Firstsource Solutions Limited (FSL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Firstsource Solutions Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankur Maheshwari from Firstsource Solutions Limited. Thank you, and over to you, sir.

Thank you, Faizan. Welcome, everyone, and thank you for joining us for the quarter ended March 31, 2021 earnings call for Firstsource. To take us through the results and to answer your queries, we have with us today Vipul Khanna, our MD and CEO; and Dinesh Jain, our CFO. We will be starting this call with a quick overview of the company's performance, followed by a Q&A session. You'll note that the results, the fact sheet and the presentation have been e-mailed to you, and you can also view this on our website, www.firstsource.com. Before we begin the call, please note that some of the matters we will discuss on this call, including our business outlook, are forward-looking and, as such, are subject to known and unknown risks. These uncertainties and risks are included, but not limited, to what we have mentioned in our prospectus filed with SEBI and subsequent annual reports that are available on our website. With that said, I'll now turn the call over to Vipul to begin the proceedings. Vipul?

Thanks, Ankur. And, Ankur, can you hear me okay?

Yes, I can.

All right. Good morning, everyone, and thank you for joining us today. I hope you and your loved ones are keeping safe in this time, almost severe times. It's deeply distressing and painful to see the wrath of the pandemic second wave in India. In the last few weeks, almost every person I've spoken to has a story of either themselves or their loved ones being impacted. The ITS industry, including Firstsource, is no exception. Our top priority this time is the safety and support of our colleagues and their families. We have mobilized critical oxygen equipment, medical supplies, kits for COVID management in home, remote doctor consultation, hotel space for isolation needs and a dedicated support for our colleagues. Additionally, we've put together a number of fiscal support measures to support our colleagues. And needless to say, we will cover the cost of vaccination for all our colleagues. Right now, we're working with partners to secure access to vaccines. Finally, we have set up our partnerships with grassroot organizations to voluntary time, financial support and expertise for COVID relief. Let me take a minute about the impact of COVID on our business. In the last 1 month, we have understandably seen a higher level of absenteeism in our India operations. The situation on the ground is dynamic. As you know, some states have recently announced lockdowns and movement restrictions. We fully support these moves and hope these interventions can help break the chain. Given our hybrid work environment and the onshore/offshore delivery mix, we don't expect a material financial impact unless the situation changes drastically for the worse and for a sustained period of time. Again, at this point, the focus is on colleagues' safety, health and emotional wellbeing. Focusing on our results, I'm happy to report that fiscal '21 has been a standout year for Firstsource despite the challenges in our path. This was the year of many firsts. Revenue surpassed the INR 5,000 crore mark. We achieved a constant currency growth of 17.9%, our highest ever. We added 6,800 employees during the year, again, our highest ever. And needless to say, we enjoyed market capitalization hit the $1 billion mark. A big shout-out to our Firstsource family for making this happen in this crazy pandemic year. Summarizing our FY '21 performance, I'm happy to state that we achieved better than our guidance. Revenues grew from INR 40,986 million or $578 million in FY '20 to INR 50,780 million or $685 million. This implies a constant currency growth of 17.9%. And for this year, our operating margin came in at 11.8%, again higher than the guidance that we have. We took a charge of INR 1,151 million, which is considered as an exceptional item. Excluding that, our profit after tax came in at INR 4,499 million. We will provide more details on this charge in a few minutes. Let me do a quick round-up on Q4. Q4 was a stellar quarter. Revenues grew 31.7% year-on-year in constant currency, and we clocked INR 14,628 million in rupee terms and $200 million in U.S. dollars. For this quarter, the operating margin came in higher at 12.4%. The demand environment continues to be resilient and broad-based. Our leasing momentum remains strong. The solid performance during FY '21 across all dimensions validates the growth framework we established over the last 18 months. Our sales wins are up. The operating margins are improving. Our digital program is becoming more meaningful and, as an organization, we're becoming more purposeful. To reiterate, we've been channeling our energy in 3 directions. First, maintaining a sharp focus on our 3 core industry segments: BFS, health care and CMT, across North America and the U.K. We systematically invest in building out our capabilities and expanding our client base in the Born Digital new age client segment of these industries. These include fintech, edtech, streaming and digital media. We are encouraged by the progress thus far and the traction we've seen with our pipeline conversions. We added 11 new logos in Q4 and 54 during the fiscal '21. The second element of our growth framework is modernizing our offering and what we call Digital First, Digital Now. We continue to make investments in development capabilities, upgrading our platform and strengthening our partner ecosystem. In FY '21, we upgraded our digital intake option for the health plan and health services business. It is a complete facelift to the user experience of our health care provider platform. And we added AI and ML capabilities to our digital collections platforms. Our partnership ecosystem continues to strengthen. Industry-leading solutions such as Upfront Health, UiPath, IntelliH [indiscernible] Zappix, et cetera, are now integrated into our solutions as we keep marching further into the business avenues. We recently launched a BFS [indiscernible] in mortgage sector. I'm happy to report a marked change in the quality of our client conversation and the scope of projects we are participating in. And lastly, building a scalable and agile organization to keep having the growth momentum. We made changes to organization design and invested in sales, solutioning, new markets and digital capabilities. I'm intensely focused on sales operations excellence and account management discipline. As our sales and revenue growth is accelerated, we are now focused on building the next evolution of our delivery operating model. We're setting up COEs to strengthen our transition, training and methodology -- technology functions to better enable our operations. Our transformation playbook now has more marketing, automation and robotics. And I'm confident that this team and structure we are steadily -- with this team and structure, we are steadily moving towards our goal of being the top quartile growth leader in the BPM segment. Now let me give you some highlights and growth plans for each of our industry verticals. Our Bank Financial Services segment had a stellar year. For FY '21, it recorded 59% growth year-on-year, 51.3% in constant currency terms. In quarter 4 of FY '21, the growth was 65.8% year-on-year and 61.5% in constant currency. BFS has been a strong growth driver in the last couple of years. All BFS segments have demonstrated good growth trajectory with mortgage leading the pack. Let me spend a little bit time on each of these BFS segments. The Mortgage industry has benefited from the low interest rate environment in the last couple of years. The growth rate for both refinance and new home purchases have been at multiyear highs. And as expected, the refinance market is starting to slow, although home purchase financing remains strong. We expect industry financing volumes to taper during this and the new fiscal '22. We've been preparing for this turn by hiring new clients and scaling our services segment. In the last 12 months, we added 31 new clients in our mortgage business, which will continue to ramp into the new fiscal. Mortgage servicing could see steady growth as we continue to sell new services to our existing client base. Based on these trends, we are confident of delivering a growth year for mortgage, though this growth will likely to be modest relative to FY '21. The Collections segment started strong last year, helped by the government stimulus programs in the U.S. However, with lockdown and contraction in discretionary spend, the card industry witnessed a decline in spending, charge-off rates and credit card delinquencies, all of which impacted the volume for the industry and for us as well. As vaccination help reopen the country, lowering unemployment rates and the revival of discretionary activities are expected to drive spend level back to pre-pandemic levels. The other lever could come from government institutions, lifting the moratoria providing a tailwind for collections industry in the next year plus. Also, in the last 12 months, we've made steady progress in expanding our capabilities to the fintech market, especially the buy now, pay later or BNPL segment. This segment is among the fastest growing and potentially another attractive market opportunity. We are already working with 2 of the top 3 BNPL companies in the U.S. and pursuing a healthy pipeline. The U.K. banking remains resilient. We've seen good volume growth from our clients across their product lines. Banks are rationalizing their physical infrastructure of consumership to digital. This creates additional opportunities for us to help our clients in the shift to new operating models. Furthermore, as the economy reopens, growth in credit card operations and contact center operations is expected. The U.K. mortgage market is also witnessing lesser growth driven by low interest rates and government policy actions. We are well placed to capitalize on the volume growth and volume growth emerging from the post Brexit transition, clients' needs for cost-efficient operations and core economic activity revival. Let me shift to Healthcare. Healthcare segment overall had a muted year. For FY '21, the segment was flat year-on-year or [ degrew ] by 4.1% in constant currency. In fourth quarter FY '21, the growth was 7.8% year-on-year and 6.8% in constant currency. Our health plan and healthcare services business witnessed a strong turnaround. This part of the business has delivered solid growth despite lower claim volumes in the industry. We have secured a number of marquee clients during the year and have scaled our platform-based offerings in the market. In this quarter, we added 3 new clients and now service 6 of the top 10 health plans. We continue to make inroads in the fast care and telehealth and remote patient monitoring market. And we have recently partnered with an emerging remote monitoring platform to extend our offering for this segment. We expect the growth momentum to continue for this -- for HPHS segment, supported by a revival of claim volumes, the scale-up of our platform-based solutions and by adding in growing new clients. Healthcare Provider had a soft year. The volumes remained low through the year as patients deferred their elective treatments. The progress around vaccinations and the easing of public health emergency in the U.S. should help drive a steady recovery in volumes, paving the way for growth in FY '22. We are encouraged by the growth of volumes we've seen in March and April -- as late as April last month. PatientMatters integration is going well. We've already started to see green shoots in terms of a strong pipeline for cross-selling of platform services to PatientMatters clients and vice versa. In Comm, Media and Tech, that segment is scaling well. It grew 2.2% year-on-year, and degrew 4.6% in constant currency in FY '21. For Q4, the growth was 23.2% year-on-year and 15.3% in constant currency. If you recollect, this segment had a weak Q1 due to lockdowns and our top clients' decision to focus on selective priority services only. We have seen how this segment has turned around from those lows of Q1 of FY '21. Fourth quarter has been a strong quarter for CMT driven by growth in our top line and ramp in recent wins. Our focus now is to scale the U.S. business and build referenceability there. The pipeline build is encouraging. This segment should continue to perform well in FY '17. And last, our diversified industries in Q4 declined to 2.8% year-on-year and 9.9% in constant currency. Let me give you some context into the exceptional charge now of the INR 1,151 million that we have taken to our P&L. in 2018 April, we had entered into a strategic partnership agreement with a leading mortgage business group to help accelerate the growth of our then nascent mortgage business. We agreed to a structure wherein in a graded manner, they could approve a small minority equity position in our mortgage business based on the revenue realized by this process. This partnership has served us very well. And FY '21 was the breakout year. The mortgage business nearly doubled in size in that way. In addition to meaningful revenue from the relationship, it accelerated market share gains and afforded us the scale to harvest the macro tailwinds of the last 12 months. They have requested for an early partial monetization for their accrued options, which are due in calendar year 2023. We are currently in discussion with them, and we'll update you once we conclude. This charge corresponds to the valuation of options we had allotted to them. Dinesh will also talk about this in a moment. Finally, coming to FY '22 outlook. Financial year '21 has provided a very strong platform and momentum going into the new fiscal. While there are still a lot of macro uncertainties out there, considering the momentum we are witnessing in each of our segments, we are guiding FY '22 revenue growth to be in the range of 15% to 18% in constant currency terms. This guidance encompasses a solid pickup in our Healthcare business, continued strong growth of CMT and the BFS business ex Mortgage. And as I mentioned earlier, growth trajectory in the Mortgage business is expected to moderate. As I've said in the past, our strategy is to build overlapping growth pace to deliver sustainable industry-leading growth. This approach and the diversity of our portfolio is playing out nicely. For FY '22, our operating margin should be in the range of 11.8% to 12.3%, an expansion of up to 50 basis points year-on-year. The operation vigor across our businesses will drive this expansion. And at the same time, we'll be challenged to fund continued SGA for building new capabilities and scaling our sales and delivery ecosystem. With that, let me hand over to Dinesh to cover the financials.

