Firstsource Solutions Ltd (NSE: FSL) Q3 2026 Earnings Call dated Feb. 03, 2026
Corporate Participants:
Ritesh Idnani — Managing Director and Chief Executive Officer
Dinesh Jain — Chief Financial Officer
Analysts:
Unidentified Participant
Vibhor Singhal — Analyst
Abhishek Bhandari — Analyst
Dipesh Mehta — Analyst
Shradha Agrawal — Analyst
Ankur Pant — Analyst
Sushovon Nayak — Analyst
Girish Pai — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to First Source Solutions Limited Q3FY26 earnings conference call. As a reminder, all participant lines will win the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. On this call we have Mr. Ritesh Adnani, MD and CEO and Mr. Dinesh Jain, CFO to provide an overview on company’s performance followed by Q and 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 file with SEBI and subsequent annual report that are available on its website. I now hand the conference over to Mr. Ritesh Adnani. Thank you. And over to you sir.
Ritesh Idnani — Managing Director and Chief Executive Officer
Hello everybody. Thank you for joining us today to. Discuss our financial results for the third quarter of FY26. My name is Ritesh Adnani and I’m the CEO at FirstSource. Before I start with the discussion on our Q3 performance, I would like to welcome our colleagues from Past Due Credit and Telemedic who have joined the First Source team over the last two months. I would also like to thank them. And each one of our 36,689 first sourcers around the world for their relentless commitment to delivering value to our clients. Q3 marks the seventh straight quarter of double digit year on year. Revenue Growth Our Revenue grew by 16.2% year on year and came in at rupees 24.4 billion In US dollar terms the growth was 10.2% year on year and 3.6% quarter on quarter to US dollars. 274 million. In constant currency terms our revenue grew 10.6% year on year and 4.6% quarter on quarter. These numbers are inclusive of the past due credit acquisition which we integrated during the quarter and contributed to about 2% to our year on year growth in constant currency terms. EBIT margin for the quarter was 11.9% up 80 basis points and 40 basis points on a year on year and quarter on quarter basis respectively. It’s also the fifth straight quarter of margin expansion and the increase over the trailing 12 months has been ahead of our guided band of 50 to 75 basis points expansion every year.
Our net profit adjusted for exceptional items was Rupees 2 billion and the diluted EPS for the quarter was Rupees 2.87. Coming to the business highlights, I will start with our deal wins and other client related metrics. In Q3 we signed five large deals. As you are aware, we consider a deal with an ACV over 5 million and as a large deal. Some of the deal wins include a leading on demand manufacturing marketplace in the US selected us to provide account servicing and customer experience services. We gained additional business from one of the largest communications and media companies for customer onboarding and account service processes that are currently managed by in house teams.
We were also selected as a Global Operations Outsourcing Partner by a leading UK based MVNO to support account servicing, billing and customer inquiry management across multiple markets. This incidentally is also a new logo for us. One of the leading global online fashion retailers also selected us to drive customer operations. This again is a new logo for us. In Australia we won a large onshore customer experience engagement with a leading health insurer focused on member services. During the quarter we added nine new logos which included five strategic logos. As you’re aware, we define a strategic logo as one where we see the potential of at least a $5 million revenue run rate annually and we run a structured program to handhold and monitor such relationships to grow them at an accelerated pace.
As I mentioned, two of the five large deals in Q3 were from new logos. In fact, we have been able to hit our aspirational target of a $5 million relationship size in 10 of the 20 strategic logos that we added over the past four quarters, including Q3. This conversion is about 60% if we consider the 33 strategic logos we added over the past eight quarters. Let me now provide you a flavor from a vertical standpoint. Let’s start with banking and financial services. In Q3 of FY26, our financial services vertical grew 9% year on year and was flat sequentially.
In constant currency terms, we added five new logos during the quarter. From a demand perspective, clients are increasingly prioritizing regulatory adherence, customer experience and cost efficiency which play directly to our strengths. We see a strong client interest in our tech enabled capability portfolio anchored around AI, automation and data driven transformation. For example, our consulting led mortgage transformation offerings are resonating very strongly with clients seeking low origination and refinance volumes. Given a prolonged high interest rate environment, they’re looking for structural cost reduction, productivity uplift and end to end process simplification. Our consulting led model deploying AI enabled. Optimization and workflow redesign, particularly for monoliner. Mortgage customers who are operating under sustained. Margin pressure is finding good acceptance. This approach has enabled us to move beyond pure execution and play a more strategic role in reimagining mortgage operations across several accounts. We’re also partnering more closely with mid. Sized banks and Fintechs as they accelerate platform modernization, embed AI across customer journeys and enhance their digital experience, especially across onboarding, servicing and collections workflows. Our Q3 exit deal pipeline was amongst the strongest in recent quarters with at. Least one large deal in advanced stages. Of closure giving us confidence in sustaining. Growth momentum in this vertical. In Healthcare the revenue grew 6% year on year but were flat sequentially in constant currency terms. We added one new logo during the quarter. Healthcare continues to be a core growth. Pillar and a key area of strategic differentiation for First Source. We are amongst the few companies with a strong and well diversified presence across both the payer and provider segments giving us a unique end to end view of the health care value chain. While clients across both segments are navigating similar macro pressures of rising costs and increasing regulatory complexity and the need to deliver better experiences and outcomes, we believe payers and providers are at very different stages of their transformation journeys and therefore require differentiated approaches to sharpen our focus on these distinct needs, dynamics and growth opportunities.
