Firstsource Solutions Limited ($FSL)

Ladies and gentlemen, good day, and welcome to Firstsource Solutions Limited Q4 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. On this call, we have Mr. Ritesh Idnani, MD & CEO; and Mr. Dinesh Jain, CFO, to provide an overview on company's performance followed by Q&A. Please note that some of the matters that we'll discuss on this call, including the company's 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 company has mentioned in its prospectus filed with SEBI and subsequent annual report that are available on its website. I now hand the conference over to Mr. Ritesh Idnani. Thank you, and over to you, sir.

Thank you. Hello, everybody. Good morning, good afternoon and good evening, depending on where you are. Thank you for joining us today to discuss our financial results for the fourth quarter and full year of FY '26. This year is especially meaningful as Firstsource crossed $1 billion in revenue, enters its 25th year, having started with answering calls and delivering service at scale and now evolving into becoming a global intelligence partner that brings together deep domain expertise with agent-first, AI-enabled operations to help clients make better decisions and drive measurable outcomes. We believe that this evolution is creating a compounding advantage and sets us up strongly for the next chapter. I would like to thank each one of our 36,205 Firstsourcers around the world for their relentless commitment to delivering value to our clients. Let me start with the discussion on our Q4 performance. Q4 marks the eighth straight quarter of double-digit year-on-year revenue growth. Our revenue grew by 19.5% year-on-year and came in at INR 25.8 billion. In U.S. dollar terms, the growth was 13.2% year-on-year and 3.2% quarter-on-quarter to USD 283 million. In constant currency terms, our revenue grew 11.6% year-on-year and 3% quarter-on-quarter. These numbers are inclusive of the TeleMedik acquisition, which we integrated during the quarter and that contributed 1.3% to our year-on-year growth in constant currency terms. EBIT margin for the quarter was 12.2%, up 100 basis points and 30 basis points on a year-on-year and quarter-on-quarter, respectively. It's also the sixth straight quarter of margin expansion. Our net profit was INR 2.1 billion and the diluted EPS for the quarter was INR 2.91. For the full year, our revenues came in at INR 95.6 billion, which grew by 19.7% in rupee terms and 14.6% in dollar terms. Our constant currency revenue growth was 13.6%. Our EBIT margin for FY '26 was 11.7%, within our guided range of 11.5% to 12%. Our PAT for FY '26 stood at INR 6.7 billion, a growth of 13.5% over last year on a reported basis. Coming to the business highlights. Let me start with our deal wins and other client-related metrics. In Q4, we signed 4 large deals. As you're aware, we consider a deal with ACV of over USD 5 billion as a large deal. Overall, we won 17 large deals in FY '26. Our ACV intake for FY '26 remains healthy. I am encouraged by the strength of our wins, both in number and scale. This reflects our ability to bring together deep industry and functional expertise, a strong technology ecosystem partnership and an AI-first automation approach that's delivering clear and tangible outcomes for our clients, better customer experience, faster decisioning and a lower cost to serve. For instance, we won business from a leading pension and benefits administrator on a multiyear digital transformation, starting with the front office modernization to improve customer experience and agent productivity and then expanding into the back office to drive operational efficiency and scalability. The program is building a connected intelligent operating model enabled through deep domain-led transformation, systems integration and agentic operations. What's different this year is the nature of our demand. Clients aren't just running efficiency programs. They're redesigning their operating models for AI, combining data modernization, cloud, workflow orchestration and AI to move from manual execution to assisted and increasingly automated operations. We're also seeing more programs shift from pilots to scaled rollouts with governance, security and ROI measurements built in. I would like to emphasize that several of our wins are transformative and ramp up in phases, unlike traditional steady-state work. So while they strengthen long-term growth visibility, revenue conversion is typically spread over a longer period as transformation and enablement milestones are completed. Let me now highlight a few other notable wins during Q4. We won a large deal from a global leader in financial technology solutions in the U.S. to redesign and transform their customer experience. In Australia, we won a large engagement with a leading regional water utility service to help them across their value chain. We secured additional business and were chosen as the global operations outsourcing partner by a leading U.K.-based MVNO to manage their entire account servicing, billing and customer support across multiple markets globally. We won business also from a premium U.K. retail brand for customer experience. And finally, we expanded our relationship with one of the leading mortgage lenders and services in the U.S. across their entire value chain. During the quarter, we added 11 new logos, which includes 6 strategic logos. As you're aware, we define a strategic logo as one where we see the potential of at least $5 million in annual revenue, and we run a structured program to handhold and monitor such relationships to grow them at an accelerated pace. In FY '26, we added 47 new clients, including 24 strategic clients, doubling our strategic additions compared to FY '25. In fact, over the past 8 quarters, we have converted around 50% of these strategic wins into relationships exceeding $5 million in annual revenue. With that, let me now turn to the vertical commentary. Let me start with Banking & Financial Services. In Q4 of FY '26, our BFS vertical grew 9% year-on-year and 5% sequentially in constant currency terms. We added 6 new logos during the quarter. Demand remains centered on regulatory compliance, financial and economic crimes, customer experience and cost efficiency, and we are seeing strong pull for our AI and automation-led outcome-oriented transformation offerings across risk, controls and operations, both across the front office and back office. On execution, I would highlight 2 updates. First, as you may recall, in Q2, we had announced a large collections deal in the U.K. with one of our long-standing clients. Given the regulated nature of this deal, it required approvals from the regulatory authorities in the U.K., which we earlier anticipated to get in early Q4. However, that process took time, and we have now received the approvals and the operations are also up and running as we speak. Second, a leading U.S. payments and financial services institution is partnering with us to modernize their operations on the collection side across first-party, third-party and legal using our digital platform. This embeds 25-plus years of deep domain expertise with a built-in compliance and risk hardness and is model-agnostic across AI partners so that the client does not carry the technology risk. This is not a chatbot. It's a governed, autonomous collector with outcome accountability through a platform fee plus per interaction pricing, where higher value per interaction can drive greater volume allocation, supporting a K-shaped growth dynamic. Within Financial Services, we've also seen significant growth across the midsized banks and fintechs as they look to modernize platforms and embed AI across onboarding, servicing and collections. We're also partnering more closely with these clients as they accelerate platform modernization, embed AI across their customer journeys and enhance their digital experience. Our Q4 exit deal pipeline in Financial Services was amongst the strongest in recent quarters, giving us confidence in sustaining growth momentum in this vertical. In Healthcare, revenues grew 16% year-on-year and 10% sequentially in constant currency terms. We added 1 new logo during the quarter. Healthcare continues to be a core growth pillar and a key area of strategic differentiation for Firstsource with a well-diversified presence across both the provider and the payer segments that give us an end-to-end view of the healthcare value