Thank you, Vipul. Firstly, I would like to echo Vipul's sentiment and wish that each one of you and your dear ones are able to tide through this crisis unscathed. Here is quick summary for Q4 FY '21 and full fiscal FY '21 performance. Revenue for Q4 came in at INR 14,628 million or $200 million. This implied a year-on-year growth of 31.7% in constant currency terms and 35.4% in rupee terms. For the full year, the revenue grew at 17.9% in constant currency to INR 50,780 million or $685 million. For the margin front, operating margin, which is earning before interest and tax, came in at INR 1,809 million or 12.4% of the revenue for Q4, which shows the 54.9% growth year-on-year and implies a margin expansion of 150 basis points. For the full year, operating margin came in at INR 5,979 million or 11.8%, which again implies a healthy margin expansion of 95 bps for the year. Profit after tax, excluding the exceptional charge, came in at INR 1,309 million or 8.9% of the revenue for Q4 and INR 4,499 million or 8.9% of the revenue for FY '21. This again shows the healthy expansion which year-on-year growth for Q4 is 42.9% and 32.4% for '21. After considering the adjustment charge, the PAT came in at INR 467 million or 3.2% of revenue in Q4 and INR 3,617 million or 7.1% of revenue for FY '21. Exceptional charge in the P&L correspond to the current valuation for the equity option granted to a large customer group in our mortgage business. Vipul has already provided the rationale for this item. Option accounting is done under Ind AS 102 or IFRS 2, which is called a share-based payments. Option awarded to the counterparty basis that terms have been treated as a cash settle option for [indiscernible] accounts. The key factor that has led to the increase in charge this year are significant growth in the size and valuation of our Mortgage business, which you've already seen in the commentary that Vipul talks about and which has resulted in a considerable increase in the value of the option. With higher-than-anticipated revenue realized from the relationship, the equity option accrual got firmed up this year and also increased their entitlement compared to the last year. The counterparty has also requested for early part monetization of the options. This. [Technical Difficulty]

Ladies and gentlemen, the line from Mr. Dinesh Jain has got disconnected. Please hold while we reconnect him. Ladies and gentlemen, thank you for patiently waiting. The line for Mr. Dinesh Jain has got reconnected. Thank you, and over to you, sir.

