- Rakesh Jhunjhunwala sold shares of Firstsource Solutions in the March quarter.
- The stock is currently up 80 per cent.
- Analysts expect the stock to deliver returns of up to 40 per cent at current levels.
The stock could return up to 40 percent if the company’s second-quarter results come in after the initial targets. Analysts said an increase in digital revenue shares as a percentage of total revenue would retake the stock, which mostly trades at a discount compared to stocks of other IT companies. They weren’t overly concerned about a cut in fiscal 2022 revenue guidance.
Edelweiss Securities said Firstsource is on track to transform its business from pure-play business process management (BPM) to a digital and platform company. The brokerage paid him Rs. 251 is the target. He added that the company is moving towards its digital journey as 17 per cent of its deals in the quarter were in digital projects. The stock is trading at multiple discounts in IT Midcap and increase in digital revenue share will lead to multiple re-ratings of the stock.
Emkay Global said Firstpost’s September quarter results were slightly weaker. However, the brokerage said the valuation was attractive at Rs. It is recommended to buy this stock with a target of 220. He said the stock has gained about 15 per cent in one month and the decline in performance in the second quarter was mainly due to temporary factors. Growth may strengthen from the March quarter.
Jhunjhunwala’s investment in FirstSolutions fell from a high of 3.26 per cent in the March quarter of 2019 to 1.29 per cent in the December 2020 quarter. He was not on the company’s list of shareholders in the March quarter, indicating that he had sold all shares in the quarter or reduced his stake to less than 1 per cent. The stock traded in a strong range between 100-110 during the quarter.
The BPM firm posted a consolidated net profit of 28.3 per cent in the September quarter, up from Rs. 105.2 crores. Revenue from operations is Rs. 1,178.3 crore to Rs. 1,418.2 crores.