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Bls International Services Ltd
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Ladies and gentlemen, good day, and welcome to BLS International Services Limited Q1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties, which are difficult to predict. As a reminder, all participant lines will be in 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, [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Shikhar Aggarwal, Joint Managing Director. Thank you, and over to you, Mr. Aggarwal.
Good after, everyone. I welcome you all to our earnings conference call to discuss the business and financial performance for Q1 FY '24. I have on call with me today, Mr. Nikhil Gupta, Managing Director; and Mr. Amit Sudhakar, Chief Financial Officer of the company. I'm happy to share that we have begun the new financial year on a strong note. The company's performance in the first quarter of FY '24 was in line with expectations, maintaining the upward trend of growth seen in previous quarters. The all-in revival of travel and tourism industry worldwide is driving an increase in number of these applications. This, along with higher realization is leading to continuous month-by-month growth in all [indiscernible] business. Today, I would like to share some of the recent developments and highlights. Firstly, I'm thrilled to announce that the Ministry of Foreign Affairs Spain has once again chosen BLS International as a global, Visa contractor for the visa application outsourcing. This marks the second time that we have been trusted with this significant responsibility. The contract covers a wide range of regions, including Europe, Americas, Latin America, [ CIS ], Africa, Middle East and APAC among others. BLS has been serving the Spanish government through [indiscernible] and have 822 visa application centers. We processed almost 2 million applications from the Spanish government every year. And this number has -- is expected to increase further. What's more exciting is that we have also been outsourced a National Visa for the first time, which will lead to further growth in volume and opening offices in new geographies. As normally is the case under the contract, BLS will also be providing different kinds of additional value-added services including [indiscernible] et cetera. [ But loyalty ] services, we hope to enhance the overall experience for visa applications, applicants and further strengthen our position as a trusted service provider. One of the key factors contributing to our success is a strong partnership we have formed with the governments around the world. We're currently working more than 46 client government. These partnerships have allowed us to leverage our expertise and provide [ timely ] services for [indiscernible] and governments alike. We've also won some new contracts with the Italian government, [indiscernible] governments and within other governments. Our digital service front as well as we are [indiscernible] based on the growth of our banking correspondent in e-government business, we decided to merge these 2 into [ integrated ] service segment and focus on growing these lines of business. As our number of partners across India increase, we expect robust growth of these revenues. The business now comes under our subset BLS e-services. I'm happy to share that Board has approved a fundraising initiative to an IPO of its equity shares of BLS e-services. We recently filed the DRHP for the company with [ decent ]. The move subject to approval and market conditions will enable us to explore new avenues of growth and expand our reach. BLS e-services will continue to be a subsidiary dealer of international services. The funds raised through this will help fund our growth plan for this business, where we see significant growth potential. Overall, we aim to grow both Visa culture as a data service business organically as well as exploring inorganic opportunities. To sum up, we are optimistic for the ongoing fiscal and [ prior to ] customer growth. I would now like to hand it over to Mr. Amit Sudhakar, our CFO, for an update on the financial performance. Thank you.
I'm sorry, sir, the line has dropped for Mr. Sudhakar. I'll reconnect him, sir, give you a moment.
I can read for Mr. Sudhakar
[indiscernible] I'll try connecting him in the mean time.
Good afternoon, everyone. I'm pleased to present the financial performance for the quarter ended June 30, 2023. In quarter 1 FY '24, we recorded a revenue of INR 83.49 crores, a 40% increase year-on-year, primarily driven by the robust recovery of Visa volumes supported by the value-added services. We are retesting positive momentum across all our businesses and are optimistic about our [indiscernible] growth in the coming quarters. Our digital service revenue increased about 140% year-on-year during the quarter, supporting the overall growth. During the quarter, our EBITDA stood at INR 80.5 crores compared to INR 31 crores in the corresponding quarter last year and INR 66.53 crores quarter-in-quarter 4 FY '23. The EBITDA margin for the quarter crossed 20% mark, standing at 20.8%, an increase of 933 basis points compared to the performing quarter last year. We were able to offset the impact of higher cost of services and higher employee cost by implementing cost optimization and managing higher volume, thereby benefiting EBITDA margins for the quarter. In quarter 1 FY '24, the PAT stood at INR 70.9 crores as compared to INR 30 crores in the previous corresponding quarter and INR 76.3 crores in Q4 FY '23. That's all from our end. And we can now open the call for any questions. Thank you.
Thank you very much, sir. We can now begin the question-and-answer session. [Operator Instructions]. We'll take the first question from the line of Ravi Naredi from Naredi Investments.