Sorry, sorry, I think line got connected. So I was talking on exceptional charge, where I said that this led the reasons which I talked about, the 2, 3 reasons, which have increased the charge in the P&L to the extent of INR 1,151 million for the year and INR 1,099 million for the quarter. In the FY '21, we generated INR 8,921 million cash from operation. And our FCF was INR 7,225 million. After adjusting for the CapEx of INR 1,696 million, which is comparatively to the last few years is much higher due to the higher investment in the tech infrastructure and employees facility which has resulted into those. And the advantage for customer was also INR 835 million, which we talked in the last quarter. In Q4, we have generated INR 1,506 million cash from operations. Our closing cash balance as of 31st March is INR 2,199 million, which is after repaying for INR 2,672 million of our short-term borrowings, paying dividend of INR 2,038 million and utilizing $950 million for acquiring PatientMatters. Net debt as of 31st March stands at INR 3,846 million or $52.6 million, which when compared to the last year number of $86.2 million. Our DSO came in at 52 days versus the 53 days of the last quarter as well as I think the [ FAB ] drop from the last 63 days. And you are all aware that last March was the challenging one from the COVID point of view. But I think this year and this quarter is basically we're able to recover all of the money which was slightly got delayed in the last year in March. Tax rate for the Q4 and the full year was around 16% for FY '20. And for FY '22, we're expecting it should be then between 17% to 19% for the year. On our ForEx hedging, we have coverage of GBP 63.8 million for the next 2 years with a rate ranging from INR 102 to INR 115 to the pound. Dollar coverage is at $89.6 million and with the average rate of INR 76.7 to the dollar. I'm really proud how the businesses have shown resilience and delivered growth in these times. The teams have carried out their responsibility exceptionally. And I think is really the close to the whole team within the Firstsource [indiscernible]. With this, we can open the call for questions.

[Operator Instructions] The first question is from the line of Manik Taneja from JM Financial.

Congratulations for the solid execution through this year. Vipul, just wanted to get your thoughts around the health care vertical. You said that you've now managed to get 6 of the top 10 health plans in the U.S. If you could talk in detail about what's driving our success here in terms of competitive intensity? That's question number one. The second question was with regards to the shift in terms of new offshore delivery that we've seen through this year. How much of it effectually is a function of the macro trends from Brexit and whereby the entire sort of labor mobility in U.K. if you could talk about that?

Sure. Thanks, Manik. Good to hear your voice. Healthcare, on the HPHS, which is Health Plans and Health Services, you know that we had completely rebooted the team. We added across the value chain leadership, sales, solution, technology and delivery to kind of, as I said, reboot the basics of how we're doing the business. They bring a set of relationships, which has allowed us to have conversations. We've taken our existing capabilities in claim processing as well as the digital intake platform, revamped it, right, completely repositioned it relative to competition in the market. So those are our initial stalking horses to go out in open client conversations with a very targeted, hey, we do these things, here's our offerings. That's the first step. Second, the sheer agility that we've built up and the responsiveness that we built up in that team and that business and the relationships they had, as the world went through COVID, some of the clients needed short-term support, they needed like right away, I need this, I need that. We kind of jumped to it and delivered on it. And that's kind of allowed us to kind of open some relationship as well as bed down some of the earlier relationships into a next level of strategies. And third, as remote patient monitoring and telehealth took off post COVID, we jumped into that new segment. We've got a bunch of new client wins way back, if I remember in Q2 of fiscal '21, and then we continued to some gains in Q3 and Q4. And we continue to kind of make sure that we are very out there in terms of our thinking. It's not just a human service but taking a lot of technology there as well. And that's kind of -- given that's a really rising demand curve, it kind of brings us squarely in strategic conversations with our clients. So you're right that it's a very well-served market, but it's such a giant market with so many set of niches, I think there's a tremendous opportunity for us to continue to grow in that segment through these offerings that I talked about as well as a few -- a couple of newer that we are exploring in the horizon. The second question you had about offshore delivery, and you mentioned macro trends, did you say broadly macro trends or were you referring just to U.K.?

So I was more interested about what you would be seeing on the ground in U.K. given the Brexit and thereby the impact on the labor mobility, especially from the low-cost European countries.

Okay. So yes, Europe has been a driver in increasing our offshoring component and so has been the BFS and the mortgage business. These have been the 2 growth drivers for our offshore growing stronger in this year relative to the past. I think partly, it's also a function of talent availability in the market -- both of these markets. I don't think per se Brexit has played a role in labor shift from on to off. It's just the core strategic desire of some of our clients. Earlier on, it was also partly U.K., India balanced when COVID has just about started. But I think over time, especially with the banking sector in the U.K., we've seen more strategic outlook towards offshoring a little bit starting to rise up. And that's reflecting in the gains that we are making in offshore. That's how I would characterize the movement in offshore.

The next question is from the line of Rahul Jain from Dolat Capital.

Yes. Congratulations on strong performance. Firstly, on the -- on this onetime thing that has happened, so if we could articulate how much revenue has come from first contract and what is the total valuation of the business at the subsidiary level we are signing because this looks like a significant charge in terms of...

Rahul, one sec. I can't understand you very clearly.

Okay. Is this better?

[Operator Instructions]

So what I was asking is that if we could quantify the kind of revenue we might have achieved on such contracts in the Mortgage business and what is the total valuation for the business as a whole that we have assigned to the subsidiary because this -- the value that we are looking to pay looks like a very high number. So any clarity on that, if you could share?

Yes. So look, I think the details of this contract, as I shared, just to run them very quickly again, this is a large customer group. We have given them a graded equity structure, right, linked to the spending. The contract has performed really well. It has exceeded our expectations, and the tailwinds have helped right, the industry tailwinds have helped. They are entitled to the structure provided for equity to them anywhere from 0 to 15%, right? And there are certain floor boundary conditions based on revenue threshold, and it caps out at 15% if they achieve or exceed our most aggressive scenario. So basically run rate that we have now, we have -- as Dinesh said, we followed option accounting. We valued the business and assigned the value to the options that are accrued to our counterparty. The contract, we are currently in discussions with the client. The contract provides for certain liquid optionalities. And when that happens, there will be a fair market value exercise by an independent body at that point in time. And that then kind of determines sort of how we finally set a way. But right now, for March '21, consistent with the past years, we value the options based on the current run rate span of this relationship as well as our overall market business.

So this number has come at a peak calculation of 15% based on current valuation?

That's our estimate at this point in time, although the same period continues, right? So this is our estimate going into the future. But yes, based on the current run rate, we have valued the options closer to the peak equity option accrual for them.

And you said there could be a partial early exit or this is a complete exit? And was that number CY '23 what you said? Or I heard it wrong?

No, what I meant was that in the original agreement that we have, there is a spend period, which is a visibility period. And the monetization is expected in FY '23, '24, right, starting from FY '23 then some of the monetization options that have been in total. And what we're discussing now with our counterparty is that we might -- they have requested for part monetization now. So we are in the midst of doing all that. Those are commercial negotiations going on. I will update you as soon as we kind of conclude with them.

Okay. Okay. Got it. And secondly, if I may, from a guidance point of view, since you say that we are going to see some growth in the mortgage business and the kind of run rate we are at, and in general, commentary looks strong across other business segments. So in that light, the guidance that we see looks like a conservative one. So is that what you also see given the uncertainty? Or this is the realistic thing which we can forecast as of now?