We have created dedicated leadership roles for both the payer and the provider segments. Matthew Barlow and Scott Schrader each bring over two decades of industry experience, deep client relationships and they will drive our unbpo approach to build domain led technology enabled solutions that help health plans and health systems respectively operate smarter, scale responsibly and adapt faster to change. Ramp ups in our previously won large deals are progressing well and we see a healthy deal pipeline. This actually gives us the confidence to. Bring forward the planned rationalization of low margin low growth accounts particularly in the. Provider segment aligned with the recent leadership changes. While this may weigh on the optical. Growth in this vertical in the short. Term it gives us a strong push up on our medium term margin aspirations. Coming to the CMT vertical, revenues grew 14% year on year and 2% on. A quarter on quarter basis. We added 2 new logos during the quarter and 3 of our last deal. Wins in Q3 came from this segment. Q3 tends to be seasonally soft due to the holiday period which affects the timing and flow of work packets, particularly. Across our consumer technology clients. That aside, CMT remains one of our fastest growing verticals. Growth continues to be driven by deepening engagements with leading consumer tech companies spanning. Both our core service offerings as well. As a growing set of non traditional technology led solutions that support the integration of AI into client product ecosystems. We exited the quarter with a well balanced and healthy pipeline covering opportunities across both traditional media and telecom clients as well as the new age technology companies, giving us confidence in the sustained growth momentum of this vertical. Lastly, coming to the diverse portfolio that. Grew 21% year on year and 37% quarter on quarter in constant currency terms. As you’re aware, this portfolio includes our. Businesses with utilities and retail clients, mainly in the uk. We have a healthy deal pipeline across both retail and utilities verticals. With the past due credit capabilities, we. Plan to double down, especially in the utility segment where the acquisition adds several large and new logos to our portfolio. We are also optimistic about growth in our retail portfolio where we’ve been able. To expand our footprint as well as win additional business with several clients during recent renewals. Moving to the geographies From a geographic standpoint, North America delivered 1% sequential growth and 13% year on year growth in constant currency terms. We continue to see broad based momentum. Across our three core verticals in the. Region and expect to sustain this 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 other markets such as utilities and retail. From the UK. Europe grew 14% quarter on quarter and 2% year on year in constant currency terms. As we have highlighted in the past. We have 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 broadening both our geographic and vertical presence are yielding results. Our pitch for transformational programs and nearshore delivery from South Africa has been resonating strongly with clients during Q3. We also renewed our contract with a. UK banking based client, one of our largest and oldest clients, and we’ve now been recognized as the primary partner for both onshore and offshore work. We believe this places us well to further deepen and expand our relationship with this client. With another large communications and media clients, we continue to gain additional estate mostly from their in house teams. We also won three large deals in Q3 and our pipeline continues to build up well. In fact it’s up about 40% over. The last four quarters. We see an improving growth trajectory in this market, though the pace could be gradual. In Australia, we continue to win additional business with existing clients while building a pipeline in new logos. One of the largest deal wins in Q3 was in this market. On the people front, we closed the quarter with a headcount of 36,689 first sources which is a net increase of about 690 employees over the last quarter. Offshore and nearshore hires accounted for close to 80% of gross additions. Our trailing twelve month attrition continued to trend down to 27.4% marking an improvement.
Of almost 10 percentage points over the last eight quarters. During the quarter we laid the foundation. For a fundamental shift from a role. Based to a Skills first organization with the launch of Unbounded Our Skills and Talent platform, enabling every First Source employee to build a unique skill profile to support internal mobility, targeted development and future workforce planning. This transformation was reinforced through nearly 44,000. Learning hours delivered globally focused on building capability in AI and data fluency, leadership and cognitive skills. We also further strengthened our people operations backbone by improving onboarding speed and accuracy, scaling HR platforms across geographies and reinforcing payroll and statutory governance to support seamless business continuity. Our People first culture was further reflected in recognitions earned this quarter including being. Named Amongst the top 25 best workplaces for IT and IT BPM in 2025, honors at the Great Manager Awards 2025 and a repeat Great Place to Work certification across our key markets. From an awards recognition and sustainability standpoint. First Source continues to earn strong recognition. From leading industry analysts for delivering strong client value and driving innovation through technology led solutions in our focus markets. During Q3, Nelson hall named FirstSource as a leader in banking for both Operations Services and Process Automation services and a leader in CX Services transformation. Everest Group recognizes as a leader and. Star performer in its Banking Operations Services Peak Matrix assessment of 2025. Additionally, ISG positioned FirstSource as a leader in both Generative AI Services and Contact Center CX services. ISG also featured FirstSource in its booming. 15 list based on the annual value of commercial contracts awarded over the past 12 months for the fifth consecutive quarter. I’m also proud to share that FirstSource achieved an ESG and CSA score of 87 by S&P Global Sustainable One Assessment our third year of significant improvement, rising from 61 in FY23 and 81 in FY24 to 87 in FY25. This performance positions FirstSource as the number one ranked company globally in the professional services sector. These recognitions reflect not just external validation. But the collective commitment of our teams to driving sustainable and responsible growth. Let me talk a little bit about the Telemedic acquisition. We announced this acquisition last month. As you’re aware, Telemedic is a Puerto Rico based pioneer with close to three decades of operations well aligned with the. Fast growing Medicaid, Medicare Advantage and dual eligible segments including Spanish speaking and underserved communities. Its service portfolio spans clinical operations, utilization management, telehealth enabled care and contact center solutions. This acquisition meaningfully strengthens our end to end clinical and utilization management capabilities and expands our on ground pairs presence in the payer market in Puerto Rico. With that let me turn over the call to Dinesh to give a detailed color on the quarterly financials. I will come back to talk about our progress on the strategic priorities as well as the outlook for FY26. Over to you Dinesh.