chain. As we highlighted last quarter, we strengthened our operating model with dedicated segment-focused leadership and improved portfolio quality through targeted rationalization actions. In Q4, both payer and provider performance remained resilient. On the payer side, we saw some short-term timing shifts as Medicare Advantage plans recalibrated select program rollouts in a tighter regulatory environment, primarily with rates remaining flat, but this was more about pacing than demand and the focus on measurable outcome-led efficiency programs remains intact. On the provider side, we continue to scale the right opportunities with a deliberate technology-first approach, bringing together access, integrity and denials into a metrics-led operating model while taking on the ongoing technology refresh burden so health systems can stay current without repeated re-platforming, supporting sustained momentum and medium-term margin expansion. Coming to the CMT vertical. Revenues grew 3% year-on-year, but degrew 4% on a quarter-on-quarter basis. We had a soft quarter here in Q4, largely driven by the inherent volatility in this segment, particularly the timing of work packets and program transitions in large consumer tech engagements. That said, the underlying demand drivers here continue to remain intact, particularly as the consumer tech companies continue to enhance and increase their CapEx spend, and we think we can end up being beneficiaries of the same. We continue to see strong client interest in AI enablement and non-traditional tech-led solutions, particularly around the AI training data side that support the integration of the same into their product ecosystems, and we're exiting the quarter with a well-balanced pipeline across telecom, ed-tech, media and technology clients, which gives us confidence in a return to a healthier growth trajectory as transitions complete and volumes normalize. Lastly, coming to our diverse portfolio that grew 23% year-on-year, but degrew 8% quarter-on-quarter in constant currency terms. We added 4 new logos during the quarter. Q4 performance reflected a dip in retail following the seasonal peak in Q3. However, we added 2 key household retail clients in Q4 amongst our client portfolio. In utilities, we continue to see steady underlying demand supported by a healthy pipeline, and we remain optimistic on conversion over the coming quarters. One of our acquisitions, Pastdue Credit, we continue to strengthen our position in the U.K. utilities ecosystem, and this also enhances our cross-sell opportunities across customer operations and collections. Overall, we exited the quarter with a well-qualified and healthy deal pipeline across both utilities and retail, giving us confidence in improved momentum as seasonal effects normalize and new wins ramp up. Let me now turn to the geographical commentary itself. From a geography standpoint, North America delivered 4% sequential growth and 14% year-on-year growth in constant-currency terms. We continue to see broad-based momentum across our 3 core verticals in the region and expect this to sustain over the coming quarters. In parallel, we are also incubating new growth opportunities in North America by setting up our sales presence in Canada and by replicating capabilities where we have demonstrated strength in the U.K. market in the utilities and retail side and extending the same to the U.S. The TeleMedik acquisition, which we updated you on last quarter, also gives us a delivery presence in Puerto Rico, a fully U.S. compliant lower-cost location that we see as an advantage for both healthcare work and non-healthcare clients increasingly nearshoring there. Europe grew 4% year-on-year and flat quarter-on-quarter in constant currency terms. We continue to deepen relationships and gain share of wallet in the region. As we've highlighted in the past, we've seen an accelerated move towards offshore and nearshore delivery over the past few quarters with several of our clients. While this may continue in the near term, we believe our proactive steps to make the business more resilient by both broadening our geographic and vertical presence are yielding results. Also, our pitch for transformational programs and nearshore delivery from South Africa has been resonating strongly with clients. As I mentioned, we have received regulatory approval with one of our long-standing banking clients in the U.K. market for collections, which positions us very well to expand our footprint there. Overall, we won 2 large deals in Q4, and our pipeline continues to build well. In fact, it's up about 60% over the last 4 quarters, supporting our view of a gradually improving growth trajectory in Europe, despite a soft macro environment. In Australia, we continue to win additional business with existing clients while building a pipeline in new logos. One of the new logos in Q4 was from this market. With that, let me turn to the people front. On the people front, our strategy this quarter reflects the shift towards an agentic operating model, where value is defined by the intelligence we operate, not the headcounts we deploy. As that shift takes hold, we believe the right way to measure our business is no longer headcount alone. It's the value we generate per employee. The headline is straightforward. Over the last 2 years, our revenue per employee has gone up by 12%. Our revenue growth over the last 2 years has been materially faster than our headcount growth, and we expect that gap to widen as agentic operations scale. We closed FY '26 with a headcount of 36,205 Firstsourcers, a net increase of 1,554 employees over last year. Offshore and nearshore hiring remained a strategic lever in FY '26, accounting for close to 80% of gross additions, preserving deep domain expertise while supporting cost and outcome economics. Anchoring this transition is the global employee value proposition we launched in FY '26, Brilliant People, Bold Tech, Uncommon Careers. In fact, we want to make sure that people who are currently in Firstsource as well as new associates find the opportunity at Firstsource to do the best work of their life. Our blueprint for a truly AI-first organization, built on high-quality talent, technology at the core of value creation and differentiated skill-based career pathways. That blueprint is actually already showing up in the numbers. Attrition improved to 29.7%, down almost 6 percentage points over the last 8 quarters, a clear signal of rising workforce stability. We further strengthened our people operations backbone through faster and scaled HR platforms across geographies. Externally, we were also recognized in the Corporate Equality Index, the Workplace Equality Index and with the ATD BEST Award, validating the people side of our journey to deliver intelligence that operates. And last, but not the least, on the awards, recognitions and sustainability side, Firstsource continues to earn strong recognition from leading industry analysts for delivering strong client value and driving innovation through technology-led solutions across our focus markets. During Q4, Everest Group recognized us as a leader in its Healthcare Payer Intelligent Operations PEAK Matrix of 2026, underscoring our ability to combine deep domain expertise with automation and AI-led execution. We were also recognized as a leader in the overall market segment of NelsonHall's Healthcare Payer Agility & Innovation NEAT Evaluation for 2026. In addition, we were also named amongst the frontier firms in Microsoft's Frontier Firms of India & Southeast Asia, highlighting our continued progress in building technology forward future-ready solutions at scale. ISG also featured Firstsource in its Booming 15 list based on the annual value of commercial contracts awarded over the last 12 months, now for the sixth consecutive quarter. I'm proud to share that Firstsource also participated this year in CDP and EcoVadis, where we were awarded with the climate and water rating of B each and supplier engagement at A. EcoVadis received a bronze badge with a 70/100 rating where we were in the top 81st percentile. These recognitions reflect not just external validation, but the collective commitment of our teams to drive sustainable and responsible growth. I will now turn over the call to Dinesh to give a detailed color on the quarterly financials. 'll come back to talk about our progress on the strategic priorities as well as our outlook for FY '27. Over to you, Dinesh.