So look, we've given you -- we see strong growth in health care. I see good continued growth in our CMT portfolio. Our North America CMT portfolio is new. We're still building it out, right? It's not material, but it's our intention to kind of stay focused and build that out. Banking and Financial Services, our U.K. portfolio, our collection portfolio is, I think, on a reasonable basis, decent momentum. Mortgage business obviously is basically a bit more sensitive to interest rate movements and stuff. We've seen sort of different projections in the marketplace. And candidly, we started to see some volume softness in the markets, especially for refi. So we have modeled it such that we can see reasonably where we could end up in the next 12 months in our Mortgage. And that's based on sort of our yield of the interest rate movements where the volumes will lie. If this trend continues longer, there might be a little bit more upside. But at this time, this is our best estimate on where the Mortgage business could end up.

Got it. Got it. Congratulation on great execution and great outlook. All the best for the coming quarters.

The next question is from the line of Mohit Jain from Anand Rathi.

Sir, I wanted a little more details on the industry outlook that you guys are currently operating in and also with respect to vertical CMT and within that perspective top line. So how do you see things moving there? This account obviously was more or less stagnated for a few years, and now we are seeing some ramp-up. So how should we read it? Do you expect some more growth to continue there? Or do you think that we will get back to that, let's say, pre-COVID time of more or less stable revenues there and then ramp-up of new accounts in the vertical?

And your question is, Mohit, all related to the CMT vertical, right?

CMT and broader outlook that you guys are seeing because I think you are quite positive this time on the U.S. market. So what is your reading optimal BPM thing because you're -- in our case, the outlook, the growth outlook in the last 2 years, it has completely changed for Firstsource. So such high growth numbers, is it more driven by overall positioning of the company within the BPM market? Or do you think that in general, BPM market is doing very well compared to some of the other segments of the industry?

Understood. Okay. All right. Let me address -- let me answer the large customer question that you asked. So clearly, way back instead of FY '20, there was a portfolio reallocation, and we had seen a downturn, right? And then we get stabilized towards March '20. Then COVID came and Q1 was hard hit because of clients have decided to do only essential services. Since then, we've seen the volumes have steadily come back. And as their business has taken different direction, they would [indiscernible] digital and stuff like that, we've seen our clients have more volumes, and we have played a good part, I would say, almost like an outside part in helping their new business growth and the diversification of their business. So we've gotten more than our fair share of the growth there. And as I mentioned, even in Q3, we were back to pre-pandemic level, and Q4 has kind of built up from that. I think we are at a good place as far as our share of wallet there is concerned, as far as the stock account is concerned. I do not expect sort of material growth from that front. We'll see sort of moderate growth in the portfolio, some adjustments up and down. But I think we had a good run rate as far as that account is concerned. And clearly our focus is to open new accounts. We've had some very good wins in digital media in the U.K. We're starting to build that pipeline in the U.S. And with them, we're driving hard on the tech segment as far as CMT is concerned. In fact, while it's a very small number, our North America CMT has doubled in size this year, although from a small base, very small base. So I'm hopeful, and I'm spending a lot of time fine-tuning our strategy into client action and stuff so that we can build momentum onto the CMT, especially on the North America side. On your FSL question relative to the industry. Unless it's a good thing or a bad thing, you asked the question. But overall, as I've been saying, my intention has been to build overlapping basis of growth, right? BFS is going strong. We kind of put our foot down, put a lot of investment sales focus, solution focus, delivery investment area, time so that we could kind of get the growth that's there in the market. And while at the same time, we were building health care. And now if Mortgage moderates out this year, health care is starting to pick up, and we will see strong growth from health care in FY '22, if all goes well. And then hopefully, by that time, CMT starts to kind of gather momentum and will start to pick it -- pull its weight towards the end of the year. So the intention is to build sort of sustained growth by having sort of people or industries at different levels of growth and different levels of investment and needed cycle, so to say. We'll see sort of what the outlook comes out from the industry for FY '22. But at this stage, it's kind of uneven across industries. Depends on whether we're playing in a mature industry or a growth industry. And if you're playing in a mature industry, if you have disruptive solutions or not. And my focus is to make sure that we kind of try to play in the disruptive cases and not play where we have to go display on price. In some cases, we have the challenger. So we kind of stick to our strengths or we build on our leadership positions. So we're trying to kind of go to places which are more tailwinds rather than headwinds and competitive business intensity is high. I could characterize that part of our strategy, which has given good growth for us in FY '21 and hopefully continues in FY '22.

And sir, just a follow-up on -- if you could spend like 2, 3 minutes on this digital media offering which you spoke about. So what are we trying to do there? And what kind of clientele do you expect in FY '22?

Sure. So when I say digital media, this is traditional media, your traditional print, et cetera, which is now moving to digital, right, whether it's digital access of content as well as how they interact with their customers, right? So in that segment, as that industry moves, right, we've had some early good wins. I think we have a good operating model now. And it seems to be replicating across different publications. And I think we've -- right now, we've built a small but consequential pipeline in the U.S. as well, taking our U.K. capabilities into the U.S. market. That's one manifestation of digital media. And there are some other new segments that we are evaluating linked to sort of what's coming up good in this pandemic era of sort. So streaming, for instance, right, has taken off, as you've seen going from cable to streaming. We have good strength given our large relationships both in U.K. and U.S. and that. That's one area we're focused on, streaming. And very early days and looking at things like what could be our play in the edtech segment, right, as education goes online, but it's still early days -- very early days for that segment. Those are some of the segments that we are focused as far as digital media and digital consumption is concerned.

So this would be which service line? This will not be contact center, right?

It could be. Yes. Contact center is one part of it. It may not be sort of contact center, right? It could be multi-model, multichannel. There's a lot of automation in it. But our intent is to go beyond just this and kind of talk about holistic customer experience, content delivery, response to content, et cetera, et cetera. So that we are able to make a meaningful dent into their adoption rates, into their revenue rates and not just a cost provider -- or cost efficiency provider.

The next question is from the line of Dipesh Mehta from Emkay Global.

Congrats for strong operational performance. A couple of questions. So first question is about the health care provider side. If I look at your revenue run rate, it's roughly 20% is below your pre-COVID peak level. Considering normalcy returning in U.S. market, by when you expect that full recovery and then, on top of that, the growth playing out? If you can provide some trajectory how the recovery is likely to play out? Second question is the number of clients which we added into Born Digital segment in Q4 and maybe in FY '21, if you can provide some color about kind of client, what kind of services we are offering, so how we are building our tech business. And third question is related to the exceptional items. So some clarity, I just want -- if you can provide incrementally than what you've already said? First is about the -- when cash flow-related impact will come out, if you can quantify and if you can provide some time line? Second question is about the disclosure perspective. Now I could not find anywhere it was mentioned in contingent liability perspective. So if you can provide some perspective there? And last thing is any incremental impact you expect. Considering the nature of contract, you said 15% that we are fully factoring. But let's say if revenue grow further, is there any further liability or potential liability coming into our P&L?

Okay. Good. Second question is about Born Digital. Third was the exception. First one is about health care, right, when do we expect to go to pre-pandemic?

Provider, yes.

