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Bls International Services Ltd
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Ladies and gentlemen, good day, and welcome to the Q1 FY '19 earnings conference call of BLS International, hosted by Centrum Broking Limited. [Operator Instructions] I now hand the conference over to Mr. Ankit Kedia from Centrum Broking. Thank you and over to you, Mr. Kedia.
Thank you, Kit. We at Centrum Broking are pleased to host the Q1 FY '19 results conference call for BLS International. Today from the management, we have Mr. Nikhil Gupta, Managing Director; Mr. Shikhar Aggarwal, Joint Managing Director; Mr. Karan Aggarwal, Executive Director; and Mr. Ajay Milhotra, Chief Financial Officer. I would now like to hand over the call to the management for opening remarks, followed by which we can have an interactive Q&A. Over to you, sir.
Thank you. Good afternoon, everybody. I welcome you all to the first quarter earnings call. As you're all aware, BLS International Services is a specialist service provider of visa, passport, attestation and Citizen services for the governments and diplomatic missions across the world. I'd like to give you a quick highlight of the first quarter, ended June 30, 2018, and then hand it over for the question-and-answer session. For the quarter ended June 30, 2018, that's the first quarter of FY '18-'19, the company reported consolidated income at INR 202.22 crores, EBITDA of INR 60.46 crores, which is a growth of 14.77% over Q1 of FY '18. Net profit stood at INR 34.03 crores, which is a growth of 17.09% versus Q1 of FY '18. Earnings per share for Q1 FY '19 stood at INR 3.32 as compared to INR 2.84 for Q1 FY '18. The company ended this quarter with excellent results that are testament to the dedication and efforts of the entire company. Being the face of the government across the globe and providing best-in-class services, coupled with outstanding results are a reflection of the pace at which the company is growing, and this is likely to continue for the next year as well. We continue to aspire to be the full differentiated service provider for all governments and diplomatic missions in India and overseas with our specialized domain expertise and have set newer benchmarks for service delivery [ with quick results ] and excellent execution of all our contracts across the world. We have been able to set up VACs in smaller metropolitan cities across the globe providing higher reach to applicants.Just in FY '18, BLS processed close to 11 million applications as compared to total 20 million applications processed until the end of FY '17. BLS International kickstarted the first quarter of FY '19 by a strategic alliance with Sopra Steria for delivery of contracts awarded by United Kingdom Visas & Immigration to enable visa renewals for individuals who are already in the U.K. Under this alliance, BLS International will be supporting Sopra Steria in the UKVI by providing many of the key deliverables in the contract as well as the [ suite ] of value-added services. UKVI is a division of the U.K. home office responsible for deciding who can visit and stay within the U.K. BLS International also signed a contract with Ministry of Foreign Affairs Italy and commenced operation of processing Italy visa applications in Singapore on 2nd July 2018. These significant milestones were the major drivers of strong and sustainable growth for the company. And we believe we will be [ able to ] sustain growth momentum in future. The same global contract that BLS International [ backed ] in December [ 2015 ] delivered strong results for the first quarter of FY '19 as well. With a total of 124 BLS operated [indiscernible] VACs in 49 countries, the count of applications processed increased by 10% since BLS International took over Spain visa process application processing. The centers are regularly fortified with a wide range of value-added services for the applicants' convenience. The company has recently been awarded a new contract by the Punjab Government for a period of 5 years to operate 352 facilitation centers for providing 169 citizen-centric services covering 16 districts of Punjab and working with 22 different departments. BLS E-Services Private Limited, a wholly-owned subsidiary of BLS International Services Limited, acquired Delhi-based Starfin India Private Limited, a banking business correspondent of State Bank of India, which holds the national license. The company has over 1,500 active customer centers and will aim to provide BLS with a ready customer base, wide geographical reach, trained and enthusiastic local entrepreneurs -- franchisees, that is, and a strong relationship with State Bank of India. BLS is also under contract with Islamic Republic of Afghanistan in the UAE, representing Afghanistan Mission in UAE, Qatar, Oman, Bahrain and Kuwait and Saudi Arabia. Under this partnership, the company is providing consular services through registration of Afghan citizens [indiscernible]. BLS is an outside service provider for attestation of documents by the Ministry of External Affairs