Thank you, Ritesh, and hello, everyone. Let me start by taking you through our quarterly financial numbers. Revenue for Q4 FY '26 came in at INR 25.8 billion or USD 283 million. This implies a year-on-year growth of 19.5% in rupee terms and 13.2% in dollar terms. In constant currency, this translates to year-on-year growth of 11.6%. We reported operating profit of INR 3.1 billion in Q4 FY '26, up 29.8% over Q4 FY '25 and translate to EBIT margin of 12.2%, up 30 bps sequentially. As Ritesh earlier mentioned, this is the sixth straight quarter of sequential margin expansion and translates to 100 bps improvement in the last 4 quarters. This is above our stated objective of 50 to 75 bps margin expansion every year. Profit after tax came in at INR 2.1 billion or 7.9% of the revenue for the quarter. Our profit after tax grew 27.7% year-on-year and 1.5% quarter-on-quarter adjusted for exceptional items in Q3 FY '26 regarding the base pay. DSO stands at 66 days in Q4 versus 67 days in Q3. I will now turn to our annual performance of FY '26. For fiscal year FY '26, our revenue stood at INR 95.6 billion or USD 1,082 million, which is $1 billion mark -- over the $1 billion mark. This implies a year-on-year growth of 19.7% in the rupee terms and 13.6% in constant currency terms. Our operating profit was INR 11.2 billion, up 27.4% over FY '25 and translate to EBIT margin of 11.7%, within the 11.5% to 12% range we have guided previously. Normalized profit after tax for FY '26 stood at INR 7.6 billion, which translates to year-on-year growth of 27% adjusted for exceptional items. Our reported PAT stood at INR 6.7 billion. The tax rate was 21.2% for Q4. And for FY '26, the effective tax rate was 20.6%, within the previously guided range of 19% to 21%. We expect to be 20% to 22% range in the FY '27. Our cash balance, including investments, stood at INR 3.1 billion at the end of the Q4 FY '26. This is after the dividend payout of INR 3.8 billion during the quarter. Our net debt stands at INR 16.3 billion as of 31st March 2026 versus the INR 13.2 billion as of 31st March 2025. ROCE for the FY '26 is 17.7% versus the 15.6% for FY '25. Our hedge book as of 31st March 2026 were as follows: We had average coverage of GBP 54.5 million for the next 12 months with an average rate of INR 117 to the pound and coverage of $107 million with an average rate of INR 91.5. With that, I will hand over back to Ritesh to discuss strategic priorities and outlook for FY '27. Ritesh, over to you. Ritesh?