Dinesh Jain — Chief Financial Officer
Thank you Ritesh and hello everyone. Let me start by taking you through our quarterly financial numbers. Revenue for the Q3FY26 came in as rupees 24.4 billion or US dollar 274 million. This implies a year on year growth of 16.2% in rupee term and 10.2% in dollar terms in constant currency. This translates to year on year growth of 10.6%. Our operating profit stood at rupees 2.9 billion up 24.9% over Q3 of last year and translate to a ebit margin of 11.9% up 40 bip of 40bps quarter on quarter. As Ritesh earlier mentioned, this is the fifth straight quarter of sequential margin expansion and translate to a 80bps improvement in the last four quarter.
This is a little above our stated objective of a 50 to 75 base margin expansion every year. Effective tax rate in Q3 was 21% and for the ninth month it was 20% which is within the guided 19 to 21% range. For FY26. As I mentioned there is a one time charge of Rupees 914 million on account of increased provisioning for gratuity of leave encasement in accordance with the new Labor Code announced by the Government of India as well as there is exceptional item related to provision of rupees 88 million for the diminution in the value of one of the legacy investment.
Profit. After tax adjusted for these exceptional item came in at rupees 2 billion 800 a year on year growth of 26%. DSO was 67 days for the quarter versus 69 days in the Q2. Tighter working capital days help on improved cash conversion. Our OCF to EBITDA was 93% and FCF to adjusted PAT was 164% for the quarter. For nine months our revenue grew at 14.3% in constant currency terms and 15.1% in US dollar terms. Our EBIT has grown by 26.5% year on year and adjusted PAT has grown 27% over last year. Cash conversion continued to be strong.
Our OCF to EBITDA for nine months was 86% and FCF to adjusted PAT was 159%. Our cash balance including investment stood at Rupees 4 billion at the end of quarter three. Our net debt stand at Rupees 11.7 billion as of 31st December 2025 versus 10.8 billion as 31st September 2025 and Rupees 13.2 billion as of 31st March 2025. Our head book as of 31st December was as follows. We had coverage of GBP 95.3 million for the next 12 months with an average rate of 114 per pound and coverage of US dollar 178 million with an average rate of 88.64 per dollar.
During the quarter we have paid Rupees 2.2 billion toward the acquisition of past due credit for which we have received the regulatory approval during the quarter. As we have reported earlier, we acquired 100% stake in the company at a purchase consideration of GBP 22 million which include GBP 4.4 million as a earnout link to achieving predefined milestone. I am also pleased to share that the Board has declared an interim dividend of rupees 5.5 per share. This is all from my side. I will hand over the call back to Ritesh to talk about our strategic priorities and outlook for the coming quarter.
Ritesh Idnani — Managing Director and Chief Executive Officer
Thank you Dinesh. I’m pleased with the progress we are. Making on our agenda to leverage the. Current fault lines created by technology and macroeconomic shifts to broad based our client footprint and curate new growth engines. Let me give you a few data points. We closed Q3 with 141 clients with over $1 million of revenue from a run rate standpoint. An addition of 34 clients over the same period in Q3 of FY25. During the same period, our US$10 Million. As well as our 5 million plus. Clients increased by 4 and 13 respectively. Over the last 8 quarters. The revenue share of top 5 and. Top 10 clients has come down by. 8% and 11% respectively. Importantly, this has happened even as our. Top 5 clients continue to grow at. Industry growth rates despite a significant onshore to nearshore delivery in at least a couple of them. As you have noticed, we had back to back large deal wins in the. Form of additional business in one of. Our largest clients over the past two quarters. So the broad basing of growth that. You see is a result of focused account management strategy which is driving a. Faster growth in our non top 5. Top 10 accounts in many cases through large deals. We are also now winning a higher. Number of large deals and also doing so more consistently. We 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 four large deal wins in each of. The past four quarters with five deals. In the current quarter. Importantly, despite the strong closure, our deal pipeline has stayed above a billion dollars. Let me give you some additional insights. We have won 13 large deals in the first nine months of FY26 versus 14 wins in entire FY25 and close to double the number of wins in FY24. Not just that, while previously our large. Deals almost always came from existing clients. Six of the large deals this year so far came from new logos vs 5 in FY25. This underlies 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. As you can see, we have delivered. Continued improvement in our sequential growth rate. Throughout the course of FY26 in line with our initial commentary. This has given us the confidence to bring forward the account rationalization program, especially. In the health care provider segment, to coincide with the recent leadership changes in that vertical that I mentioned earlier. As such, we now expect our constant. Currency revenue growth for FY26 to be. In the 13 to 14% range. This does not include the recent past due Credit Solutions and telemedic acquisitions. Including these two acquisitions, we expect our. FY26 constant currency growth revenue growth to be in the 14.5% to 15.5% range. We are also raising our EBIT margin guidance for FY26 to 11.5% to 12% range. This concludes our opening remarks and we. Can now open the floor for questions. Operator, over to you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star N1 on their touchstone telephone. If you wish to remove yourself from the Question queue. You may press star N2 participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of webhoor Singhal from Nuama Equities. Please go ahead.