Let me try and factor that. Yes. So Dipesh, provider, we're starting to see at least the hospital visits start to pick up in March was good if we kind of held off to that level. The other variable, which impacts our revenue in our Healthcare Provider business is because we are in Medicaid eligibility or eligibility services or patient access, there is a fact of the volume of hospital visits. The second is when do you see approval from the paying party, which in the majority of cases is the government of Medicaid support. Now given the public health emergency in the U.S., that equation also changed because a lot of people were on compulsory enrollment and stuff like that. And then some of the states were sitting longer on approvals and inventory and stuff like that because they were distracted and the budgets were also prioritized somewhere. So these are the 2 variables, hospital visit volumes and what the state government stands on stuff there, right? Those are 2 variables to determine it. I think from a volume standpoint, if April, May can hold up, and there isn't another wave in the U.S., right, the January, February peak of cases have come down now substantially. And with vaccinations in good swing, I think there is stability there. But there is still that concern about what happens, right, if there is another wave. That's when we're able to play out. And then at this point in time, the expectation is that the public health emergency, which is a government formulated sort of condition, last until July. So at this stage, we know the feasibility in July, and then you'll see how they generally act after that, right? But our sense is that as current conditions hold, it will continue to pick up in Q1 and then still start to get to a decent place by Q2 as far as Provider is concerned. Second question on Born Digital segment. As I mentioned, we are reaching a new age of Born Digital across the 3 industries that we play. Fintechs, even BFS is our biggest vertical, fintechs has been a good source. A lot of offerings in our arsenal, we've taken to fintechs, both on collections as well as the servicing side of it. A few of the Born Digital mortgage players are also part of our portfolio. And as we kind of -- as I talked about, the new segment originating like BNPL, buy now, pay later, which is kind of the mixed form of payment evolution to card, targeted towards a more younger population who is not as card friendly product sales. And those markets have kind of really taken off in terms of spend. Those are the focuses that we have on the fintech side of it. As far as healthtech is concerned, this is more a play for HPHS, and we are focused on remote patient monitoring or companies or arms of health plans. It is about telehealth and how do they use IoT and other devices for remote and continuous patient monitoring. That's our focus, and we have a couple of good wins in that sector. Again, it's a nascent sector but growing very fast. And everybody, including us, is trying to find the operating model to support those players. The one derivative of that is because we have a lot of expertise in the provider side, right, on how to bill on behalf of hospitals and recover from health plans as well as from government, we're taking that expertise and trying to extend into the medtech segments, right, to be med device segment. Same capabilities, but do it for med device providers as opposed to the hospital. Again, nascent efforts, we just built in a very small team, and it will take us, obviously, a while to kind of build out that capability. And then CMT, obviously, is a function of the streaming, digital media and pure tech companies, right, who are either consumer or enterprise tech. Again, something which is our aspiration focus, and we still need to get some meaningful traction in the last part of the consumer and the enterprise stack that we want to get into. On the exceptional item, on your question about the cash flow impact, so look, as I mentioned, as per the contract, the cash flow is envisaged for FY '23, '24. But clearly, we are currently in talks and we might go to a place where we do partial monetization sooner. So the cash flow will ultimately depend upon the fair market value of the business at the time of exit or exits and also the final equity percentage based on how spend kind of play out over the term that I mentioned and the FMB, as I also mentioned, will be done by the independent dilutions. So these factors will determine the quantum of cash flow and the timing of the cash flow. And as I said, right now, this is commercial conversations, so let me leave it at that and then come back and update you guys as soon as we kind of close that. Your question was, was there any further liabilities, will there be further liabilities. So right now, we have booked the amount of INR 1,155 million. We -- given this option will -- or part of the options might extend over to next year, we have also -- we envisage another something south of $2 million as part of the current value exercise which will come in FY '22 and which we have baked into our estimates for FY '22. That's our fair estimate at this point in time based on the run rate of the spend as far as liability into the P&L from the option accounting basis is concerned.

Sorry, I missed the last part. You said $2 million extra maybe possible, that's what you are indicating?

So right now, we have estimated that for FY '22, because these options that span up to FY -- at the end of March '22, we anticipate that we'll take a charge of $2 million in FY '22, and that's baked in to the margin estimates that we have shared the 11.8% to 12.3% that I laid off for the guidance in the year.

Understood. And on the first question, can you tell me the number of clients added? Because I think earlier you indicated near term, our focus is how many clients we had and then revenue trajectory. So if you can help us with number of clients added in tech segment?

The number of clients. Okay. I think the number is closer to 8 or 9. Ankur, remind the ballpark?

Yes, Vipul, across the vertical, we would be around that number.

Yes. And the last question, if you can answer. The third question is on the contingent liability and related disclosures, if you can provide some perspective?

So as Dinesh said, since this is option accounting and that's cash setting, there is no need to show as contingent liability considering cash settlement on this one. Dinesh, anything else to add on that?

Yes, because we -- so we already accounted as option liability, so there is no need to be showing at the contingent liability in the past also because always option accounting was that. And there is no need for a contingent liability to show.

The next question is from the line of Pavan Ahluwalia from Laburnum Capital.

Many congrats on a great operating performance. I just wanted to understand the exceptional item a little bit better. So just so I understand clearly putting together what you said to different people, the INR 115 crores plus the $2 million for next year reflects the full 15%, which is the max of equity dilution that would accrue to this client. Any adjustment to these valuations would therefore have to come from 1 of 2 things, a, much better-than-expected performance of the mortgage business from here on, which would lead to the value of equity being higher; or two, the independent value are coming up with a different measure of FMB, which is probably not likely given if you have a pretty competent finance department, I'm sure you're pricing option properly, right? So one is if you could just confirm that I've understood what's going on correctly? Two, it would be good if you could just give us some clarity...

I am sorry. This is Ankur. Just to iterate there, I think Vipul lost the connection. Just give us another 10 seconds...

I'm back.

Sorry, he's back.

Okay. Yes. So what I was saying my question is on the exceptional item. So one is I just want to clarify putting together everything you've said so far that the INR 115 crores plus the $2 million for FY '22 reflects the full 15%, which is the max dilution in our subsidiary that the client is entitled to. Any adjustments to the valuation would therefore come from 1 of 2 sources: a, a better-than-expected performance in the mortgage business, which would obviously raise the equity value of the subsidiaries; or b, a different calculation on the part of the independent value for the option. And I'm assuming b is not very likely because you guys have a pretty strong finance team, and I'm assuming they price the option correctly. Is my understanding of this correct?

The color I would add to that, Pavan, is that, clearly, yes, the performance of the Mortgage business is done on that. Second, we have done option accounting based on sort of IFRS of the business, our valuation. Clearly, the independent valuation, a more holistic exercise, there might be some adjustments coming out of it. And third, these are bilateral commercial transaction as well, right, so we'll see how that plays out. That could play another factor in sort of where we end up in bilateral agreement with the client.

But in terms of client is entitled to a certain amount of equity, right? The only bilateral thing you can negotiate, and you can mutually agree on the independent valuer. So the bilateral transaction would only favor you if they are requesting an early monetization and they take some haircut in returns, is that correct?

Also, sort of the relationship and sort of how the future will play out, right, that would be the other factors.

Got it. So you may say, look, if you want early monetization, commit to such levels of spend or something like that.

Yes. The only hesitancy, Pavan, I have is since we are in the midst of sort of conversations, I'm happy to come back and talk a little bit more on that once we conclude the conversations.