Thank you to give me opportunity. Mr. Shikhar, I am watching BLS International since last 6 years and realizing how you change the fortune company with help of good consultant. Our [ fund is start ] with Punjab government and how we come out of the mess. Now you change business model and very much impressed as you are doing your working and wishing you all the best. Now my question is how many tenders Visa tender we apply and likely to get in next 3 months, maybe March '24 and the INR 642 crore cash, how we utilize for the development of the company, and we are also making an IPO in subsidiary, we maybe receive the money from there -- so what is your plan for long-term purpose, if you tell specific, which will help us. Thank you very much.
Thank you, Mr. Ravi. I would like to [ reiterate ] that we have a 10,000 more strong spend of people in the company that are working hard for the growth of the company, and there is no particular individual. So it is the entire company that is working towards the growth of the company. [indiscernible] And second of all, the growth, if you see the contracts that we have won in the last 2 years -- in the last few months also that we've announced, the Italian government, we have announced 6 contracts within this year itself. The Polish government we recently announced a contract with Germany announced a few contracts. And we have been winning all of these contracts and plan these contracts in the next 3 months and 2 years also as we discussed last time, there are multiple opportunities coming out for contracts is that really bidding for. The opportunity is huge. We have already mentioned more than available opportunity out of this some have been realized as the contract that we be [ billing ] for. So the opportunity size is deep and whatever number that we have recently renewed our contract with the Spanish government also. So all the contracts that we have won, we've deployed and we renew contracts as in when the come, it will lead to an increase in profit and revenue of the company. Regarding BLS digital services, such as BLS e-services business, that has grown around 40% compared to similar quarter last year. That is a compact business. We see growth coming in that business also. But we want to want to utilize the money in visa business for the growth of that business. That was the reason that we wanted to list the company and we find the DRHP. The funds that will be coming in will be utilized for both organic and inorganic growth opportunities of that company. So we are expecting for future growth in that country also come in.
Nice, sir. Really, the 10,000 employees are also part of our family. I forget to mention their numbers. So sorry, correct. And in the state of dividend in future, you consider by day, it will help us as a shareholder and investor, thank you very much
[Operator Instructions] We'll take the next question from the line of [ Sakshi Kabra ] from Svan Investments.
Sir, my first question is I wanted to understand that if we are not [indiscernible] INR 640 crores of cash that we have for the digital side of the business since you're coming out with [indiscernible]. So what is this money going to be used for exactly?
So we -- definitely, we expect further growth in the Visa and outsourced consular service business that is the momentum has been increased after COVID also. So we are looking at acquisition in the Visa [indiscernible] of some digital providers and also the kind of contract that we are eyeing and the business that we are eyeing will require the project of cash or opening up offices in the Punjabi [indiscernible]. Many new governments, which are going to outsource for the first time now also will acquire a new introducer and setup. So we are looking at, as we have explained before, acquisition organic growth, all the new contracts that we will will deploy and definitely dividend and shareholders to enhance shareholder value, all the steps that we can take well do that to like this cash.
And sir, is there any quantum that you decided on the rate for the IPO?
We are not -- I think -- Amit, would you like to comment on that? We have decided on the number of shares.
So this will be decided, the value will come from the merchant bankers once they get it through with the setting. We have defined the number of shares which we plan to dilute or issue the new ones.
Right. But you mentioned the size of our free amount that you wish to raise it?
Yes. So it will be somewhere in the range of INR 290 to, say, INR 320, that the range we are expecting.
Okay. All right. And sir, another thing I wanted to just understand. So if I see the EBIT that is reported in the last quarter for the digital services, that was around INR 1.6 crores versus in this quarter, that number is down to INR 9 crores. So is it that in the previous quarter, there was something exceptional because of which that number was so high?
Yes. That's right. If you see the last quarter results, there was an exceptional item of INR 22 crores which was related to this. So if you take that out then about INR 955 crores was the operating EBITDA H2 in the Q4.
Okay. And sir, on your Visa and [indiscernible] services in what [indiscernible] EBITDA margin that we can look at going forward?
What we have reached in the current quarter, we are looking at maintaining that at least if we cannot increase it further, but that will become the base now for the growth.
[Operator Instructions] We'll take the next question from the line of [ Mayur ] and Individual Investor.
So I wanted to note that so you told that margins in the Visa segment, which we achieved this quarter. So is it sustainable? Right?
Yes, that's right.
So what is the reason behind such improvement in this margin improvement?