Vibhor Singhal
Yeah, hi, thanks for taking my questions and congrats on a good quarter. Couple of questions from my side. On the business side, basically in the healthcare segment, we have very recently heard of a lot of concerns about the government spending that was supposed to be is much lower, just increased by 0.5% on a Y and Y business as compared to general expectations around 5%. So how does that play out in terms of our overall demand environment? What kind of basically businesses do we have because of which we do get impacted or do not get impacted because of this lower increase in spend that has come out to be.
And similarly in the BFSI segment, what are we seeing on the mortgage business side at this point of time? As you mentioned, that we have some very niche capabilities which is helping us our clients, especially in the entire interest rate regimes. Are we seeing any revival in that business from industry point of view and how are we kind of placed to take care of that? That will be my first couple of questions if you can.
Ritesh Idnani
Thank you Vibor, for those two questions. Let me respond to the first one on the health care side. You know, clearly, you know, all of. Us have seen the recent CMS proposal. To keep the Medicare Advantage rates largely unchanged. What I would say is that it’s. A little early to give a specific. View because the final rates will only come out in a few months from now. But what I can say based on conversations that we’ve been having is this is obviously adding to the pressure on margins for the payers which are already under stress from rising medical and utilization costs. You guys saw the, the stock market reaction last week with most of the payers probably reporting a decline of anywhere from 10 to 20% in stock price. In response to some of the proposals. Itself, our view is that look, this. Should lead to not just more outsourcing but also more offshoring and clients looking for more transformational programs that give them a structural uplift in their cost structures. So we think it’s a net net positive in terms of a tailwind. But let me also give you one more data point which I think strengthens our own position. So our recent acquisition of Telemedic in Puerto Rico is a potential advantage in this environment, recognizing fully well that the Medicaid work cannot move outside the foreshores of the US itself. Puerto Rico being a US territory, has a structural cost advantage compared to the rest of the US mainland itself.
And for organizations, the health care payers that are looking to potentially get the benefit of that, they now have a viable alternative available in terms of scaling up on the island itself. So we think that these two, you know, one is what it does do to that cost structure and how we can benefit from that in terms of supporting their transformation journeys. But the other is the location benefit that we might be able to bring. We are already having conversations around how that can act as a competitive advantage for health care clients itself on the market side.
Look, the business itself from our perspective has been stable. But you know, you guys have been probably reading the same commentary that I have. You have the president of the US asking for, you know, the Fed chairman to, to drop rates down, I saw last week as low as a percentage point or whatever else. But if you look at the 30. Year mortgage rate, it’s still been hovering. Around the 6.1 to 6.25% for the past few weeks. And while on a secular basis this has been trending down to have a. More meaningful impact on the refinance market, I think you start seeing some, some tailwinds or some early green shoots emerge once you start hitting the 5% mark or thereabouts, given the fact that you still have close to 88% of all existing mortgages below 5%. Right. So I think what we’ve been doing, at least in terms of response and. Which has been yielding results, is broad. Basing our portfolio both in terms of the profile of clients that we are going after and also the offerings that. We are taking to the clients as well. Right. And there we have seen opportunities emerge on both the origination and the servicing side. And that’s the reason why what you’re seeing is that we are able to get a stable growth in this part of our portfolio without any macro support.
Vibhor Singhal
Right, Right. Indeed. In fact, despite no macro support, I think our BFSI has held very well. So full points on that. Just a bit on the BFSI segment. Again, Ritesh, we had heard a few weeks back the announcement by again the US President about the basically capping the interest rate on credit card late payment fees. Now, given that we had acquired this company, ersi, which was probably in the recovery business, I mean, I know it’s still a statement, I don’t know what is the stage of that being implemented, but how are you seeing that as a development? It is adverse, is it adverse for our business.
How does this impact our business going forward if eventually it is enforced?
Ritesh Idnani
So look, it’s a little too early to react to it because you know, as I understand, as I’m sure you’re also seeing this, this is still a proposal at this point in time. Details on the implementation and compliance requirements associated with this are still awaited. So at least from a near term impact standpoint, I don’t see any challenges. To the business itself. But from a medium term perspective, as. Far as I know, with our interactions. With banks as well as fintechs, banks are putting their point of view across since the APR has a wider linkage to the overall unit economics of the card business itself. And there are talks that obviously a. Cap will lead to lower credit limits, tightening of underwriting and so on and so forth. Some banks may also pull back from riskier segments at this stage. Look, there’s a lot of chatter and there’s a fair amount of ambiguity at this point in time. And what I can only tell you is at this point, as of now, it’s not come up specifically in our client conversations. So we don’t see any business impact yet. If anything else, what I will say in the collections business, we’ve been doing some very interesting stuff around the agent AI side in terms of creating virtual collectors and how that can change the profile of how this business itself is rendered itself and that’s receiving broad based acceptance both amongst banks as well as fintechs itself.
So if anything else, that’s creating differentiation for us in the marketplace and allowing us to win more.
Vibhor Singhal
Got it, got it. Just one last bookkeeping question on my side. Our offshoring has increased very smartly to around 43.4% in this quarter, up by almost 1314 percentage points over the last 9 to 10 quarters. Do you think we still have room to go from current levels or do you think we kind of will plateau out or maybe find an equilibrium close to these levels?