Thank you, Dinesh. Before I close, I want to spend a few minutes on something that several of you have been asking about, how to think about Firstsource over the next 3 to 5 years? And what makes our positioning distinctive in a market that's changing very rapidly? And why is that important? Because we believe that we are creating a category in this industry that does not yet exist. We're calling it intelligence that operates. Let me explain the evolution. One year ago, we introduced UnBPO. It captured a real shift. Clients had moved beyond cost arbitrage and were asking for outcomes with technology doing more of the work. UnBPO is the right diagnosis for the moment, and it took us a long way, but it was also about who we are not. We were saying that the industry itself is not dead, but the traditional ways of working in the industry were outdated. The moment we are now is actually different. AI agents have become capable enough to execute work, not just advise on it. The interesting question is no longer whether AI can do the task? It usually can. The harder question is, whether AI can be trusted to operate it with context, with domain judgment, within the policy and compliance boundaries that real industries demand and with somebody willing to underwrite the result? That is a much narrower problem, and it is the problem that we have built to solve. Most of the market today sits in 1 of 2 camps. On one side, technology platforms that sell agents and tools, but leave the operating model, the change management and the accountability to the client or to a downstream integrator. On the other side, services firms that bolt AI onto a labor delivery model neither bridges the gap between AI capability and operating model reality. Intelligence That Operates is that bridge. It is deep domain expertise encoded into AI that doesn't just advise or automate. It operates end-to-end with accountability and gets smarter with every engagement. We design the operating model, we built the agentic systems, and we run them under one roof, under one contract with our revenue tied to the outcomes we underwrite. The way we deliver this for clients is Kairos. Kairos is a Greek word, between the promise and the reality and the provider who is able to bridge the gap between the promise and the reality. A useful analogy to think about this. AI agents are like surgeons. A surgeon is only as good as the operating room around them, the instruments, the protocols, the support systems, the team. We bring the operating room. Kairos is 25 years of domain expertise, encoded as executable know-how, governance guardrails and continuous learning loops. It turns general purpose AI into systems that can run regulated high-stakes operations. It's portable and composable, built to run in our clients' own technology environments across whatever agents and models they choose. Why does this matter commercially? Because the value moves. As we shift from labor price delivery to outcomes linked delivery, the unit of value stops being the seat and starts being the result. It's also why we are increasingly comfortable underwriting outcomes in our commercial constructs and why our pipeline of transformative wins continues to grow. Clients want a partner who will design it, build it and run it in one single continuous motion, not 3 different vendors stitched together. Case in point, a leading U.S. financial services institution recently launched governed AI agents to streamline their collections process with Firstsource designing, implementing and operating their agentic operations end-to-end. This is the chapter we are now writing. We believe Intelligence That Operates puts Firstsource in a category of one, and the long-term opportunity for our clients and our shareholders is to compound that advantage every year. I'm pleased with the progress we are making on our agenda to leverage the current fault lines created by technology as well as the macroeconomic shifts to broad base our client footprint and curate new growth engines. Let me help you with a few more data points. We closed FY '26 with 150 clients with over $1 million revenue from a run rate standpoint, an addition of 34 clients over Q4 of FY '25. During this period, our $10 million as well as our $5 million-plus clients increased by 2% and 12%, respectively. Over the last 8 quarters, the revenue share of top 5 and top 10 clients has come down by 8% and 12%, respectively. Importantly, this has happened even as our top 5 clients continue to grow at industry growth rate despite a significant onshore to nearshore delivery in at least a couple of them. So the broad basing of growth that you see is the result of focused account management, which is driving a faster growth in our non-top 5, top 10 accounts in many cases through large deals. We're also winning a higher number of large deals and doing so more consistently. We now have a dedicated team to bring more focus to our efforts and ensure we are covering all the aspects that go into a large deal pursuit. This has helped us report at least 4 large deals in each of the past 5 quarters. Importantly, despite the strong closure, our deal pipeline has stayed above $1 billion and in fact, is at its highest ever level. Let me give you some additional insights. We have won 17 large deals in FY '26 versus 14 wins in the entire FY '25 and more than double the number of wins in FY '24. Also, we added 24 strategic clients in FY '26, doubling our additions compared to FY '25. Not just that, while previously our large deals almost always came from existing clients, 7 of the large deals this year came from new logos versus 5 in FY '25. This underlines the strength of our differentiated solutions, attractiveness of our commercial construct and a growing client acceptance of us as a disruptor. This gives me confidence that we are on the right trajectory to deliver sustainable, profitable, and industry-leading growth. And with that, let me turn to our outlook for FY '27. We are entering the year with strong momentum, a healthy deal pipeline, a record large deal intake exiting FY '26 and the early commercial traction of intelligence that operates. Against that backdrop on revenue, we are guiding to constant currency growth for FY '27 to be in the 10% to 13% range, and we are guiding for EBIT margin band of 12.25% to 12.75% for FY '27. We believe this places us comfortably in the top decile of growth in the industry globally. This concludes our opening remarks, and we can now open the floor for questions. Operator, over to you.

[Operator Instructions] The first question is from the line of Vibhor Singhal from Nuvama Equities.