Okay, that's fine. So let me then get more to, I think, what shareholders are really more curious about there's the spirit of this agreement. I know this was done under your predecessor. But you claim that this was actually a good deal for the company. Am I looking at this right way when I say, look, let's say, this 130 -- INR 120 crores, INR 130 crores, I should look at it as kind of CapEx needed to enter the mortgage business. That's one way of looking at it. So basically say, look, whatever CapEx we did on mortgage, which has given us $30 million, $40 million of operating profit this year and probably a little bit less last year, that was basically earned by putting up this much CapEx. And obviously, future operating profit also gets credited to this CapEx because it's a onetime thing. Is that the way you're looking at and saying, look, in hindsight, it was a good thing because we were 0 in this business earlier. It enabled us to enter. And in as little as 2 years, we've more than recovered -- I mean just even if you were to shut down the mortgage business today, the IRR on this investment would look pretty attractive. Is that the angle you're coming from when you said it's been a good deal for the company?

So look, in our industry's track record, right, across industry, and I have done it in the past as well, when you're starting -- when you have either a young sector or a new sector, you either do an acquisition, you have a strategic agreement with an anchor customer or you do a carve-out, right, where you buy over somebody's capitals and operations center, right? Those are primarily the 3 modalities of accelerating your presence in a specific segment, right? So directionally, what you're saying is correct. Our intention obviously was to kind of build a meaningful business, get scale and referenceability and kind of build the business for the long term. So -- and I think that thesis has played out well. We've added a number of clients. We were ready when the tailwinds came. And we are in a place where we think we can continue to grow this business strongly in the future as well. Yes, that's the only color that I would add, but directionally, your thesis is correct.

And so I think the only thing I would add to that is when you go and pay for a contract or incur CapEx for the contract or make an acquisition, that is immediately visible to shareholders at that time. This thing is unfortunately visible ex-post. Can we think of possibly you guys disclosing [indiscernible] whenever there are these kinds of options embedded in either Firstsource itself or any of the subsidiaries? And could you let us know, are there other similar contracts you've signed with these sorts of options that may materialize in the future? Because we totally understand that it's necessary, right? And we encourage you doing it because you have to think very creatively in order to be able to grow in this industry, and flexibility and dynamism and structuring contracts is a key growth lever. And you've certainly seen that done very successfully at Cognizant. And we can see the results we are bringing that approach to Firstsource. But in terms of your shareholders' understanding upfront, can you give us a sense, is there other stuff like this that we should expect going forward? And if there isn't then in the event that you were to enter into such agreements, is there a way for you to just flag it to us in advance?

Yes. Yes. No. So Pavan, there is no other such structured deal or strategic agreement besides this across any of our businesses. This one, as opposed to our largest client, which we had talked about in 2016, that was a different structure, right? They were an upfront money spend and there was an MRC. This structure with the mortgage client is more like an earn-out structure, right? It's more like an entitlement structure rather than a commitment structure. And as I said, '21 was the breakout year where the spend came through, the business grew on and so on and so forth. So it became material. And we were doing earlier, it was not material. When we did the deal, Mortgage business was like 30 million, right, out of a company, which is about 545 million, 550 million at that point in time. So it was like 5% or 6% of the business. And this year is there is kind of broke out and we kind of disclosed, but I take your point in terms of better going forward.

Yes. Because I mean this is how doing deals like this, doing deals like Sky, this is how you grow at 15% to 20% in an industry that grows at 10%, right? So there's no way that you're going to be able to outgrow the industry sustainably unless you're 1 of the most dynamic contract structurers out there. So I think as long as this is all disclosed upfront, it just becomes much more transparent.

Great. Fair point.

The next question is from the line of Sachin Kasera from Svan Investment.

Congrats for a good set of results. Just one advice or comment on what has been raised previously regarding disclosure. Vipul, after you have taken over, we have seen consistently the growth trajectory changing, the quality of growth has been becoming very good. Last 8, 9 quarters here since you've taken charge, FSL has completely changed the character of the company. And obviously, the stock is still under the value, is getting slowly re-rated. We don't want these type of surprises to derail that process of getting due rerating which is there for FSL. So I would just again say that we have to be very clear in referencing of all this disclosure. It should not come as a negative surprise for us.

Yes. No. Sachin, point taken. But as I said, right, in our judgment, when it became material, we disclose this. And we've kind of given in the forward-looking view, but point taken.

Second question is now we have figured out something in terms of the capital allocation policy for the next 2, 3 years. How are we looking at it?

So the capital allocation policy remains the same, right? We think, given the sectors and the subsectors we operate in, there are a number of interesting areas where we want to build capabilities and acquisitions is a very viable strategy. PatientMatters was a small example. We have a list of priorities across the segments where we want to grow in through acquisitions. So that's one source. Clearly, there is regular CapEx, right? With this expansion, we've had to spend a lot of money in technology and less so on centers in FY '21 that we pick up as life comes back somewhat normal, not all the way, that will pick up on physical infrastructure as well. And clearly, given my focus on digital, the platform there is a partnership, et cetera, becomes the other parts. And then finally, right, we have a decent dividend record, and we hope to keep that. So between these 3, CapEx, acquisitions and dividends, we hope to keep an equitable mix while generating holding cash flows on these units.

And just to say your guidance doesn't bake in any acquisitions that you do?

At this point in time, the growth and the margin guidance we have given is -- has obviously the PatientMatters full year impact. But it doesn't have any significant acquisitions baked in.

Sure. Just one question on the tax front for CFO. Dinesh, if you could tell us what is the tax rate we are seeing for '22 and '23?

So I think it should range between current year, we're looking 17% to 19%. And it may be slightly up in the next year because I think, as you know, that new debts have been already over by 20. So some of the debt come as a taxability for 50% in '23. So I think I'll put another 1%, but we can range between 17% to 20% for the next 2 years.

Just 1 last question on the return on capital because of this high amount of intangible and goodwill that we are carrying, return on capital continues to look a little lower. So in between, you are evaluating it is an option to maybe soon take some sort of write-offs. So any thoughts, any progress further on that because our balance sheet has become much more stronger in the last 2 or 3 years?

I don't think we can take a charge because the valuation would be evaluate it every period from the goodwill impairment point, there is no case to do the impairment. Yes, in the past, I think at the Board level, it was discussed. But as of today, I don't think we are discussing anything of that nature. But yes, point is valid, that balance sheet has a big intent with us. And at some point of time, we need to look. But as of today, really we're not looking any of those ones, and there is no response as a goodwill from the valuation front.

The next question is from the line of Shradha from Amsec.

Congratulations to the team on an outstanding year. Vipul, just 1 quick question. How big is the mortgage business in terms of revenue?

[Operator Instructions]

Yes, sorry. Congratulations on a good year. Just 1 quick question. How big is the mortgage business in terms of revenue run rate for us now?

So we've kind of nearly doubled. We are closer to 200 million per annum in that.

And I'm assuming we do the entire U.S. mortgage business to Sourcepoint. So would it be right to assume that Sourcepoint revenue would be also in the ballpark of 200 million?

Yes. That is the entity, we should do the mortgage business.

Right. And 1 thing you said that you have kind of built in the $2 million impact into your margin guidance for '22. But we booked this as an exceptional item in FY '21. So would we be booking in the $2 million as in operating expense in '22? Just want clarity.