in India. It also serves the Embassy of the State of Kuwait and High Commission of Malaysia and several others in the field of visa, attestation of documents and [ apercu ] in India. We have the necessary skill human resources, along with technical and financial capability to deliver efficient and optimal outsourcing solutions. BLS ensures to adopt highly efficient project management practices and assigns dedicated teams with skilled and experienced professionals with relevant project management experience for each project. The company today employs approximately 9,000 people, and at the same time, heavily invests time and money in the creation of the technology platform and IT software, which includes providing high-tech security systems ranging from data purging to passport verification. It also provides a company and a client government a better control and view on day-to-day operations of various centers around the world. This has helped us to meet various service level agreements and is further helping us in getting an edge over the current [ normal man ] industry. Lastly, I'm extremely pleased to inform you that BLS International has been listed in the Forbes Asia 2018 list of Best Under A Billion top 200 publicly listed companies in the Asia-Pacific region. From a universe of 24,000 companies in Asia-Pacific, only 4 Indian companies were selected on sales and revenue and earnings growth in the last 12 months, [ and ], over the last 3 years and for the strongest 5-year return on equity. The final list of 200 has BLS peer with top 1% in their sector. With this, ladies and gentlemen, thank you for your patience. I invite questions you may have relating to the results of the last quarter and the first half -- first quarter of this year. Thank you.
[Operator Instructions]
Moderator?
Yes. Can you hear me? Hello? Yes, can you hear me?
Yes, I can hear now.
[Operator Instructions] We have the first question from the line of Nirmal Bari from Sameeksha Capital.
So my first question is on the Punjab project that has been awarded to us. What is the scope of project? You just mentioned that we would be managing 352 centers. So how many services would we be managing from this? And what is the revenue scope? Is it on application basis or is it a fixed revenue project like earlier? And what would be the kind of margins that we should expect from?
Yes. So to answer your question, number one, this is -- the centers we'll be managing will be offering 109 services right now, but the government intends to scale it up very quickly to approximately 300 services from new centers. Okay? And number two is that the revenue is being earned will be per application, not a fixed amount as was done earlier.
Okay. And is there a fixed amount that we will be earning per application? Or would it be dependent on the kind of services that we are [indiscernible]?
It will depend on the kind of services which we will be offering. Incidentally, we will also be allowed to offer B2C services from these centers.
Okay. And sir, secondly, on the contract that was entered previously. So on that contract, we had some INR 212 crores of receivables as of the quarter end, but what was the amount that was received from the government during the quarter and in July if you can [indiscernible]
Approximately in the last 3 months, we probably received approximately INR 100 crores from the government.
Okay. INR 100 crore [ rupees]. The last 3 months that's including July or the quarter results?
It's including the first part of July also. First half.
Okay. So by the end of July, the amount should have been down INR 200 or INR 150 crores?
No, no, no. Not that much. The figure -- remember, we've also been inviting the government [indiscernible] and June also. Okay? We also -- remember -- transferred all our assets that we had purchased on this contract to the government. So spending of the government remain at around INR 215 or so crores at the end July.
Okay. So and this is including the assets that were then passed on from -- to the government?
Correct. That is correct.
And for this slate of data centers, do we -- are we doing some investments? Or -- and there's no investment?
Nothing, nothing. No investment, our -- effectively, our EBITDA will be [ our CBT ].
Just to add to the advantage of this model, it will be a completely asset-light model. All the computers, all the infrastructure will be provided by the government unlike the previous tender. So this is a very advantageous -- it's a new tender for us. So whatever revenue we will get is incremental revenue because this is all [indiscernible].
So also the margins that we had in the previous tender that would be lower in this tender given that there's no working capital involved as well as there's no assets involved.
That is correct.
So what kind of margin should we expect? Should it be similar to our current EBITDA margins? Or would it be lower than that?
We're looking at upwards of 15%. And since we've just started the contract a week ago, we really need to build on our other services to see how much we can enhance it with that.
