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Bls International Services Ltd
Earnings Call Analysis
Q2-2024 Analysis
Bls International Services Ltd
As we recap this past quarter, it's worth noting that BLS International has indeed embarked on a promising journey this fiscal year, which is evident from the strong financial results reported for Q2 FY '24. The company, known for its outsourcing services, particularly in the visa outsourcing market, has begun to see the fruits of a recovering travel industry which translates to an upswing in visa applications and subsequently, their bottom line.
The company has not only seen its highest ever EBITDA but also boasts EBITDA margins that consistently exceed 20%. This strong profitability is something they believe will continue into the future, further bolstered by potential new contracts and acquisitions.
The last quarter witnessed significant strides in expansion, highlighted by an exclusive global visa contract with Slovakia and new application centers in Beijing. Not to mention, growth in volume is anticipated with China's opening and further openings in CIS countries. Operations in Saudi Arabia and Nigeria have also seen expansion, underscoring a robust visa service business.
On the digital front, BLS Visas achieved a milestone by successfully integrating over 500 e-governance services into its digital platform through a strategic collaboration with the National e-governance division. They have also partnered with Kotak Mahindra Bank to expand banking correspondent services.
Focusing on the numbers, Q2 FY '24 saw a 14.3% year-over-year increase in revenue to INR 407.7 crores. The EBITDA soared by 52.7% to INR 86.7 crores, with the EBITDA margin expanding by 535 basis points to 21.27%. Significant growth was also recorded in the profit before tax, at 55%, and the profit after tax, growing by 60.8%. These strong financials continued into the half year, with a revenue growth of 25.6% and EBITDA growth of 88.9%.
The company maintained EBITDA margins around 20%, with the potential to sustain these margins moving forward. They continue to actively pursue new visa contracts, having acquired some key tenders from various governments like Slovakia, Germany, Italy, among others, and have a promising pipeline of upcoming tenders.
Looking ahead, BLS International appears poised for future growth with strong visa volume anticipated in the coming years. With a stated focus on both organic growth and exploring opportunities for inorganic growth both in India and abroad, the company remains optimistic about its prospects for the foreseeable future.
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Ladies and gentlemen, good day, and welcome to BLS International Services Limited Q2 and H1 FY '24 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. The statements are not the guarantee of future performance and involve risks and uncertainties, which are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Shikhar Aggarwal, Joint MD from BLS International Services Limited. Thank you, and over to you, Mr. Shikhar Aggarwal.
Thank you. Good afternoon -- good evening, everyone. A very welcome -- warm welcome to all of you, and thank you for participating in our earnings call for the quarter ended 30th September 2023. I have on call with me today, Mr. Nikhil Gupta, Managing Director; Mr. Amit Sudhakar, Chief Financial Officer of the company; and Mr. Gaurav Chugh, who has recently joined us as Head of Investor Relations and ADFACTORS PR IR team.
I'm happy to share our recent development and achievements during the last few months and our future plans for the company. We have set the stage for an exciting journey in the current fiscal year, commencing on a strong note with the more promising financial results for the second quarter of financial year '24.
Our business continues to witness growth momentum as well as strong profitability. We saw highest ever EBITDA being reported by the company. And in addition, our EBITDA margins continue to be in excess of 20%. On the given basis, we believe that this momentum will continue for the foreseeable future. Any new contracts or acquisition will further add to this momentum.
Regarding the industry we operate in, we believe the outsourcing market, particularly the visa outsourcing market, has been expanding rapidly with many new countries counting for partners who can facilitate visa as well as counselor services for them. Additionally, the travel industry continues on a trajectory of revival worldwide. This global recovery is expected to translate into a surge in visa applications, fueling the growth of our visa business.
Month-on-month, we are witnessing a steady upward trend driven by both growth in applications as well as improving realizations. The last quarter has been quite eventful for us. In our visa business, we signed up with the government of Slovakia to offer outsourced visa services across 18 countries.
This is an exclusive global visa contract. Slovakia is fast becoming a sought-after tourism destination for travelers across the world. We also recently opened up new application centers in Beijing, China for the Spanish embassy. As China is opening up, we expect to see further growth in volume from the region.
This growth could also be complemented with further openings in CIS countries. Furthermore, we recently expanded our operations in Saudi Arabia and Nigeria, where we have opened new offices. These offices also will further help enhance our visa service business.
On the digital service front, I am still to share a significant milestone achieved by our subsidiary, BLS Visa, which is we have successfully integrated Umang services into our digital platform. The strategic collaboration with the National e-governance division, aims to make over 500 e-governance services easily available. This integration underscores our commitment to provide seamless and convenience as to citizens, both in India and overseas and in multiple languages.
In addition, BLS visa also tied up with Kotak Mahindra Bank for offering banking corresponding services.
Looking ahead, our focus remains twofold: growing both our visa counselor services and digital services business organically and exploring opportunities for inorganic growth in India as well as abroad. We continue to be optimistic about the ongoing physical and are committed to fostering growth.