That's correct. That's correct.

Okay. And I'm not sure if you've given any indicative number on the CapEx plan for '22.

Dinesh?

The CapEx plan, we -- I think the last year, we spent almost $20 million. Current year, again, we expect that it's not been around $15 million, but around $20 million CapEx will be because we still have to invest in the facilities as the people will start coming back to the offices. So yes, there will be a CapEx still around $20 million.

Sure. And just 1 final bit for me. Could you just give me the puts and takes for margin guidance for next year? And given that some work from home normalization would happen towards the second half of the year and some costs might come back, so what are we baking in terms of whatever guidance of this expansion you are talking of, so whatever puts and takes for that?

Sure. I think you've identified one. We will see a percentage return to work. And obviously, our growth last year was strong. And we'll have to catch up on some of the capacity, right, as some of the capacity comes back to work from office, from work from home. Prashant has been building up his team. Our CEO has been building up the team and capabilities working with every business. So we expect an element of operational excellence and operational resilience, which kind of gives us some more gains as far as ops delivery cost, et cetera, is concerned. So that gives us some takes out there. And then we'll continue to make healthy investment into new capabilities, both sales as well as delivery and digital. Some of it's the gains that we made from operating excellence kind of goes there. And thirdly, while we're still building the businesses and platform side, clearly, those are higher-margin businesses, albeit, they're a small portion of our revenue, they're higher-margin businesses once we get to scale. And in general, we're starting to take a little bit more higher watermark on the kind of deal we want to do, especially onshore. So those are the factors in terms of increased costs, et cetera, et cetera. Labor market is tight, getting to get tight in U.S. We'll see how U.K. kind of plays out in the next few months. So those are some of the puts and some of the takes I mentioned from our continued investment in SGA and digital business.

Right. That's helpful. And Vipul, you did indicate that labor market is getting back in the U.S. and so is the case in India as well. So what are we baking in, in terms of annual wage cycle? Are we talking of an advancement of a wage cycle here in India? Or are we looking at the normal wage cycle?

At this point, we're taking at a normal wage cycle. But clearly, at a tactical level, if you need to do some tactical measures, some restructuring of how we pay and better incentive structure, those are some of the thoughts that we've already put in place for the mortgage market, which is very hard. And we might have to replicate as health care and other things pick up in the U.S.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Sir, most of my questions have been answered. I have just 2 small points. One is, while historically, our growth rates have been subdued in this year, for the first time, we have seen a very strong growth. So ex of Mortgage, are there any changes that you are seeing in your revenue contracts in terms of maybe the longevity of contracts or the possibilities of increasing the ticket size of contracts, which is giving you sort of more confidence of a higher trajectory of growth rate going forward? So that is number one. Secondly, on the operating margins, because of this -- the cycle of increase in wages that we are seeing across the industry, so ordinarily, with such high revenue growth, you would also expect a much higher sort of increase in the operating margins. But given the fact that our lower operating margins are probably due to higher wages cost compared to the revenues, so compared to a normal industry, our operating margins are a little bit on the lower side, that means our people cost is higher. So this wage cost impact which can have an inflationary impact, is it going to disturb this guidance of, I think, 11.8 to 13.8, which you alluded towards?

Yes. So the guidance was 11.8 to 12.3 or 50 basis points spread on that. So longevity on the nature of contracts, yes, I have been very focused on making sure we have sales operations discipline, a formal and structured way of account management. So that for our targeted growth accounts, we're putting very disciplined account growth plans, and we are investing in the right network and relationships, understanding of client products better and taking the right solutions. So I think that plays a role in terms of your farming becomes better. And obviously, you're embedding yourselves, hence, the length of your SAWs or statement of perks tends to be longer. So I think you've hit 2 of the key points that, that is an expectation that I had from our businesses as we continue to invest in more senior and more well-trained effort as far as account management is concerned. Especially in areas like HPHS, Europe, historically have enjoyed fewer but stronger relationships. I think that already is this. And likewise, for collections. But HPHS is one area as well as mortgages. These are 2 areas where I expect there will be a different flavor of our relationships for the better as we kind of settle in. And the second element that will change is now digital, right? It could be small in terms of automation, could be more strategic on intake. It would be even more transformational, where you're looking at internal target -- target operating model will be done of the entire stack to the tech operations or analytics on top, including software. So I think in certain areas, that area -- that's what we're building up, where the nature of the contract becomes business process as a service, a platform-based service, which is a very different consumption base, sort of the SaaS equivalent of our industry, it becomes consumption-based and, hopefully, more sticky because you are taking care of something sort of end-to-end. Again, small at this point in time, as you see from our service line data, that's something which we are focused on in building in select areas. So that's the color commentary as far as change in nature of contracts is concerned. Your second question was on margin expansion given the growth and will labor cost play out or will impact our margin guidance. So look, I think as I've been saying, the strategy to build the growth is that we need to continuously invest in newer capabilities, right, where it's new segments, new offerings, new operating models, partnerships, et cetera, et cetera. They're not CapEx, but they are still there [indiscernible] investment that you're doing. And the strategy is to harvest margins from operating efficiency and put some of it to work for the future capabilities so that you can keep running the growth, right? That's one dynamic, an important -- simple but important dynamic to keep in mind as far as the margin build and the margin change for -- at least for our FSL business is concerned. Wage costs, typically, we do have contracts. We have indexation clauses in our contracts, in most cases, some cases not, that we are able to recover some of it with our clients. There are obviously timing differences. There are differences in terms of what we pay versus what's allowed, the indexes and stuff. So there is always some arbitrage or some gap out there. But to an extent, it is covered. And at this stage, we are looking at -- as the labor market continues to come back strongly, we are wanting to make sure that we are the right employer and very focused on becoming a very purposeful company not just for temporary certain situations like COVID but long term. And so the first core effort is to become a strategic -- strategically focused on becoming a strong employer of choice with a sense of community, a sense of purpose. And that should drive to allow us to get more people and not necessarily who's paying the extra 5% or 10%. That will always be -- this should be the bigger driver. So on the 1 hand, that is the focus. And then the other is to make sure that we are continuously looking at the right places to grow so that we are able to kind of assess the labor market potential to grow. Obviously, big cities are important, but we also want to make sure, whether it's India or U.S., U.K., we have the right geographical mix, and we are very focused on having the right strategy upfront. And just in the last couple of quarters, we shut down 4 smaller U.S. sites as we are focused on building more strategic sites where we can invest in the right infrastructure, the right leadership and stuff like that. So there are a mix of factors to draw people, to keep people as well as choose the right locations both near and offshore. And you'll see how that plays out as the year goes by.

Next question is from the line of Kartik from [ Unifi Capital ].

Just wanted to understand about the PatientMatters run rate for the quarter, how much was it and probably what's the growth projection going forward.

Sure. So when they were acquired, it was on a run rate of about $17 million per annum. Obviously, December, we had gotten 1 month, and now we got full quarter. Q4 was full quarter. Our integration plan calls for reasonable revenue synergy between our business and PatientMatters over the next 2 years for FY '22 and FY '23. And we're starting to see good cross-sell happening. So that is baked into our overall Healthcare growth guidance as far as revenue synergies is concerned.