Ritesh Idnani
So again, Vipoor, I think the I’ll give you one data point, right? The first data point is that if you look at our gross hiring, 80% of our gross hiring is still happening offshore and nearshore. We don’t see that changing. So if we have to go out there and continue to hire, that will continue to be the nature of how this business evolves. And if that plays out, my sense is that this ratio should continue to improve towards more offshore and nearshore versus onshore.
Vibhor Singhal
Got it. Great. Thank you so much for taking my questions and wish you all the best thank you Vipur.
operator
Thank you. The next question is from the line of Abhishek Bhandari from Namura. Please go ahead.
Abhishek Bhandari
Yeah, thank you for the opportunity. Team. Congrats on a good execution in the quarter, especially on margins. I had two questions, you know, first is, you know, if I look at your guidance now, you know, on the organic side, Exopus 2 at the midpoint, we are talking about 13 and a half, you know, compared to 14 which was the Q2 exit number. So in the context of the large deals what we had announced in Q1, which was anchored or associated with an IT company, if you can just tie the two, is there any delay in that ramp up or is this.
We are probably going to be slightly towards the bitcoin that the new assumption.
Ritesh Idnani
So look, I’m not going to comment on the specific numbers itself, but you know, one of the things that we stated even in the last earnings call, if you recall, is to say that directionally the guidance has built on improved growth in the second half of FY26. You’ve seen that with Q3, where the growth rate was sequentially better than what it was in Q2. And obviously the guidance builds directionally on the fact that there will be an improved growth in Q4 as well. It’s consistent with the commentary that we have provided right from the start of the year that we expect an upward trend in our quarter on quarter quarter growth through the course of the year itself.
I’m going to reiterate one comment from what we have said all along, right? Our guidance band is based on a clear line of sight to the business over FY26 at the lower end of the guidance and the upper end is based on how things pan out, particularly with pipeline and so on and so forth. And at the same time, the guidance does not assume anything from a macro perspective itself. Right? So that’s broadly the philosophy that we have still continued to follow as it pertains to what you see in the numbers itself with specific reference to the large deal wins, etc.
We don’t see anything which has changed etc. From that standpoint.
Abhishek Bhandari
Got it. Thanks. Ritesh. My last question is on the margin side. Now that we are exceeding what we initially thought in terms of annual expansion of margin, how should one think about the path from here on? Would you be reinvesting some of the incremental gains or you would let the margins expand in the natural way?
Ritesh Idnani
So let me go back to what we had said in the beginning of FY25, right? We had said at that point in time in FY25 that our margins for that fiscal year would be flat as we were looking to make investments in the business from both a go to market as well as a capability standpoint to ensure that we were competitive. And then we said that we would look to do 50 to 75 basis points margin expansion in FY26, 27 and 28 respectively, such that we would be in a 14 to 15% band, which we felt would be relevant in terms of where we think this business should be at.
We have not deviated from any of that. We still stand true to that. And as you can see from an execution perspective, you’ve seen the first three quarters we ended up at 11.6% of ITT, which is roughly about 60 basis points and clearly, you know, ahead of the low. And that’s the reason why we upped the lower end of the guidance from 11.25 to 11.5 at the same time. What I will say is that while we want, while we are, you know, we feel good about the 50 to 75 basis points going forward as well, the environment around us continues to evolve.
This is probably the most relevant platform and technology shifts that we’re all going to experience in our lifetimes. And therefore in that context where it’s appropriate, we are continuing to make the necessary investments, accepting that we are able to manage those investments while we are continuing to drive out efficiency in the business itself. So the investments will continue to be to happen as appropriate. But I don’t think it’s going to come in the way of the margin guidance that we have outlined.
Abhishek Bhandari
Got it. Thanks Ritesh and all the best.
Ritesh Idnani
Thank you.
operator
Thank you ladies and gentlemen. In order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow up question, please rejoin the queue. The next question is from the line of Dipesh Mehta from MK Global. Please go ahead.
Dipesh Mehta
Thanks for the opportunity. A couple of questions. First about the data perspective. Can you share how many headcount addition happened because of the PDC acquisition? I believe Telematic is not yet integrated at the end of December so there might not be any addition from it, but you can clarify that part also. Second question is about just to get. Sense about this account rationalization on provider side which you highlighted. Can you help us understand what would be the end outcome which you are expecting from it and what would be the impact on revenue margin which you can envisage based on the action which we are taking currently. If I can squeeze one more question on the PDC business, I think can you help us understand profitability, profitability of that business and any seasonality in that business? Because first source collection business do have some seasonality in quarter four. So whether PDC also has some seasonality there and PDC related amortization impact seems to be missing this quarter.
So if you can maybe help us understand how to understand that part. Thank you.
Ritesh Idnani
Thank you. Dipesh. That seemed almost like four questions instead of two. But let me try and take a stab at addressing the first three and then I’ll turn it over to Dinesh. On the PDC amortization bit, the first point that you had was related to headcount. On the total headcount that we added, roughly about 300 plus people came from the PDC acquisition itself. So that’s data point one. The second comment question that you had was related to the tail account rationalization itself in Q3. Look, the impact in Q3 was about a couple of million dollars.
We think it will be a little higher in Q4, so roughly about 50 basis points on our FY26 revenue growth itself. What I can say is that, look, the visible impact of trimming of any of these tail accounts will typically be visible in the first couple of quarters, 2 to 3 quarters or so, and thereafter it’s critical. But what was important for us is with the leadership changes, we brought forward some of the account rationalization, particularly for low margin, low growth accounts itself, which. We felt was critical from a business standpoint itself. What is the third question, Dipesh?
