Firstsource looks at healthcare as a hedge

India’s leading third-party business outsourcing unit Firstsource Solutions is now looking at healthcare as a key area for diversification. This, the management holds, will enable the company to derisk its business from the vagaries of the banking and financial services sector in the US. From a share of 9.2% of its revenues in FY07, the share of healthcare has risen to slightly above 40% in the third quarter of FY08. This tremendous growth in the healthcare business was supported by the three acquisitions the company had made since March 2005. Since then it has acquired RevIT Systems, BPM Inc and MedAssist Holdings, which was picked up in September 2007.

“Healthcare forms around 25% of the US GDP, hence it is a huge opportunity,” says Ananda Mukerji, MD& CEO of Firstsource Solutions. “Around 5% of hospitals revenues are lost simply by not managing collections and claims, and we can impact that market,” says Mukerji. The management expects this vertical to contribute around 50% of its revenues in the days to come. For the Rs. 840 crore company with a compounded rate of 82% for the past four years, the speed is expected to slowdown. The impact of the US credit crisis will be felt. “The size of the crisis is huge and there will be a negative impact,” says Mukerji. The extent of this is not clear at the moment and will not have a huge impact on the current year’s figures.

Already the liquidations or debt collections rates have been falling, he added. “At the same time, we expect the collections market to rise and the quantum of business will grow, giving us volume growth without a significant rise in the operating costs,’ Mukerji added. The management is also toying with the idea of setting up an SEZ and expanding into other east Asian countries.