So is there a particular number or a run rate that you've foreseen in Q4? And maybe with the exit for FY '22, '23, do you foresee a number?

So our run rate for Q4 '21 was between $4 million to $4.5 million. I don't have a specific number in terms of just that run rate because if we blend out by end of this quarter, you blend into 1 operating units as far as PatientMatters and Healthcare Provider business is concerned.

Sure, sir. That's helpful. Another one the CMT front. I just wanted to understand one thing. So when you say the top client, right, so being in a media business, there are streaming or the digital outlook for them is also probably going to be on a high scale given that there's a lot of competition increase from Netflix and so many other streaming partners, so the traditional people are putting in so much effort in there to up the game as well. So does this or will it translate to a drastic change in the deal wins from their end? Or what's the outlook specifically for the top client?

So for our top client, we serve both their, let's call it, the full-scale product, right, the triple play product, as well as the streaming product. And whatever change in portfolio that has happened or will happen in the future, we have been part of the journey from them, right, whether it was an adjustment or building in capabilities. So given our portfolio mix there and what we know of our business plans, there isn't a significant change or a drastic change as we characterized it as far as their operating model and hence the impact of that is concerned. That change is happening, and it's already baked into our portfolio. Today, we have been servicing both cross-sell sales, services, retention, et cetera, et cetera.

Sure. In fact, even if you see this quarter, it's been probably the best quarter in the last 3 years given the run rate for the last 3 quarters also have been really good. So do you foresee this kind of a run rate going forward for the next 2 -- in probably 8 quarters? Or do you see some good growth coming in from your deal wins?

So as I mentioned, I think there was an element of enabling down [indiscernible], and then there was some change in the mix and consumption patterns and we kind of have the advantage to have a strong relationship and harness most of that. I think we are at a good run rate. I wouldn't expect significant growth from this on the top client, and we'll see sort of incremental growth in this. And at this time, I'm not expecting any drastic reduction per se, unless something dramatic came up, but I think we are in good shape as far as current run rate is concerned of the top client.

Sure. So even in the same vertical assets, right, in CMT, can I say probably 70% to 80% is from the top client? Or to put in other words, what's the outlook for other than top client in the CMT vertical?

So we've had good wins in this year. We are still building out some of those wins, and you will see the revenue impact come through for the full year. Again, they were small relative to the decline. And the other dimension that I mentioned to you was that our small North America CMT portfolio showed good growth in our -- in one of the key accounts that we have in the U.S. And the new team is working hard to kind of build up the pipeline and get some wins out there. So it's -- the North American CMT is kind of a long-term build, but we are commented, given the size and of the opportunities there. We should see sort of meaningful growth start to come out in '22, maybe even '23 from that segment. But we are kind of building multiple segments within that.

Sure, sir. And just one last question on the healthcare part. So PatientMatters do come in, in Provider section, right? Am I right to say that?

Yes.

So along with that, now that we have a full-fledged Healthcare Provider services front and back end, so can I say that the health care vertical is going to go through a revival going forward in the next 2 years?

Yes. Yes, we feel good about it. It's the massive sectors. We've invested heavily. We are working hard for pipeline accounts and then growing accounts. We should see strong growth from the combined health care segment.

[Operator Instructions] Next question is from the line of Sonaal Kohli from Bowhead Investment Advisors.

So my first question is that is my understanding correct, the sales cycles in your industry are much longer than IT services, therefore, a lot of efforts you have been putting in or you put in the past or putting in now would flow through the company only with a lag. And hence, is it a fair assumption to conclude that the high growth rate for this company would continue for next 3, 4 years or next 2 or 3 years? Your comments would be appreciated on this. Secondly, is my understanding also correct that your aspiration long term is to have a 15% EBIT margin? And currently or in the last year, you were in the recent phase? So probably in 2024, '25, your margin particularly could be significantly different than in 2022?

Yes. So look, the first part, sales cycle is longer, right? And the revenue build takes a while, right, once you are on the relationship. Typically, it takes a while to build up on the revenue bit budgets when you take the time to understand their processes, their operating systems, their cultures, build their relationships. Yes, we've been working hard on it, some of the benefits you're starting to see. Like you saw the benefits in FY '21, and we've seen the health care benefits start to pop up. Obviously, we need to continue to put our foot to the accelerator here in terms of capabilities, sales, et cetera, et cetera, to keep at it. To kind of -- the aspiration, as I've been saying, is to kind of be a top quartile for the industry growth lever, and for that, right, account management, sales, new segments, new capabilities, instead of different levels of waves of investment and adoption maturity will pay out. Long-term margin, I have said and we have commented that we will continue to pick up our margins year-on-year operationally and continue to put some of it back into SGA. We haven't really modeled out to say where we end up in 3 years, but yes, we should see continued pickup in our margins in the next few years. It's too early to comment on will it be 15% or will it be 15% or not?

There's a reasonable possibility that your margins in '23 or '24 could be materially different than '22. I'm not asking for the guidance, I'm talking whether it's a possibility.

So the way we are looking at the business and the modeling, as I said, we expect likely improved margins in '21, and we are committed to improving them by another sort of 50 basis points in '22. You should see that sort of ballpark of quantum improvement.

And sir, is my understanding that [indiscernible] paid off so far. But larger and bigger deal wins require longer time, and therefore, if you're successful in that based on the efforts you have been putting in, is it safe to conclude 15%, 20% growth trajectory is possible over the next few years? And this is not one-off led by mortgage benefits or health care revival?

Back to when I came, I have been saying consistently, we want to make sure that we are diversified in our portfolio. And we are able to take advantages of development happening across industries. And any kind of -- it's played out in our forecast for next year as well. So it's not definitely on one industry. It goes to the other. We have given the guidance for FY '22, and we'll see how it goes after that in terms of the next few years.

Sir, are you modeling significant declining your mortgage assumptions from a Q4 run rate while building in this forecast? And if it's possible for you to give some color, it will be appreciated to understand what's moderate in the range of the guidance from a Q4 run rate or the yearly ended? And secondly, your personal opinion, do you think BPO industry seeming its growth trajectory post COVID compared to last few years, they expect that at some point of time to cut costs, there'll be significant increase in outsourcing in the industry?

I couldn't say that it's a secular trend across industries that because of COVID, there will be more or less outsourcing. The secular trend coming out, as you know, is more digitization, right, because all of us have found different ways of doing everything on digital. And it's a matter of sort of who gets in and adapt to digital and puts more digital in their offering. I think that's the secular trend to play out. So does it play out across the industry for every player? I don't know. I think it will be like who jumps in and who has better chance of coming out with greater wallet share. And that's that endeavor to make sure our [indiscernible] inventory and it kind of bake in all the learnings of COVID and the continued behavior change in the enterprise behavior into our options.

Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.

Great. Well, first of all, thank you all so much for taking the time. I know these are incredibly hard times in India. I hope everybody keeps safe right, that is health and the revival and within few weeks, we see reverse of it. We continue to run our business to high standards as well as to make sure that we take care of our people and take care of ambitions in that endeavor. Thank you for your time and interest. See you in the next quarter.

Thank you, everyone.

Thank you. Ladies and gentlemen, on behalf of Firstsource Solutions Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.