So, Ritesh, a couple of questions from my side. One is, if you look at the overall industry at this point of time, I think last 3, 4 months, I think we've seen a lot of narrative being set by the AI model builders around the basically cannibalization of revenue and the business model of system integrators coming into question. We, of course, have continued to maintain that and you clarified it in a very detailed manner as to who's going to underwrite the outcome and how. Specifically for the BPO industry, the concerns have been quite paramount that BPO industry is at the forefront of this disruption. Our numbers, of course, says a completely different story. We've had a very good growth this year. We're guiding for a strong growth next year. Now could you basically help us understand where does the dichotomy lie? I mean, not just us, most of the, I think, BPO companies are reporting good growth. So is this growth coming despite the basically cannibalization of revenue due to the Gen AI platforms or the Gen AI platforms, which are being, let's say, implemented by the enterprise clients are not yielding the results as we've also heard a lot of stories about very few projects making past the POC stage? Or is it that we are gaining market share from the larger clients? What is the mix that is basically leading us to this kind of a growth despite the negative narrative around it? Thank you.

Thank you, Vibhor, for that question. Look, let me start by saying that we have seen this macro duality for some time, right? The degree keeps shifting every few months and sometimes every few weeks, right? One thing to bear in mind is that the traditional business process services are not as linked to discretionary spend as the traditional IT services side. That's one part of it, right? A substantial part of the business, therefore, ends up being annuity and recurring, giving a greater visibility, if you will, right? What I will say is that, in some sense, the recent developments and the pace of advancement on the AI side, if nothing else are structurally expanding the addressable market for players such as ourselves. And one of the things I talked about is, what we have been seeing over the last few months where we are perceived as a consulting partner who doesn't just advise but also implements, doesn't just implement but also runs and doesn't just run but also transforms. That's the core of what Intelligence That Operates represents that we are able to do this in one single continuous motion. And I think when we are doing that, what it does is, it expands the surface area of what is available for us in terms of the TAM itself because we're getting called in for deals that maybe 3 years back, if we were perceived as a deep domain BPM player in regulated markets, today, I think we are seeing a lot of opportunities that cut across different areas itself. And that expansion in surface area is certainly something that I think clients appreciate because they want one single continuous motion towards underwriting the business outcomes. So I think that's one part of it. I think the second part of it is related to the opportunity to expand share and take share from competitors itself. And certainly, we are seeing opportunities out there where the ability to play on offense, and that has been a consistent theme that we've been saying now for -- at least ever since I've been at Firstsource that, look, when you end up having technology and macro shifts, it creates a dichotomy in terms of how different players operate, right? And certainly, challenger brands such as ourselves have the opportunity to play on offense and adapt sooner. And that, in turn, allows you to take share away from other players in the marketplace on the back of very specific value propositions targeted towards the industries in which we have domain depth, et cetera. And I think that combination is certainly yielding results as well. And I think third is in certain -- some of the markets in which we operate, the degree of in-sourced that might have existed in the past, people are probably willing to look at many more options. And as long as you're willing to go to them with a compelling proposition and creative commercial construct, I think those are certainly, again, allowing them to evaluate different opportunities and maybe give us a sizable part of the pie as well. So I think it's a combination of all these 3; the value proposition, the share shift that we can impact and the expansion from potentially what might be an in-sourced portfolio to a larger share of the pie.

Got it. Got it. And on the first point, you mentioned about that expansion of TAM. Would you believe that given that we are in the initial stages of the Gen AI cycle, the TAM expansion also would be in initial stages and the TAM expansion will continue and perhaps maybe accelerate in the coming years?

We certainly think, Vibhor, the opportunity exists. And here's why, right? I mean if you talk to folks in Silicon Valley, I think they will assume that everything can be automated overnight, right? And that's what sometimes paints the scenario that, "Hey, what does this mean for the industry?" And you can -- you've seen this with data that's reported that the industry is continuing to hold its own, certainly for some players in the market in terms of growth and so on and so forth. But a lot of it is because when you get into the -- get under the hood of client operations, particularly go to a large bank, go to a large telco, go to a large health plan. And I'm just giving you 3 distinct sectors which are regulated in nature, data quality is not where it needs to be. So, you can't just go overnight and automate their operations or even have agentic operations run autonomously, et cetera. So there's a significant amount of scaffolding work that needs to happen to ensure that the operation is ready for prime time. The determination of which processes are eligible for even an agentic operation requires work. The determination of what kind of security guardrails need to be in place is an opportunity. The determination of where should the process overrides be with a human in the loop is an intentional exercise. All of these are the scaffolding that needs to be put in place to ensure that you can actually truly get to the end state itself. And our view is that, that's creating expanding surface area in terms of the places where we can play.

Got it. Got it. Just one bookkeeping question for Dinesh, sir. Sir, our debt on the book has more than doubled over the last 2 years from INR 1,600 crores -- to almost INR 1,600 crores right now. Of course, this is based on the acquisitions -- primarily due to the acquisitions that we've done. What is the outlook on this number? Do we expect this number to remain stable here on and then maybe the internal cash flow generation to lower this debt in the coming years? Or do you believe we are not going to shy away from any -- more acquisition opportunities and this debt, and we would be okay with this debt going further up as well?