Okay. That's helpful, sir. And sir, on the number of application counts, if you can give the application counts for the quarter cumulative as well as separately for the visa business?
Are you talking about Punjab? [ Or do you know if ] you're talking about the company?
About the company -- about the company, as well as for the visa business separately, what was the application?
For the quarter, the application counts were 2.8 million.
That was a separate count.
For the company as a whole, both visa and Punjab.
Okay. Again for visa separately, how much was it?
Well, we generally talk about the total application count.
Yes, but in the previous quarter, we used to give the Punjab number separately. So that -- if I can get either of the numbers separately, we will calculate.
We're having approximately the [indiscernible]. In 3 months, we have about 2 million applications. So I guess about [indiscernible] the first quarter.
Okay. Okay.
[indiscernible] talking about Punjab. Punjab had about 2 million.
Yes. I got. So it seems to be certain amount of seasonality in our EBITDA margin. So is it like that so then [ our part ] visa businesses, which are a higher margin, contribute a lot more in quarter 1 and quarter 2 as compared to quarter 3 and quarter 4?
Sorry, can you repeat the question?
If I look at the EBITDA margins even for the previous year, Q1 and Q2, our EBITDA margin was around 22%. And then, Q3, Q4, it was on the lower side, 18% and 16 -- 17%, respectively. Again, this year Q1, we have reported quite significant jump in EBITDA margins quarter-on-quarter. It is 24% now. So I wanted to understand is there some kind of seasonality in our EBITDA margins in like, projects like Spain, which have higher EBITDA margins, those have higher number of counts in Q1 and Q2 versus, or is it...
[indiscernible] Actually, we've incurred some expenses for the new tenders like U.K. government tender in the last 2 quarters. That is why the margins for the last 2 quarters of the year were a little bit less. But going forward, the margins will, Ajay, if you correct me, it will remain the same.
Right, right. And we've been speaking, what happens is, before a tender is awarded or as we anticipate the award of the tender, we incur expenses, all right? And therefore, you will see that in the last 2 quarters of last fiscal, we incurred expenses. But in this year, as we reported earlier, the third and fourth quarter, those expenses will start showing revenues of U.K., the U.K. strategic partnership that we signed.
And also another reason, expenses are less this quarter. Because last quarter, there were some also reevaluation of assets that was coming into expense. So that is also the reason that NPAT margins are up this quarter.
Okay. Sir, finally on the U.K. project, when would it start earning revenues?
For U.K. project, we are poised to start in October 2018. So by -- we're already in the rollout phase. All our teams are in the U.K. So October 2018 should be the revenue starting.
That project, if I remember it, sir, GBP 91 million project for Sopra Steria. So what part of it would be our share of revenue?
So see, we have -- first of all, we have [indiscernible] with U.K. government and our strategic alliance partner, Sopra Steria. So we can only give limited information before we start the project. But first of all, this project, we gave the announcement is a GBP 110 million revenue project. And we will -- BLS will generate that revenue in 3 years.
Okay. And BLS...
On top of that, there will be value-added services also because this is the basic [ revenue we will generate ] and upside could be higher.
And the possibility of another renewal for 2 separate terms.
Yes, so I wanted to understand of this GBP 110 million and this revenue will flow to our P&N. But of this, we will have to pay certain amount to Sopra Steria for the contract?
Yes. So this is our agreement between the partners and the government. So [ there will be computer ] services delivered by each respective partner.
Okay. So the entire revenue will come to our -- I'm not looking for specific numbers, I'm just understanding the flow of the entire [indiscernible].
Definitely, all the revenue will be booked in our -- GBP 110 million will be booked in our books.
And then we will pay out to the partners?
Yes.
We have the next question from the line of [ Meretri Raju ] from Equity -- who is an equity analyst.
On this Starfin acquisition, can you give us broad color on that in terms of what is that we are expecting in terms of business? What is the potential? What is the current revenues? And how do we want to take it forward, particularly in the light of another big player got into a lot of controversies just a few months back? Can you just give us good color on this acquisition from when the revenues will start flowing?