Dipesh Mehta
Yeah, so another question was about PDC business seasonality and profitability.
Ritesh Idnani
No, actually you know, there isn’t a. Typical seasonality to that business itself. So you know, we, we do end up, you know, seeing a more secular trend play out across the four quarters itself. That’s a, that’s a simple response to that business itself. Dinesh, you want to take on the. Fourth point on the amortization side, what.
Dipesh Mehta
Kind of profitability there? Profitability is in line with company numbers itself. So because you’re looking about the amortization value on the PDC acquisition, what are you looking for? I am referring to depreciation, amortization, absolute number qq. Not much change.
Dinesh Jain
Yeah, it not been up the small. Acquisition like 22 million pound equation. Probably the amortization cost will be two or two and a half million pound. The large number, we’re not able to see the change because the charge which is coming in the balance sheet will be larger than the increase which is adding. So I don’t think it will matter. But the number is around two and a half million pounds for a four year amortization.
Dipesh Mehta
Okay, thank you.
operator
Thank you. The next question is from the line of Shraddha Agrawal from AM Securities. Please go ahead.
Shradha Agrawal
Yeah, hi, two questions from my side. Congratulations first of all, Ritesh, on a good execution on margins, but on growth, how would you rate this quarter versus your expectations entered beginning when you got into the quarter?
Ritesh Idnani
No, thank you Shraddha for the question. Look, Q3 was broadly in line with. Our expectations at the start of the. Quarter, you know, except for the trimming of the tail accounts in the provider segment which we decided to bring forward in the quarter itself.
Shradha Agrawal
Okay. And if you look at the guidance, I know there’s a seasonality in the collections business that we see every year in Q4. But even if we exclude that, there’s a huge ask rate implication for 4Q to get to the full year guided numbers. So what gives us confidence of a 4% plus organic number in 4Q despite the. Despite incremental impact of carving out the healthcare business? Some portion of healthcare business.
Ritesh Idnani
Yeah. So look, I think one of the things that we’ve stated right at the outset, right when we provided the guidance. At the beginning of FY26 was, you. Know, we expected an upward trajectory in our Q on Q growth through the course of the year itself. And if you look at how this has played out from Q1 to Q2 to Q3, that we pretty much delivered against the same itself. So we expect the same trend line to continue. We had line of sight to how this was going to play out itself. So you’re right, directionally this is building on an improved growth in Q4 itself. But also what you also have seen now consistently in terms of how we have performed over the last several quarters, not just in this fiscal but before, our guidance is based on a clear line of sight to the lower end of the lower end itself.
And the upper end is based on a bunch of other variables which can. Create upside, whether it’s related to pipeline conversion and so on and so forth. Again, the guidance is conservative to the extent that it does not factor in. Any impact of macro. So those are the variables that, that we have, that we have considered. And therefore, you know, with that context, I know the ask translates to a 4% Q on Q growth at the lower end. You know, we feel comfortable with what. We see at this point.
Shradha Agrawal
Right. And just one last Question if I can. I mean the new deals that we’ve been announcing in the last one or two quarters, do they also follow a staggered ramp up schedule like the deals that we had announced in 1q and 2q in 1q and 4q of 25?
Ritesh Idnani
So it’s a mixed bag. Right. So not every deal has a, has a similar execution pattern. Right. There are, there’s one deal where we have got to finish the implementation first and then there is a ramp that happens on the part of that. It’s an implementation of a contact center traffic transformation platform. As a case in point, there are. A couple of other deals which follow a standard more linear ramp that is there and that’s part of the wins that’s reflected.
Shradha Agrawal
Great. Thanks, Ritesh. And all the best.
Ritesh Idnani
Thank you, Shraddha.
operator
Thank you. The next question is from the line of ankur Pan from IFL Capital Services Ltd. Please go ahead.
Ankur Pant
Hi. Am I audible?
Ritesh Idnani
Yes, I’m good.
Ankur Pant
Yeah. Hi Ritesh. Thank you for taking my questions and congrats on good execution this quarter. So when I’m looking at your growth, the overall number is good, but it’s primarily driven by the diverse industry.
operator
Sorry to interrupt. Ankur, could you please speak a little louder?
Ankur Pant
Yeah, sorry. So I’m saying that is it better? Yes, I’m saying that the growth was primarily driven by the diverse vertical and bfsi, Healthcare, cmt. All other verticals were not really that strong. Understand that some of the impact would be because of the account rationalization you have done. But we also had the BPAAS deal ramping up. So just wanted your thoughts on, on how you saw the quarter. Was this the expected outcome?
Ritesh Idnani
So I think Shraddha asked the same question. Right. Was the quarter in line with what we saw? Look, I’ll repeat the same comment first and then talk a little bit about. The diverse business itself. Broadly, the quarter was in line with our expectations, you know, at the start of the quarter, barring the trimming of the tail accounts that we talked about in the provider segment, which we decided to move forward during the quarter itself. But I think one comment that I would state right at the outset there is don’t think of just the diverse portfolio itself. That’s probably not the right way to look at the overall numbers. One of our main differentiators is that. We run a range of segments, a. Portfolio of different businesses in which different. Segments have push and pulls at various points in time in the year. Right. So example, if you take retail, there is a seasonal strength that is there. But at the same time. Typically Q3, which is the October to December quarter, tends to be a weak quarter for our technology business because most of them are looking to take decisions in Q1 itself. You will see a little bit of that, those puts and takes playing out itself. So that’s why what I would recommend is look at this from an overall portfolio standpoint. Because when you think about these on a year, on year basis over a four quarter time horizon, you will see a much more, you’ll see a more representative view of the portfolio itself rather than just a quarter on quarter view.