I think we don't -- debt, don't see with that angle of [ being ]. I think some portion of the debt continue to be. And you've seen that our main model is the cash flow, what we generate. Normally, we pay 40% to 50% to the shareholders, 50% mainly utilized for, I'll say the, more for acquisition or growth purposes. So I think that will continue to remain. And so debt level will continue to go down. Last year also, I think -- if you see before that year, we almost -- debt increase was INR 700 crores, while the current year the debt increase is INR 200 crores or INR 250 crores. So it has been -- come down. we actually repaid. So the initial buildup and the additional buildup is -- some of them is through the acquisition, but the cash flow is very healthy. I think we want to just ensure that we have a right billing and right receivables we are in the stage of being. And we continue to utilize that cash flow from an overall risk basis, and not to be really thinking of being just repaying a debt or not to think on a growth or other investment.

Got it. Got it. So the debt is not at any alarming level in our opinion. And there would still be some buffer if you want to acquire -- make any more acquisitions, right?

Yes.

Next question is from the line of Girish Pai from BOB Capital Markets.

I just had a few questions on the fourth quarter and the guidance you've given for FY '27. So fourth quarter, you had a 3% Q-on-Q growth in CC terms, I think of which some 130 basis points came from TeleMedik, if I heard you right. So was this quarter softer than what you thought when the quarter started? And if that were to be the case, what drove the softness?

Thank you, Girish, for that question. So Q4 was broadly in line with our expectations at the start of the quarter with 2 exceptions, and I called that out in our opening comments itself. The first shortfall was on account of the implementation of a key U.K. collections deal that shifted to the current quarter that we are in, Q1 of FY '27 because regulatory approvals took much longer than we anticipated itself. And what I will say is that we have since received the approval and the deal is now pretty much ramped up as we speak. And the second is in January 2026, Medicare Advantage plans entered a tighter regulatory environment. In response, some of the payers suspended the ramp-up of planned programs that were already underway while they reassess the implications. So it's a short-term timing impact on the healthcare payer revenue in Q4, but neither of this in our minds is structural. The U.K. deal, as I said, is now live. The payer programs are expected to resume. If anything else, it actually puts even more pressure on them as regulatory clarity emerges. And excluding these timing effects, I think the underlying business momentum continues to remain strong.

Okay. My second question is with regard to the yearly growth that you've clocked in FY '26, which is 13.6% on a CC basis. How much of this was contributed by inorganic? And for FY '27, this 10% to 13%, is there an inorganic component to it? So the inorganic components for both FY '26 and FY '27.

Yes. So if you take FY '26, past due credit and TeleMedik contributed about 1.5% to the FY '26 growth. Excluding this, it's about 12.1% for FY '26. And the bulk of our growth still continues to be organic, driven by deal wins, account mining and new logo additions. And as we get into FY '27, we anticipate that the contribution of the 2 acquisitions that we made will probably be in the range of about 2% to 2.5% going into FY '27.

Okay. A couple of questions on your full stack intelligent operator strategy that you have. You come from a place where you have been very strong on the operations side, the pillar on the operations side, whereas implementation strategy are probably stronger for some of the diversified IT services companies. So what exactly is the right to win for us? While I get the strategies and looks very interesting. But when you're competing against some of the diversified IT services companies, how would you stack up there because they probably come from owning or being part of the 2, 3 other pillars in a much more material fashion than you are?

Actually, I'm glad you asked the question, Girish, because the answer is actually in exactly the way you framed the question, right? The framing that you had was a lot of the diversified players have pillars. The pillars is the problem, right? Because the way a lot of organizations have built up, right, over the years, somebody is an IT services player, somebody is a systems integrator, somebody is a BPO, somebody is a consulting firm. And the problem is in that definition because it's inside out. It's the way firms have architected themselves. It's not necessarily the way clients buy. And that opportunity is playing out even more so right now from a visibility standpoint. So today, what clients are looking for is that one single continuous motion. And when we launched Intelligence That Operates as the next phase of UnBPO, our intent was to say that clients today want one single continuous motion. They want a partner who can not just advise but actually implement. That implementation could be on the technology side, it could be around modernizing what they might have, it might be around cleaning up their data, so on and so forth. But don't just implement it for us, also run the operations. And don't just run the operations, help continue to transform it. And by the way, do that in one single continuous motion without the pillars, without the silos that have historically plagued full service for us. The reason why we feel very good about it is because I think our size, our agility and nimbleness allows us to put the right team to solve the customer problem, and we start with the customer problem first to ensure that we are assembling the right set of folks rather than thinking about internal boundaries, which is typically the way full service firms might have been. So we think we -- this is creating an opportunity for us to expand our surface area. It's solving a problem for the customers. And more importantly, right, it builds on our domain depth. So what's the backbone of this? Our backbone of this is our deep domain understanding of regulated workflows. And that knowledge, coupled with what I just articulated, allows us to go out there and underwrite an outcome. And by the way, when we do it the first time, we gather information of how we did it, which then becomes a compounding advantage when we do the same process for a second client and a third client and a fourth client because you're building on that knowledge along the way itself. That's what the process harness that we have created as part of the Intelligence That Operates is an integral building block itself. So we think it sets us up well. It expands our surface area and allows us to compete very effectively.

Next question is from the line of Dipesh Mehta from Emkay Global.