Yes. So let me try and answer that. [indiscernible] has approximately 1,500 CSPs, what we could call CPSs, which are customer service points, which are active, which means that there's already business going on of banking correspondents at these centers. Now this is from the license from State Bank of India. So we have a great name in State Bank of India and [indiscernible] are already operational. What we expect to do to be able to leverage these centers to expand our B2C business. B2C business, we -- you will recall that we had started this activity approximately 3 to 6 months ago. And the idea was to introduce not only banking correspondent business, but insurance business, travel, hotel and [ really ] [indiscernible] products over a period of time. So we expect that not only will we be able to use these centers to expand our business into this -- in the [ pure ] line of business, but also use learning from there and expand our banking business -- our banking correspondent business in Punjab and other places in North India.
Are there any existing revenue numbers [indiscernible] that you can share?
I think it's a little early to talk in terms of the revenue numbers. We've just taken over the business. We're in the process of putting together some business plans, et cetera. So I think by the time we talk in the next quarter we would have some real good numbers for you.
Okay. On just as a follow-up coming back to our legacy business of visa processing, how does the quotation and order funnel look like? Do we have 3, 4, 5 or some sizable number of orders to be finalized in the next 6 months or 1 year? And whether they are kind of bigger than our biggest contract, which I believe is the U.K. contract? Or are they all tiny ones? Just some color, I know there's confidentiality involved and competitiveness involved. Just some color on the size and the kind of the funnel we have right now.
Yes. So I'm Shikhar Aggarwal, I will be taking that question. First of all, on the Starfin acquisition also, I think we've already declared that the acquisition that we've paid around INR 9.6 crores. So I think additional INR 24 crores or INR 26 crores will be acquired by March end. So it's a very small investment because we don't do large investments wherein the money will be recovered in maximum 2 to 2.5 years. It will also [ asset lay more ] so I just wanted to add on that. Other than that, visa business -- and we're all -- as from day 1 when we started this company in 2005, we are very bullish on the visa business. There are 15-odd tenders that are coming up for bidding in the next 2 years. There are many tenders and many countries follow different trajectories for tendering out. Some tenders are at the embassy level and some tenders are global tenders. So in these 15 tenders, there are some tenders which will be taken out by the respective embassies, like the tender we won from the Italian embassy in Singapore. And there will be some tenders, big tenders, like the size of the biggest tender that we have, for example, the U.K., Spain, which are up for renewal. So 6 months to 1 year trajectory can be given, but the government normally -- because of the change in politics scenarios, it will take time, for the timing. So maybe 1-, 2-year horizon could be a better...
Yes. What's your gut feel, in 1 to 2 years, how many can be finalized?
I think [ 1 to 2 ] BLS winning on the finalization from the government side.
Finalization from the government side?
I think normally finalization at least, we could say around 7 or 8 should be finalized in the next 2 years at least.
We have the next question from the line of [ Niranjan Shetty ] who is an investor.
I wanted to understand how much cash do we hold in our overseas subsidiaries?
The total cash as of 30 June is about INR 138 crores consolidated.
Right. And do we have any specific plans to use this cash? Because if not, is there any reason why they are not using that to repay our debt?
The debt that we have is in India -- for operations in India. The cash that we have is to leverage any opportunities that we see coming, like Shikhar mentioned, in the next year or 2. Many of them will require some cash. And therefore, this cash lies in the overseas subsidiary.
And also the debts that we have is all these operational creditors that we're taking care of as [indiscernible] coming in. And as the recovery happens from different governments, all this credit and debt will be cleared.
I think presently the total debt on the books should be somewhere close to INR 30-odd crores. And the next tranche from the Punjab Government should clear that up within the next couple of months. So hopefully, by the next quarterly earnings, you will not have any debt on the books.
Right. But given that our business is asset-light in nature, we do not require a lot of cash to expand. Is this our strategic plan, to keep all the cash overseas always?
So see, basically, the money that we are generating overseas -- from the overseas operations are being invested for the opportunities that are coming up. For example, the U.K. government opportunity and new opportunities for bidding. There's an [ odd ] expense for survey on the market, that is the only reason. For fast deployment of cash, we're handling the cash in the overseas and where the money is being generated.