Ankur Pant
Understood. And the other question is, I’m sorry to get back to this question, but you had. So Hypothetically, if the 10% cap does go through, then what is the likely impact on our business in that case, how much of it would be linked to credit card volumes in that sense?
Ritesh Idnani
You know, I think at this point in time there is no foreseeable impact that we end up seeing. As I stated earlier also at this. Point in time, this is a tweet. There is a, you know, the President. Tweets a bunch of things and details. Of implementation, compliance requirements, et cetera, are still awaited. Right. And from a business perspective, therefore I’m. Not seeing any impact. There’s no conversation that we are having. With clients today on this topic at this stage at all. And as I said also earlier from a medium term perspective, banks at this. Point in time and fintechs are putting. Across their point of view to the government since the APR has a wider. Linkage to the unit economics of the cards business itself. So given the fact that this can. Result in lower credit limits, tightening of underwriting, when on one hand the President. Also wants a lower interest rate environment to drive greater growth, there may be. A little bit of a paradox out there. Right. So that’s creating the ambiguity in terms. Of how this is the case. So that’s why at this point in time, given the fact that it’s not featuring in any of our client conversations, we’re not seeing any business impact at all.
Ankur Pant
Thank you so much for clarifying. Just one last bookkeeping question. This PDC integration was for the entire quarter or a part of the quarter?
Ritesh Idnani
Was for the entire quarter.
Ankur Pant
Sure. Thank you. All the best.
Ritesh Idnani
Thank you. Thank you, Ankur.
operator
Thank you. The next question is from the line of Shashoan from Ananthrati. Please go ahead.
Sushovon Nayak
Hi. I hope my voice is audible.
Ritesh Idnani
Yes.
Sushovon Nayak
So thank you for the opportunity and congrats on the good execution. Just a bookkeeping question regarding the tax rate. Right. What we think will be the steady state tax rate. And when do you think these tax breaks will basically see the sunset? That’s basically the question as such. Thanks.
Dinesh Jain
Oh, I think we looked into the budget which have been just now announced and I think there will be no choice for not to move to new regime because there is a mad credit available in the company. And when I looked into the what the going forward rate will be, I think we see 1% plus or minus can be when we really going to go back in detailing but it seems to be that we should be within the range of 1% higher or lower to the current guided rate which is 21%.
Sushovon Nayak
Thank you so much.
operator
Thank you. The next question is from the line of Kirishpayee from Bob Capital Markets Ltd. Please go ahead.
Girish Pai
Yeah, thanks for the opportunity. Ritesh, if you look out over the various verticals over the next 12 months. How does the overall demand look to. You compared to say how it was. Say 12 months back at the beginning. Of calendar year 2025? That’s my first question.
Ritesh Idnani
Girish. I think from our vantage point it’s. Fairly broad based, right. We are still seeing demand across all our verticals. When I look at our pipeline and. The composition of the pipeline, I think. We see almost even distribution plus minus 3 to 5 percentage points in terms. Of the distribution across different vertical segments itself. I will only caveat it by putting one data point to you which is see as we are opening more and. More growth engines, what it does do. Is sometimes just by virtue of being in starting a new growth engine. Example when we acquired Ascens, we got the retail industry in the uk but now as we are trying to build up our footprint in retail in the us, just by virtue of having hands. And feet on the ground, you’ll start. Seeing pipeline out there that you weren’t necessarily the beneficiary of in the past. Right. Because the focus was not there. Similarly, if you take utilities in the uk, we are translating that capability into the US market and therefore we are seeing additional pipeline that we otherwise would not have seen just because the focus was restricted to a few other verticals. So that’s the only additional data point that I would throw out there. But if anything else, UNBPO is creating a significant amount of traction in the marketplace. I think people are looking for an alternative. They want to move away from the traditional linear contracts. They want to have a tech first play.
They want somebody who can guide them in that journey. And I think all of those elements we play well too. So that’s creating demand for both reactive. As well as places where we can proactively put proposals on the table.
Girish Pai
Okay, now that you’re discussing unbpo, your play that you have what percentage of. Revenue currently comes from non PNM or non fixed price related which are seeds oriented towards the outcome based or any other new commercial structure.
Ritesh Idnani
So look, while we will start providing some more details in terms of the some of these metrics going forward, you know, as we get into the next. Fiscal year itself and beyond. What I will state is, you know upwards of. 50% of our business today is nonlinear in construction. Okay, one last question. Bookkeeping. Did I hear right when you said.
Girish Pai
Past due constitute was there for all. The three months of the quarter and Telemedic got consolidated.
Ritesh Idnani
When Telemedic has is integrated this quarter, it’s the current quarter that we are in Q4 but past due was last. Quarter full of last quarter full of last quarter.
Girish Pai
That’s right. Okay, thank you.
Ritesh Idnani
Thank you.
operator
Thank you. The next question is from the line of Manik Taneja from GM Financial Capital Private Limited. Please go ahead.