So see, this has a couple of factors which have -- we've been talking over the last couple of quarters. One is the value-added services, which we have been able to send much more on a quarter-to-quarter basis. And if you see in the last 4 or 5 quarters, the improvement in these margins are happening because of that. And we have got new contracts which are at a much higher rate. So that has been contributing on the revenue side margin improvement as well as on the -- on our cost optimization, which we are trying to work after the overt got over, we have maintained our cost under control, whereas the volumes and the revenues are going up. So that's the other new factors which are -- have made us to reach just 30% 20% above 30% of the EBITDA margins.
Okay. So is there any chance to improve the margins further going forward, like not in the short term, but in 1 to 2 years on in Visa processing?
So we see, we are looking at every day to improve it further. And hopefully, we will be able to go and improve a bit further on a quarter-to-quarter basis. But this -- what we have achieved, we think we can continue a minimum at least we can maintain this.
Okay. Great, sir. And my second question is regarding -- you told that the cash on balance sheet like INR 642 crore, we are going to utilize it in expanding our Visa segment, Visa processing segment. So can we expect anything concrete like acquisition or something in the span of at least 1 year from now?
Certainly, there should be some acquisitions getting finalized. But again, as I said, you don't know in the last moment but we are seriously looking at acquisitions in both the fields, not only in Visa, but we are also looking into digital business also.
Okay, right, sir. And sir, my second question is regarding some -- so one U.K. tender was in the visa process, U.K. tender was there, which got out in February or January on the results for that were expected in the end of current year -- first half of current year. So anything is there regarding that? Or is it for the tender or not?
As and when the results are announced we'll let you know.
Okay. So results were not out right now, right?
Correct.
Okay. Okay, sir. And sir, what will be the BLS International holding in the Services subsidiary after the listing? Currently, it is 69% something. So what will be after the listing?
So, it will remain a subsidiary of BLS International. So we will ensure that it is not less than 50%.
Okay. And rest of the [ promoter ] is also selling this [ tech ] or...
The new IPO, the funds will be used for the organic and inorganic growth, what we are looking at a conditions as well as expanding this business.
[Operator Instructions]. We'll take the next question from the line of [ Jai Shah ] from Investec.
Can you please explain in why was that a bit in the margins of digital services. If I adjust for the exceptional item for last time, it was around 10.1%, and now it's 10.8%. This is after adjusting. And if you see Y-o-Y, it was 13.5%. So if you can just explain the rest.
So we said that this is a -- we started digital and we are expanding now. We are spending on the hiring new people on board investing in people -- we have also had a new office in Gurgaon. So the rentals have gone a little higher. So we are basically creating an infrastructure for the next growth which we are anticipating in the next year or 2. So therefore, the expenses are a little higher.
Okay. Understood. And could you say how much was the contribution from the quarter?
So [indiscernible] Yes. So sir, [indiscernible] has contributed about INR 6.5 crores EBITDA.
Okay. And that's around 13% margin.
Yes. That is about 30,000 tons, exactly about 12.78%.
Okay. And is there other any seasonality in data or in digital services in Q1?
Digital, you don't have much seasonality, but Visa obviously have seasonality that it peaks during the winter as far as India is concerned.
Just this quarter.
This quarter, there is a seasonality that [indiscernible] and if you see on a Y-o-Y basis, the growth has been because of the COVID and the new contracts that you have been now allocated.
And just one last question. Could you share with us volumes for this quarter?
That figure we don't have at the moment, but I can share it with you later.
[Operator Instructions] We move on to the next question, which is from the line of Ravi Naredi from Naredi Investments.
My question is, again, from BLS e-service IPO, BLS International reaching any fund or all fund will be from a new investor only?
So there will be no OFS. It's all going to be -- it will all be coming for the growth of the company.
So BLS International, how much it will be having after the IPO?
So it will remain a subsidiary of BLS International. Therefore, it will be higher than 50%.
[Operator Instructions] We'll take the next question from the line of Neha Jan an Individual Investor.
Just want to check for the growth in digital services that we have as of now, is that kind of favorable or how do we see it going forward?
We have seen the digital business is -- if you see the base is very small currently. So the growth what we are anticipating will continue the way we have been doing till now. So the growth will be there, we are looking at the new acquisitions as well as new contracts which will keep this momentum going. So -- but we are very, say, bullish about this business per se. So we can really take it up to a different level altogether.
So as far in terms of percentage-wise, do we see it contributing a sustainable percentage in the coming 2 to 3 years?
Yes. We are very bullish that we should continue with this momentum, but we have seen the percentage is more than 100% growth is what we are foreseeing in the near future.