In conclusion, I want to emphasize our confidence in the next few quarters. The BLS team is resilient and committed to growth in both our segments. We firmly believe that the strategies we adopt would pave the way for a bright future for BLS International Service in the coming years. Thank you for your continued trust and support.
I would now like to hand over the call to Mr. Amit Sudhakar, our CFO, for an update on our financial performance. Thank you.
Good evening, everyone. I'm pleased to present the financial performance for the second quarter and half year ending September 30, 2023. In Q2 FY '24, we recorded a revenue of INR 407.7 crores, up 14.3% Y-o-Y increase, driven by both business segments, visa and digital services. We continue to witness growth in both our business segments and are optimistic about sustained growth in the coming quarters.
During this quarter, our EBITDA stood at INR 86.7 crore compared to INR 56.8 crores in the corresponding quarter last year, witnessing a growth of 52.7%. The EBITDA margin for the quarter stood at 21.27%, an increase of 535 basis points compared to the corresponding quarter last year.
Cost optimization, higher volumes and favorable business mix helped expand the EBITDA margin for the quarter. Profit before tax stood at INR 87.2 crores, a growth of 55% over the corresponding previous quarter. The profit after tax for the quarter stood at INR 82 crores as compared to INR 51 crores in the previous corresponding quarter, strong growth of 60.8%.
The earnings per share for the quarter stood at INR 3.59 per share as compared to INR 2.46 in Q2 FY '23. Coming to the half year performance, the half year revenue stood at INR 791.2 crores, growth of 25.6% versus corresponding previous period. EBITDA for the H1 FY '24 stood at INR 166.8 crores compared to INR 88.3 crores in the corresponding half year last year, witnessing a growth of 88.9%.
EBITDA margin for H1 FY '24 stood at 21.1% versus 14% in H1 FY '23, an expansion of 706 basis points. Profit after tax, PAT, stood at INR 153 crores as compared to INR 81.7 crores in the previous corresponding half year, a growth of 87.3%.
That is all from my side. We can now open the floor for questions. Thank you.
[Operator Instructions]
The first question is from the line of Ravi Naredi from Naredi Investment.
Sir, you are doing a really fantastic tailwind with our business. We are doing very fantastic things. These enhanced margins will continue in H2? What is your expectation?
Amit?
See, margins, we -- if you see from last year, we were around EBITDA margins were in the range of 15% to 16%. Now in the current year, we are maintaining it around 20%, in 20%. And we see the potential that we should be able to continue these margins in the coming quarters.
Okay, okay. And sir, how many more visa contract we have applied? And what is success rate that we can expect from them?
No, see, we are on the ongoing business factors. We'll keep on applying for different tenders. And as you have seen, the last 1, 1.5 years, we have won a lot of tenders for different governments like recently won a contract for Slovakia, European governments, Germany, Italy, Poland, Portugal, and we also renewed our contract for the Spanish government.
So definitely, we keep on applying for different tenders. And as we have told before, there's a big pipeline. And out of this pipeline, only some of the tenders we are winning and some of the results are to be announced. So as and when everything is done, it will be announced.
So this 80% visa volume, can we expect in next few years also?
Correct.
Yes?
Yes, yes.
Okay. Okay, okay. I am not able to listen just -- and sir, how we utilize the INR 700 crore cash, which we are having and because, but saying so how you achieve 30% ROC in future? This is my question.
Sure. So what we are seriously looking at, which we have talked about in our last call also, we are looking seriously at the new acquisitions in the field. And as well as, as Shikhar said, we are bidding for big contracts, so we may need some funding requirements for setting up new offices. So we are going to use that fund for these.
Does we contract in visa service?
Both, in visa as well as regional services. So we are bidding in both the [indiscernible].
The next question is from the line of Omkar Kamtekar from Bonanza.
So firstly, with respect to the rate of growth in the digital services, we can clearly say that the visa business is growing more than twice the rate of the counselor services. And it's share in the revenue is also increasing. So first question is how much -- for how long will this sustain? And what will be the effect, say, 2 years or 3 years down the line, the share of the digital services business?
See, digital service business, as we stand today is growing 1% after entire visa -- of the entire revenue of the company. Was quite small compared -- similar compared to last year. That is why we grew quite well.
But as you know that this company, we have rapid plans for growth of this e-services business also. In the next few years also, we can see good growth coming in from different future contracts that we are acquisitions in the digital services. So I think growth momentum should continue.
So we can expect similar kind of growth or maybe higher going forward for the next 2, 3 years?
Percentage, I don't know. I cannot comment on any percentages, but as you have seen our track record, we have been focused on the growth. So definitely, next few years also, we are targeting growth.
Okay. Okay. And with respect to the -- so we had also applied for the listing of the e-services business. What is the status of that? Is there any update on that?
As for the norms, we have filed our DRHP with SEBI. And as and when we get the approval, it depends on the approval that whenever we get it, we will be listing the company and as we have stated that we want money coming into the company. So -- and that will be utilized for further growth of the company.