A couple of questions. First of all, just want to understand investment required to deliver on our strategy about Intelligence That Operates, how we intend to balance investment versus, let's say, our margin aspiration? And if you can give some sense about area of investment because you might require different kind of talent compared to, let's say, traditional hiring. So broad thought process around it. Second question is about the, considering our portfolio and composition of revenue, what kind of additional deflation or headwind you expect because of AI-led productivity expectation in existing business? Third question is about the '27 growth guidance. How you expect growth to play out? Because I think a couple of points you highlighted in your prepared remarks about some of the deals which will take time to ramp up and all those things, between H1 and H2, how the growth trajectory play out? And last question is about FY '26 versus '27 organic growth, if I look at it. You indicated about 1.5% M&A contribution in '26, which in a way implies your 12% kind of organic growth in '26, which is likely to moderate to around 9%-odd on midpoint organic growth kind of thing, considering 2.5% if I take as a number. So seems to be slightly moderating where you have some advantage now in terms of some of the deals which were delayed likely to now start penting-up, plus momentum is with you, $1 billion plus pipeline. So if you can give thought process around it.

Thank you, Dipesh, for that comprehensive list of questions. I just want to make sure that I -- you had 2 questions on the growth guidance and one on the margin versus the investments required. There was one question that I missed. Could you just -- which I think was the second question that you had?

H1 versus H2 in terms of the -- some of the deal will take time to ramp up kind of narrative?

Yes, yes, fair. So let me start with the margin versus investment. I'm actually going to go back in time, right? And one of the things that, if you recall, when I joined in the middle of FY '24, and we had provided at that point in time how this is going to play out from a guidance standpoint and what was our thesis. We said we'd hit a $1 billion run rate by Q4 of FY '26. We actually crossed that in Q4 of FY '25. We said margins would be flat in FY '25, and then we'll see 50 to 75 basis points of margin improvement every year for the next few years -- for the next 3 years so that we think a 14% to 15% EBIT band is the range at which we would like to operate. We were flat on margins while continuing to make investments in go-to-market and technology in FY '25. In FY '26, if you look at the margin EBIT expansion, it's been roughly about 74 basis points. So we are pretty much in the higher end of the range that was there. And if you look at our guidance for this fiscal, we continue to -- our guidance for FY '27 is higher than the Q4 exit EBIT, which was at 12.2%. The lower end is at 12.25%. We feel comfortable with what we have seen in terms of the opportunities. And those opportunities are coming either in account of automation and AI. They're coming because of greater offshoring and nearshoring. They're coming because of reimagining of workflows on account of how we are trying to alter our ways of working itself to become truly an AI native organization itself, and that gives us comfort on the margins. But at the same time, as you rightly called out, as we are doing some of these efficiency saves, we are also attracting different sets of folks into the organization. So for instance, we have people who are at the intersection of domain plus AI. We have people who are forward deployed engineers. We have folks who are builders -- and what they allow us to do is to unlock value, solve for the last mile problem that typically exists with customers or even for our own internal operations to ensure that we can operationalize the AI itself. So we have a new cohort of -- we have new cohorts of people, which are different than what the erstwhile Firstsource organization might have had, and we continue to build on that. That being said, we do believe that our ability to deliver the margin guidance that we have continues to remain unchanged while we make these investments. So in some sense, there are efficiency saves, which also are allowing us to fund these investments that are coming into play. So that's as far as the first question is concerned. Let me talk a little bit about the growth guidance because the last 3 questions that you had were all related to growth itself. I mean when we provided growth, and again, we've been consistent on this altogether, what we have at a point in time is always line of sight or visibility to the lower end of the guidance. And then we end up having, obviously, pipeline and where we expect different ramps and so on and so forth to allow us to bridge the gap and get to the higher end of the guidance. And that's our best -- that's our visibility at this point in time. Obviously, that continues to evolve as deal wins happen, as pipeline goes up and other variables come into play and so on and so forth. But at this point in time, as we start the year, we feel comfortable with that lower end 10% guidance that we have provided for the full year and which, as you know, is at the top decile of growth guidance that is there globally today across sector, whether it's IT, BPO, so on and so forth. The third point that is there related to the split between H1 and H2, what we expected is that, we don't expect this to be back-ended, but rather almost spread out across the 4 quarters itself. So you should see this evenly playing out.

Understand. And can you provide some sense about the organic growth restoration, which, in a way, implies in the guidance?

Yes. So as -- I think I've responded to this question a little while back, but we are accounting for roughly about a 2% inorganic growth to the 10% to 13% range.

No, I understand. Why I ask is, if I look, let's say, we guided 14.5% to 15.5% at the end of quarter 3, we are roughly 1% lower. Now when we are guiding 10% to 13%, in a way, it require roughly 2% to 3% CAGR for next 4 quarters. Just trying to understand acquisition contribution-wise now largely, we have captured most of the things. So considering these 2, 3 things, 2% to 3% is a very healthy growth CAGR, what we are building in next year. So just trying to understand what are the additional comforting factor which you have built and which -- if you can give some sense about those?