Okay. And sir, on the operating expenses also like [ reed ] so are there any specific measures that we have taken to address?
So, as I said that we have focused on cost optimization since the COVID happened. And luckily, the volumes have started coming in, but we have been able to control our costs and still we are keeping those under control. So that's why you see this improvement in the margins.
Okay. Okay. And sir, do we have any plans for inorganic expansion like M&A?
Very much.
Do we have anything that is already in process.
Yes, we are talking to a couple of targets, and let's see when they get funneled.
So then in that required any further key effects?
No maybe funding will be required, and that is what we are working on.
How do we plan to get base funding?
So it will depend on case to case and the consent on that situation or what it is, but the whole objective is to improve the ROI of the company so whatever best combination, we think will be the best for it. We will go for that. It may be a leverage buyout initially, maybe equity we think is required, we will go for it. But the intention is the principle is that we will look at improving the ROC of the company.
Okay. And just one last question. So these value-added services, what kind of revenue does it generate? And what kind of margins does it generate for the company?
See, these all improve our margins at a much better way than the visa service per se because....
I think a value-add service combined the service charge on the value services, the margin and is on a combined level. And definitely, over the years, the newer modality we are seeing going to 4 million kind of services, [indiscernible]. So that is where we see -- and we also -- and we are now working in more geographies around the world where in the consumer pattern is different. So on a consolidated level, we do now, as we have achieved our EBITDA margin of around 120%.
[Operator Instructions] We'll take the next question from the line of Harsh Sharma and Individual Investor.
Sir, you did mention INR 20 crores expression, I think could you please share what comprises of this?
This was in Q4 last FY '23, not in the current market. So we have explained it last time also. This is a stat equity payment with the promoters have given for the shares, which have been exceptional.
Also, sir, if you see our depreciation has grown around 5% number? Have you made an investment [indiscernible]
So this has gone up for -- mainly because of 2 reasons. One, we acquired in June last year, [indiscernible] the new company. So the depreciation of that business has come in the current the Q4, we are practically on the same level. So Y-o-Y, the difference you are able to see because of that NPL was not there in the Y-o-Y June FY '22 is 23 core...
Okay. And sir, APC, other income also has gone up by 87% [indiscernible] and could you please throw some light on that?
Sure. So other incomes have mainly gone up because the interest rates on our FDs are changing global market. Last year, our -- on average, our FDs were at 1% in U.S. dollars, whereas now -- most of them are at 5.5%. So that has improved our other income. And as well as the additional funding which we have got, the number of FDs have gone up. So that's mainly because of the interest income.
And sir, one last question. Now that China opened border, do you see any kind of volumes or revenue do you expect?
China has opened up. So we expect increase in volume coming from China.
[Operator Instructions] We'll take the next question from the line of Aniket an Individual Investor.
So sir, how does the company plan to utilize this cash? Can you provide some light on this?
I think we've already answered this multiple in the last few questions.
So I think... So as we said, we are using this money for new, say, M&A activities as well as for new contracts, which we expect to win in the next couple of quarters.
Okay, okay. And sir, how many touch points do you hire as of now?
Around one [indiscernible]
Okay. Okay. So sir, on the [indiscernible] plant, would this be for the Visa or for digital services?
For both, we are looking aggressively in both the businesses.
Okay. And sir, one last question. Can you give some guidance on the Visa volume and also on the revenue realization is now value-added services are quantitative better revenue?
No. First of all, we are seeing growth in the numbers as we have gained the foresight of the COVID and we want to go increasing service targets. Going to tell more from before, the [indiscernible] increased. The conversion has improved a little bit, but price has increased both in service charges and other prices. So we expect we expect to maintain the growth to
[Operator Instructions] We'll take the next question from the line of Mayur Para an Individual Investor.
Hello, sir. So just I wanted to understand Visa contracts which are up for renewal, like opportunity of $1.5 billion. So in that case, our competitors are serving for those governments already for the past long time in past. So how we are planning -- how we are strategizing to get the market share from those contracts? What is the strategy we are looking at? So can you provide some light on that?
See strategy is absolutely internal of the company, and this is what we have been working on. But definitely, as we much shown other company, we are in touch with those governments and doing pilots all over and have been talking to the government for the last number of years. So definitely, we have people from the industry that are working also.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Shikhar Aggarwal, Joint Managing Director for closing comments. Over to you, sir.
Thank you, everyone, for your participation in our Q1 FY '41 earnings call. In case of any further queries, you may [indiscernible]. We look forward to interacting with you next quarter. Thank you.
Thank you very much, ladies and gentlemen, on behalf of BLS International Services Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.