Unidentified Participant
Thanks for the opportunity. I basically you mentioned about the fact that the course of FY26 you had significant shift offshoring and we are shoring with some of your larger customers. Would be great to get some perspective how much of that would have been a headwind to growth and similarly a tailwind of margin. And a related question to that one, even through the course of FY26 you’ve spoken about an accelerating growth through the course of the year. How should we be thinking about that rhythm from an FY27 standpoint given the visibility that we enjoy right now.
And the final question was basically a clarification question. While past few you’ve spoken about the number of employees that came through the PASD Solutions acquisition. From an on site offshore revenue mix standpoint, would PDC be included with offshore and nearshore or there’ll be some element of contribution even from onshore there will be contribution for that business.
Ritesh Idnani
Yeah. So I’ll give you one data point to your first question, right. Which is our UK onshore headcount has. Come down by about 40% over the. Last four quarters while the corresponding headcount in South Africa about 50%. So that will give you a little. Bit of the trade off that’s playing. Out as you’re optically shifting work from a high cost, high revenue geography towards a low cost low revenue, lower revenue geography. Right. But that’s one data point that will hopefully amplify what we have seen while we continue to grow the business.
Unidentified Participant
Sorry to interrupt you. Any sense on absolute sizes? Because until next we know what your US onshore or UK onshore headcount was. We can all keep on guessing because this would have had some revenue to understand how much offset onshore to nearshore shift may have impacted your energy performance.
Ritesh Idnani
I don’t have those data points but you know, in some sense I think the way to think about it is from our vantage point at least the way we are tracking this is we know that some of these things will continue to be opportunities that our clients will potentially look to take advantage of as especially when you look at the economic condition of markets like the uk. Right. And given the macro out there. So the fact that you have a muted economic growth, the fact that there’s higher labor costs, I think it’s forcing customers to continue to do that.
So you know, I know where you’re going with that question in terms of trying to model it for what this might play out. I think it’s very hard to say because sometimes the regulatory things, the regulatory situation actually might counterintuitively force you to continue to keep the work in the market whether it’s in the UK or in the US for instance in Australia we have got a couple of customers where the work has to be done onshore in Australia itself as a case in point for regulatory reasons. So look, that’s been our strength as a business where we can deliver this work end to end.
We understand what it takes to work in regulated markets and do that. But at the same time the way to think about it is 80% of our cross hiring is offshore and nearshore locations that we don’t expect to change. Which means to your second question that. You asked, you will continue to see. Just as you saw a 5743 mix, you will continue to see that continue to trend in the same direction that directionally in the same way that it has been over the last six to eight quarters. It’s itself. Your third question was related to pdc. We already have active interest from several of the PDC logos towards doing work in South Africa. You know, so for them what is the big benefit is the fact that with the first source portfolio and the footprint they now have access to many more locations than just being in in Scotland itself which is where they were headquartered.
Right. So I think that’s an opportunity that I think we see as a competitive advantage for the PDC portfolio.
Unidentified Participant
Sure. The last one was just clarification question with regards to some of the rationalization that you’ve spoken about on the provider side, if I understand correctly, when this business was used to have a highest provider mix, the margins of, or the, or the segment margins for healthcare used to be higher. And then over the course of time when we built up the PR business, the margins have got magnificent. So just trying to understand in that regard, when you’re talking about rationalization of provider accounts, how does that play in terms of impacting margin?
Ritesh Idnani
Yeah, but the other way to think about it is the accounts that we are rationalizing are essentially low growth, low margin accounts. Right. So yeah, it will have a bearing on improving the margins for the provider portfolio itself. But given the fact that we are talking of a smaller base, I mean, I think that’s one way to think about it. In terms of is it going to have a material impact? Probably not. But you’ll start, you’ll see some of this playing out in the next two to three quarters. Also, as we continue to execute on. This itself, the last clarification question with.
Unidentified Participant
Regards to onshore to near shore shift, was that limited to probably two of your large UK customers. And how should we thinking about segmental margins in that regard?
Ritesh Idnani
I don’t want to comment on specific clients, but what you will see is that a bunch of our UK as well as US customers are very interested in South Africa as a location and particularly Cape Town. And so we continue to benefit from that being one of the largest local employers out there. Right. So I think you’re seeing this more broad based than just restricted to one or two clients.
Unidentified Participant
Great. And thank you.
Ritesh Idnani
Thank you.
operator
Thank you very much ladies and gentlemen. We will take that as the last question. I would now like to hand the conference over to Mr. Ritesh Adnani for closing comments. Over to you sir.
Ritesh Idnani
Thank you all for joining the call and for your questions. I want to close with a few final comments. Our sales engine is working well. We had five large deal wins in Q3 which now is the fourth straight quarter of four or more large deals. At the same time, our deal pipeline continues to remain robust over a billion dollars. Our execution is on track as you can see with the fact that we’ve executed well on improving our margins. Our EBIT margins have increased by 80 basis points over the last four quarters. Our cash conversion has been strong.
Our OCF to EBITDA for the nine months of the year is 86% and. Our free cash flow to adjusted PAT is 159%. Our long term aspirations continue to remain intact. As I stated in my opening remarks. We see our constant currency growth, revenue growth for FY26 in a 14.5 to 15.5% range, including the recent acquisitions that. Place us in the top decile for the industry. And we also remain laser focused on. Taking our EBIT margin to the 14. To 15% brand over the next three to four years. That’s all from our side, and we look to interacting with you again in the next quarter. Call thank you all.
operator
Thank you on behalf of First Source Solutions Ltd. That concludes this conference. Thank you all for joining us today. And you may now disconnect your lines.