So if you look at the variables that are coming into place, and let me just reiterate the comment on Q4. As I mentioned, Q4 was broadly in line with our expectations, barring those 2 exceptions. One was the implementation of the key U.K. collections plans, which needed regulatory approvals and those regulatory approvals got shifted by a quarter. That deal is already live as we speak. And then what we saw was a timing challenge with some of the Medicare Advantage plans itself, but those things also we expect are sorted through, both of which actually are creating tailwinds as we get into the business itself. So that's comment one. So it's not that the revenue is gone, but rather it's deferred or delayed by a quarter itself, if you will. Now going into FY '27, what are the things that make us confident of the visibility that we end up seeing today? One is our deal pipeline is at its highest ever level today as we speak in the history of the company. Number two, if you look at the strategic logos that we have added through the course of the quarter itself, we've added about 24 strategic logos out of the 47 new clients that we added in the quarter. Those 24 strategic logos have opportunity to scale up. And as we said, the strategic logo for us is one which has the potential to give us at least $5 million of annual business. So given that opportunity set that exists and given our track record, if you look at the last year, 50% of the strategic logos that we added in the previous 18 months, we've already been able to convert that into $5 million-plus accounts. We think we have a good track record of being able to deepen our footprint in these strategic logos itself. So that gives us -- that's the second data point that gives us comfort in terms of what we see as the opportunity itself. And third is, within our existing accounts already, across the portfolio, whether it's our top 5, top 10 or the next run below. You're seeing that in terms of the deepening of the client footprint that happened. I mean, just take one data point, right? Our $5 million-plus accounts in the last 2 years is up by 68%. Our $1 million-plus clients is up by 46%. Those are pretty remarkable statistics just given the fact that -- I mean if -- some of you may recall, when I just joined, we talked about one of the central themes of One Firstsource is how can we deepen our footprint and cross-sell, upsell was going to be a big part of that from a strategy standpoint. Two years out, that's what we've been executing on. And by the way, we are still scratching the surface on that. So I think the market opportunity is still immense.

[Operator Instructions] The next question is from the line of Shradha Agrawal from Asian Market Securities.

Congratulations, Ritesh, on a strong guidance. Two questions. First of all, this BPaaS Healthcare deal, has it ramped up to its potential? Or do we still have some revenue to be expected in the first half of '27?

So we don't comment on specific deals itself in terms of where they are at or so on and so forth. But what's fair to assume is that all our large deal wins, including the transformative ones progressing as per expected time lines. And we continue to remain confident in the long-term trajectory of all of these deals.

The reason I ask this is Ritesh because this quarter, our growth was predominantly led by healthcare vertical, which grew 10%, 11%. So I was just checking whether this BPaaS deal ramp-up was a good contributor to growth.

I think it was broad-based across several of our clients, Shradha, in the healthcare space. Yes.

Got it. And secondly, in your presentation, in your medium-term strategy, you highlighted vertical expansion into retail and utilities in the U.S. and geographical expansion in the Middle East as key focus areas. So are these something that we're looking at organically or you want to build up through acquisitions again?

Shradha, I think what we have is a ready base of deep domain knowledge in these 2 verticals from the work that we have done in the U.S. -- in the U.K. markets already. So our view is that we can extend some of that into the U.S. markets. In fact, as we speak in the last 3 months or so, we onboarded somebody to spearhead our business from a utility standpoint in the North American region. That's already starting to bear fruit in terms of the pipeline that we've been able to build up. So we continue to think that we can look at doing this organically. That being said, look, we are also opportunistic on some of these areas if it's going to give us a capability gap that we don't have or it's going to allow us to get distribution access. Those have been the 2 vectors that we have talked about as potentially opportunities to do tuck-ins that might be the case. So it's not that we're not -- we are averse to that. But at the same time, I think we have a strong, solid foundation to build and extend to the North American region, particularly for the retail and the utility side.

Got it. And just last question. I think you indicated that we had inorganic contribution of close to 150 bps in '26. But I guess Ascensos also got incrementally consolidated for 5 months more in '26. So wouldn't inorganic component be close to 450 bps for '26?

So you're right, Shradha. I think our organic growth was close to about 10%-odd in constant currency terms, if you exclude Ascensos, PDC and TeleMedik, yes.

Okay. Would it be slightly lower than that, Ritesh, I think sub-10%...

I think it's about 9.8% to 9.9%, somewhere in that zone.

Okay. And just last question. Will it be possible to quantify TeleMedik contribution for the quarter? You indicated the Y-o-Y contribution, but in terms of sequential contribution, what was the number?

I think we can come back to you. I don't have the data readily available, but I think we can follow that up as a follow-up question, Shradha, with you.

We will take that as the last question. I would now like to hand the conference over to Mr. Ritesh Idnani for closing comments.

Thank you all for joining the call and for your questions. I want to close with a few final points. Our sales engine continues to work well. We had 4 large deal wins in Q4, which is the fifth straight quarter of 4 or more large deals. Our deal pipeline at over $1 billion continues to be, and in fact, is at its highest ever level in the history of the company. Our execution is on track. As you can see, we are executing well on improving our margins. And last year for us was the first full year of delivering to the promise of the 50 to 75 basis point margin expansion. EBIT margins, as you know, have increased by 100 basis points over the last 4 quarters. Our cash conversion has been strong. Our OCF to EBITDA this year is 78% and our free cash flow to the adjusted PAT is 160%. Our long-term aspirations continue to remain intact. As I mentioned earlier, we see our constant currency revenue growth for FY '27 in the 10% to 13% range, which places us in the top decile in the industry. And we remain laser-focused on taking our EBIT margin to 14% to 15% band in the next couple of years. That's all from our side, and we look forward to interacting with you again in the next quarter call. Thank you all.

Thank you very much. On behalf of Firstsource Solutions Limited, that concludes this conference. Thank you all for joining us today, and you may now disconnect your lines.