Right. No, no, I understand that, but is the quantum of cash we require so high that we can't even repatriate some of it? Do we just...
No, no. It is [indiscernible] some of it. It has a [ dividend ] payout cost of 18%. So it does not make sense. If we borrow over here for short term for 3 months, 6 months, it makes more sense to use that fund over here rather than pay 18% on the cost.
And also we have aggressive plans for the future, the next 3 years wherein we know that we will require some amount of money from internally. So we do not want to be dependent externally for any money when there is opportunity that arises.
Right. All right. Okay. Just one other thing. In terms of this -- I'm not sure how this unfolds -- this Brexit is happening, as you all know. Will that have any impact on, I mean, positive or negative, because it said that even European [ citizen may ] require visa and so and so forth. Do you have any visibility or any idea? I know a lot of it cannot be shared, but will that have any positive surprises due to existing contracts that we have?
See, we have a very strict [indiscernible] with the U.K. Government. And we cannot have any comments on any geographical [ or difficult ] environment like Brexit or anything. So whatever we have got till now, we're very happy. And I think we wish to maintain that revenue. And if there's an opportunity for value-added services that [ we wish ] to increase. But we cannot give any comments on Brexit since we're dealing with the U.K. Government. It is a very sensitive topic.
Right. Understand. Understand that. Sir, my last question would be on, I think the previous gentleman also asked the same, about the future contract pipeline. You mentioned in a couple of years' time, we'll probably have 7 or 8 sort of contracts finalized. Are they sizable in nature, you reckon? And if so, what is the sort of win percentage that we can hope to expect to win? Is there any sort of estimate internally that we have? I know everything can change, but as of now, do we have any sort of idea on that one?
See, as we mentioned, these 7, 8 contracts are mixed in nature. Some are the tenders, which are big in size. Those are like our biggest contracts. And some are [indiscernible] tenders. Also since we want to deliver what we get, so we are a fast-growing company. So whatever contracts that we are getting, we want to make sure that we deliver them right. We're dealing with a very sensitive and secure environment. So we, obviously, started to get high number of contracts out of these 8, 9. But we -- at the same time, we want to make sure that we deliver all the contracts right. So that is why our strategy will be very -- it will be a very clear and cautious approach at the same time.
Right, right. Understandable. Lastly, I think in the investor presentation, you also mentioned there are a number of other contracts domestically that are coming up, apart from Punjab Government. Is there any traction on that at all?
Do you mean in India domestic or you're talking about overseas?
Yes, yes, India domestic. So in the investor presentation, there's a lot of coming contracts...
Yes, yes. Actually, [ so really ] contracts which are coming up in Punjab also, plus they're coming up in Haryana, plus there's something in Maharashtara, in Bihar. So there's plenty of opportunities coming up. We're studying each one of them. And wherever we think that we can, we have certain skills or strengths, [indiscernible].
We have the next question from the line of [ Sundibon Goshe ], who is an individual investor.
I had 2 questions. First, sir, can you repeat and clarify what the Punjab receivable -- net receivable present standing now as on date?
As of date, it will be around INR 215 crores from the old contract.
Right. Sir, back in the last con call, you mentioned also INR 200 crores. Can you help me understand why it doesn't change since we also received INR 100 crores from the government in the last 3 months?
I just explained to the other colleague. Basically, what happened is that while we have received a lot of money from the government, we have also been billing them for the remaining period of the contract. As per the terms of the contract, we were to bill them for all the assets that were remaining in our books. We billed them for that also.
Okay. Sir, what was the amount of revenue booked from Punjab this year -- this term, in this quarter?
What is amount of?
Revenue.
From Punjab?
Yes, sir. Yes, sir.
[ The same ] that was reflected in the P&L is INR 46 crores.
INR 46 crores. Okay, Okay. Sir, regarding the Starfin acquisition, sir, can you tell me what is their revenue model? Is it upfront payment? Or is it their revenue is going to come from the SBI centers?
It will come from State Bank of India and it's paid within 30 days to begin.
Okay, sir. And sir, the Italy contract that we have, sir, what is the revenue potential over there and margins and contract tenure?
