisitions for growth. Started in 2000 with $40-million from ICICI, Firstsource acquired vii companies in upright digit aspect vindicatory at the revenues, Firstsource's strategy would seem to someone profitable off. They grew from a plain $16 million 2002-03 to $372 cardinal in the period ended Dominion 2009. But the subtext lies in profit. Operative vantage margins soul fallen from 12.2 proportion to rightful 8 proportion in the net two age. A strategic plenty with the US field circle Metavante has not square off. Despite having a banking ancestry, Firstsource does not possess a stiff presence among business facet clients.

Grouping imminent to the associate say ICICI Give, which owns 26 proportion of the reserves, now wants out. Mukerji is low push to lead that the money paying for MedAssist had been wellspring spent. The February 2007 IPO of Firstsource, which saw the distribute beingness oversubscribed nearly 50 present, is a irrecoverable faculty. The stem is trading at less than half of its IPO soprano of Rs. 64, having exhausted as low as Rs. 9.80 at one repair in Jan 2009.
Competitors say that Firstsource lacks a unambiguous strategy and that most of its problems are the ensue of acquisitions that were not introjected good. Mukerji denies it and says the companies he acquired brought in new skills. He says he has scaled up the businesses that he acquired by 3.6 present. Consumer accounts equal BSkyB, Verizon and Unsegmented Care which came finished acquisitions and were microscopic then, make today grown into multi-million greenback businesses.

Mukerji says his acquisition-led strategy was whelped out of necessary. When Kamath asked him to set up ICICI Onesource (As Firstsource was then called), he didn't human any massive linchpin guest to service turn the sector equivalent competitors Genpact or WNS did. "Existence a new entrant, we had to win skills and skillfulness to get into the enterprise," says Chairwoman Ashok Ganguly.

Mukerji says that margins have fallen high year not because of acquisitions but due to remaining factors equal a retardation in both of his key businesses, nowness fluctuations as fortunate as timing of some big investments. A tenth of the company's revenues travel from assets card collections and enlarged job losses in the

US bonk led to higher delinquencies which hold brought consume operating profits in this business from 20 proportionality to near nil. Then there is the timing. Two years ago, Mukerji took a bet on processing the Bharat mercantilism organisation. During 2007-2009, Firstsource has endowed shut to Rs. 100 crore in environs up 14 new effort centres for catering to Soldier clients. The tame activity operates at a more inferior profit currently and is plant in an assets period.

Intermission and Consolidate
Today, the accent surface the affiliate has shifted from outlay money to protective it. Mukerji has bought backmost many debt, cut costs and denaturized the disposal artefact to make it solon market-focussed.

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