Rating agency Crisil has downgraded the corporate credit rating of BPO company Firstsource Solutions Ltd.

“The rating downgrade reflects delay by Firstsource Solutions in tying up adequate funds to repay its foreign currency convertible bonds,” said Crisil in a statement issued on Tuesday.

Firstsource Solutions has FCCBs worth $237 million (Rs 1,300 crore), which need to be repaid on December 4, this year. As on June 30, 2012, Firstsource had cash and bank blances of Rs 750 crore. “Assuming additional cash generation till the maturity of the FCCBs, Firstsource is likely to face a deficit of around $85 million in meeting its repayment obligation, which needs to be refinanced,” Crisil observed.

Firstsource Solutions provides BPO services to ‘telecom and media’, ‘healthcare’ and ‘banking, financial services and insurance’. The company works on a ‘global delivery model’ and has 32,553 employees.

Although it was promoted by ICICI Bank in 2001, the bank’s shareholding in the company has come down and currently stands at 19.86 per cent.

In 2011-12, Firstsource reported a net profit of Rs 62 crore, compared with Rs 138 crore in the previous year. In the first quarter of the current year, Firstsource made a net profit of Rs 29 crore against Rs 10 crore in the corresponding quarter of last year.

While noting the improvement in performance in the first quarter, and the company's strength in having a diversified sources of income, Crisil has said that these strengths are “partially offset by Firstsource’s exposure to intense competition in the BPO sector and high gearing resulting from its aggressively debt-funded growth in the past.”

On the BSE today, the Firstsource shares are currently trading at Rs 9.51.

mramesh@thehindu.co.in

(This article was published on August 16, 2012)
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