On Starfin?
No, the Italy contract. [indiscernible].
So the Italian contract that we have -- it is first of all [ internal in terms of the ] Italian Government. It is a small tender taken out by the Italian Embassy in Singapore wherein the number of visas of people growing from -- pushing [ upward ] to Italy. We have made a joint visa application center in Singapore, wherein you'll combine with Spain. Spain and Italy are happening on the same office. So we've opened no new office for Italy. Wherein the same number of people are working for Spain and Italy. So the costs for BLS is -- the additional costs margin is negligible. And the count is around 5,000 to 7,000 applications, and we just started 1 month back. So we expect the number of visas to grow up. As of now, we've not taken out any revenue estimate for the contract.
Okay. I got it. Sir, a few more questions. Regarding the depreciation expenses this time, it was lower and the tax outgo was higher. What is the reason for this?
So the depreciation was lower, but largely because we have had a lower tax base to depreciate on. Okay? Because the double [ DD ] method that was followed. And therefore, with the lower asset base, you have a lower depreciation. Okay? Higher tax is on account of larger margins because of the savings in cost, efficiency in cost and increasing value-added services, you had high EBITDA. That reflected in higher profit before tax, which is, therefore, reflected in higher taxes.
Okay, okay. That's all. Sir, then what is the guidance for Q2? Can you give some guidance? Q2 revenue and margins and profits?
[ Our endeavor ] is to maintain the healthy growth as we've -- that we've had. And it's generally we've so far not given any guidance, largely because we plan and then we execute what we plan. So all we can say at this point is that we want to continue, and we're making our best efforts to maintain these margins.
[indiscernible]
We hope to achieve a yearly increase in our bottom line around 30%, 30% to 35% on the yearly basis. So that will be -- I think, on a quarterly basis, we'll not be able to plan it, but yes. I think that was discussed in the last con call. So we're on our way to that.
We have the next question from the line of Amit Chandra from HDFC Securities.
Sir, my question was related to the Punjab contract. So the net receivables that you mentioned INR 215 crores. So that includes the INR 80 crores that [indiscernible] government [indiscernible].
Yes. It includes everything.
Okay. It includes everything. [indiscernible] INR 80 crores [indiscernible], okay. Okay. And sir, question [ related to the new contract ]. So the new contract is in that amount [indiscernible] from the number of applications that you receive. So if you could provide us some clarity on what will be the cost of [ 150 to 250 ] centers? And how many applications are required to break even? So -- and is it higher than what it was earlier? Or how is the economics there?
No. With the number of applications that we were receiving in these centers, we will break even from the first month, firstly. Okay? And secondly, as I said, the government is planning to introduce as many as 130 new processes in the near future, next 6 months. That will essentially enhance the -- both the revenue, applications as well as the profit. Not -- so we're planning to get into offering B2C services from these centers, which will further enhance the applications and the process.
Okay. Okay, sir. And sir, my next question will be related to the cost of services. So we have -- now we have seen 10% increase in the visa count. And the [indiscernible] but the cost of services is coming down. So [indiscernible] revenues here? Or what is happening? So can you please explain that?
So the cost of services is lower largely because, as we grow our [ RAS ] business, the efficiencies in cost kick in. So it's like economies of scale business. So the more applications you have, the cost is spread over the lower applications. But high applications...
[indiscernible]
Okay.
So that leads to lower cost of services.
Okay. [indiscernible] [ revenue ] repeats some [indiscernible] is not actually [indiscernible] top line, it's [indiscernible] from the cost, right? Is this how it looks?
Yes. So what happens is, as you increase your [ RAS ], as you increase the services that you deliver, the costs keep coming down.
The top line increases because of the value-added service and cost remains the same or comes down.
Correct.
But sir, we have not been seeing any increase in the top line. So top line has been remaining same the last 3 quarters. So how this is working? So the [indiscernible] wherever you are seeing the [ RAS ] revenues, I'm just not understanding that.
Okay. So while in the quality of -- you see the total sales number, what you don't see is the quality of sales. So as we start ramping up the contracts, the yield or the value for the application goes up. Yes, so when the value -- so even if -- so it's affecting the quality of the sales and not so much on the quantity. So as the sales go up, as the RAS goes up, the cost of that visibly of that RAS is not as high as it would have been the cost in our basic applications.
So I think it's very important to note that we have started reducing the amount of [indiscernible] in Punjab, which is helping in some reduction in overall billing, which is partly compensated by increased RAS from internationally.
Okay. And the operating expenses also came down very sharply. So is it the new base or it is also like the x the Punjab [indiscernible].
Sure. There are a few factors. If you were to look at either quarter-on-quarter, year-on-year, if you would look at versus the last quarter of last year, there was -- as we reported earlier, there were some provisions made for evaluation of assets. So that kind of bumped up our expenses. However, if you're looking at what is year-on-year, that is to say first quarter last year, first quarter last year didn't necessarily have the U.K. operations, which we have in this quarter this year. All right. And also to some extent, as we had continued to roll out Spain operations, there was some cost on consulting and legal. Okay?
Okay. Okay. Sir, my question will be related to the Starfin acquisition. So as you've mentioned that you paid down INR 9 crores for the acquisition. And you've said that there will be around 15 centers, CSPs basically. So these CSPs are Starfin owned or [ how is it ] because we're seeing around 50,000 per center? So [indiscernible].
They're all franchised.
Okay. All franchise model?
Yes, all franchised model.
Okay, okay. Okay, sir, and the last question on the Punjab Government. So in the first -- last month, what was the flow of applications? If you could provide some number on that -- the monthly.
You're talking about July?
Yes, July.
July, we would have got -- remember, this was running under the old contract. There was about 6 lakhs applications, 6 to 6.5 lakhs applications
We have the next question from the line of [ Varun Gaiea ] from Equity Capital.
Sir, I have a few questions. First of all, in the last con call, you had mentioned that in the Punjab contract, you had some liability of INR 30 crores towards employees and vendors. So is that done with?
You're talking about Punjab contract that [indiscernible] or the older contract?
Older contract, yes.
Yes, yes, yes. so most of the payments to employees are pretty much up to date now, okay, including taxes and everything, pretty much up to date now.
Okay. And in the new contract, how is the clause, like if you do not get the certain amount of applications, so will it be the same way like the government -- you will be receiving it from the government?
No, no. In the new contract, it's entirely an application-based. So we have to get those applications, but keep in mind that, that citizens have no option but to come to our centers for the services that they are looking for. So it's pretty much assured minimum revenue that we're going to get and with the additions that the government is planning of 130 services, it should increase substantially. So we don't see an issue with the downside of this contract very much at all.
Sir, how much revenues are you expecting from this contract?
To begin with, I guess we will get about approximately INR 3 crores to INR 4 crores, but it will gradually ramp up as the new services are introduced.
Okay. And on the visa side, how many -- last year, we did around 3 million -- we processed 3 million applications, right? Hello?
Yes, around that I think.
So this year, do we see it ramping up to 4 million?
We have delivered, when we took over Spain, we delivered 10% growth year-on-year basis. So we continue with the Italian contract also the count should go up. And there are many new tenders in the pipeline. With the U.K. tender also, the count should go up. So you will definitely see additional counts.
We have the next question from the line of from [ Chila Kwakaria ] from [ Bhutani Finance ].
Sir, just can you give this breakup of receivable on account of assets and receivables for Punjab, I need that number.
Approximately INR 50 crores for assets and balance INR 165 crores for the building that we have done.
5-0, INR 50 crores for assets.
That's right, approximately.
Incrementally, sir, how we are positioning ourselves? Are we positioning as a visa processing or citizen services company? I mean, where are we positioning? Where are the margins higher?
They are currently higher in the international business, visa business.
So I mean, again -- so where are we aggressive -- are we aggressive on the citizen services side? I mean, we heard that there are tenders coming up. So just trying to understand what would be a major chunk of our top line, incrementally?
Have you seen that we are following an asset-light formula. We've had some bad experience with making a large investment in Punjab and getting stuck with a lot of money, but we see that money coming in now. So we're not worried about it. But more and more, we've been looking at opportunities where we can collect the monies from the citizens rather than depending on government for funds.
And see, the contract that we have run with our strategy aligned partner Sopra Steria [indiscernible] Government itself is a visa tender, which is a big high revenue margin and growth tender for us. So definitely, we're looking at visa -- for visas -- they will still be a factor. We will be more aggressive towards always.
We have the next question from the line of Nirmal Bari from Sameeksha Capital.
Yes, sir, for the Starfin acquisition, the INR 9.6 crores that we paid was for what percentage stake?
74%.
74%. And we would be acquiring this by March?
That's correct.
And sir, is it possible to give the revenues and margins for Starfin for FY '18, the previous financial year?
I think this is still early, let's keep the discussion on Starfin for the next quarter, if you don't mind. But we're making profit. So it's not that we've acquired a company that's in trouble or anything, it's a profit-making company.
Yes, I'm not asking how the quarter or going forward, but FY '18, they would have already given the numbers. So is it possible to share? Or we're under some agreement or not?
Yes. At the moment, I would say that we are under some obligation. It won't be happening this week -- this transaction. So give it some time and then we'll certainly get back to you.
Okay. And sir, what would be our fixed cost? And there's Punjab fixed cost and the employee cost and all for the new Punjab project?
[indiscernible] costs are typically 50% of the total cost of operations.
Yes, so what would be the cost of operation as in for the entire 352 centers, what would be the total cost that we would incur?
I think you'll be able to ask this question when we meet [indiscernible] the team concern. We wouldn't want to get into details of costing of each of our businesses and what the EBITDA was [indiscernible].
Yes, okay. Okay. That's fine, Sir, I was asking more from the perspective of what would be the revenues that we would need to book just to break even in that business?
As I told you from the month 1 itself, we're breaking even or making money. So that's not a concern in Punjab.
And the revenue number that you said of INR 3 crores to INR 4 crores, that would be INR 3 crores to INR 4 crores per month?
Per month, per month to begin with.
We have the next question from the line of [ Deepak Agarwal ] from [ Reem deltus ] Advisors.
Sir, what was the number -- revenue number from Punjab last quarter?
INR 46 crores.
Okay. And I just want to know why is our tax rate lower than the statutory tax rate?
The bulk of our operations are overseas, all right? And therefore, the consolidated outlook for UAE being a hub for that part of the region. And therefore, with taxes that we pay in other jurisdictions, you don't get a credit in UAE. And these are, therefore, charged off as expenses in UAE. And therefore, no taxes are reflected in UAE. The taxes that you see on our books, the full RAS tax is shown for India.
Okay. Fine. And the reason that you gave for not repatriating cash dividend distribution tax?
Yes. There is a tax -- the dividend distribution tax. Now if there is a requirement, we certainly can repatriate to India and use that because we're doing -- going to do it for dividends as well with the shareholders [ with the flue of the 19th ]. So but you get a credit, if you do it for any other purpose, it comes out of the ambit of tax and goes to higher tax level and therefore, it supersedes 18%. It goes beyond that and therefore, that is the exact reason.
The main reason is also, one is the tax. The main reason is, as we know, next 2, 3 years, BLS is looking at a very aggressive growth as we've incurred in the last 3, 4 years. We do not want to be dependent on money on any external factors. We don't want to say no to a project because of money. So that is why we are -- we know that the tenders are coming in the next 2, 3 years and we are ready with the cash to deploy as if and when necessary as soon as the tender comes.
Is the bulk of cash in UAE or [indiscernible]
It's in different countries.
Different countries?
[indiscernible]
Yes, but a consolidated basis, what we say.
Thank you very much. Ladies and gentlemen, that was the last question. I'll now hand the conference over to the management for any closing comments.
Okay. I'd like to thank all the participants, all the investors, for taking the time out and asking a lot of interesting questions. I hope we have been able to give you a good insight into the business, both the past and something about the future. Thank you, again. Good afternoon.
On behalf of Centrum Broking Limited, that concludes this conference call. Thank you for joining us, and you will now disconnect your lines.