Okay. Okay. And just to comment on the visa space specifically. Now because of the conflict that has happened in the Middle Eastern region, we also have a certain amount of business in that region. So how much of an impact of that had on the business? And do you see this business impacting other regions such as Europe or adjacent areas? Can you comment on that?
See, we operate in a global environment. We operate in 64 countries. We work with 40-plus governments. So for us, this first of all, this event has not particularly impacted our business. So our revenue, as you have seen, has grown even in the last quarter. Currently there is 0 on that for us. But as we are a global company, different events keep on happening in different parts of the world. But on an annual basis, it does not hardly matter.
Till now, we are not seen any.
The next question is from the line of [ Supan Pareek ], who's an individual investor.
So I'd like to ask about the IPO. So like you plan to propose an IPO of BLS e-services. So like what is the aim for that, like could you bit elaborate much on that?
See, it has been filed with -- the DRP has been filed with SEBI. So we can say that the whole idea of the IPO is to -- for the -- funds will be for the growth capital of the company because we see a big potential of growing this digital business into a first in India and then globally. And for that, we are looking at this growth capital for the digital business at the moment.
Okay. So like what is the future road map for the BLS e-services?
I think once the SEBI approval comes in, we will share the road map and the presentation on the whole business.
Okay. Okay. No problem. So next question I would like to ask like the current growth rate and EBITDA margin, is that sustainable for long term? Like, what are the things like you're looking out for the next quarter or the fiscal year?
Yes. As we have stated, I think we already answered that question. For long time, we were doing EBITDA margin of 15% to 16%. And from first quarter, we achieved a margin of 20%, and we have sustained that in the second quarter also. So we are -- every day, we are working very hard to obviously sustain and improvise. So definitely, I think from where we stand, we feel that we get [indiscernible] in the market.
Okay. And also on the purpose of the cash utilization, so this quarter has been like -- has been highly cash generative. So what are the company's plans regarding the utilization of cash in the coming quarters?
We are very conservative in effective utilization of the money. And so as you know, that this cash that we generated is because of the hard work that the company has done from the inception. Definitely, we are looking at particular opportunities. And as and when we think that it qualifies all our conditions, we will be going in for acquisitions. Other than that, we are regularly -- company is paying dividends to the shareholders. And the opportunities that we foresee, we will utilize in growth, opening new offices on technology, everything else.
Okay. So I'm just shifting my questions right now, like I'm seeing like the volumes have recovered from China. So what are the expectations with the Russian right now?
See, volumes are pre-COVID, definitely, we are better than what we are doing in COVID in China. Now things are start opening up, we've also opened our offices. In Russia, still, the volumes are low. So if you talk about the numbers that we've achieved still -- from 2019 level, we have not achieved, the volumes are not back, but still revenue and profitability is higher.
Okay. So like we can expect it to grow, like going forward, it can go up.
Correct.
This is not the base volume. So base volume, 2019 levels, we still have not reached.
Okay. Okay. And that the impact of Canada issue being so far, like how has that impacted us?
I don't think there was any impact, as we have stated also that the visa business was annual 2% of annual revenue that will also come back. That business will also come back. So we don't see any impact from the Canada business.
Okay. And also like, the last question I would like to ask is that the status of U.K. tender, is there any progress in terms of the things like winning any geographies?
No, there is no status. We are filing for many tenders. And as in when results are announced and we are notified, we'll inform.
[Operator Instructions]
The next question is from the line of [ Vicky Patel from Artica Wealth ].
Congrats on a good set of numbers, sir. My first question is, I would like to know like any recent news, we heard that regarding the Egyptian embassy? So what is the current status? Are we -- like have they denied to work with BLS or?
No, no. See, we work for them and one of -- we are one of the authorized partners. There is an exclusive contract with them. So numbers are quite negligible from the start and still. So no one has denied, but we are not the exclusive partner. We are just -- does not follow exclusive outsourcing policy anywhere in the world. So yes, that is the status.
Okay. And sir, the ongoing Israel situation, so will it affect the current -- our current line of business?
No. Actually, we have not seen any impact on it, and we see strong growth in our numbers.
Okay. And sir, the revenue, the total income has grown, I think, roughly 14%, 15%. So do we see a similar range of growth in the coming second half of the year?
Whatever we have achieved, I think our wish is definitely to maintain it, and we are working hard towards that.
Okay. And sir, there has been a rise in the increased interest cost, the short-term borrowings or the long-term borrowings have not increased. So can you please throw some light at why has been an increase in the interest cost?
So see, the interest cost is mainly because of the new accounting standard, AS 116, where the lease write-off has been booked in the asset and the expense has been routed through the depreciation and the interest. But there's no debt on the books and there is no interest payment in the financial charges.
Okay. And also employee cost as a percentage of sales have increased if you see Y-o-Y. So is this because of the increments or we are expanding the manpower?
Right. So you're right, it is because of both the increments have been there or to the existing employees. And currently, the company is investing in people at the senior, at the middle level to ensure the growth, which we are planning to do in the next couple of quarters.
[Operator Instructions]
The next question is from the line of Omkar Kamtekar from Bonanza.
One thing that I wanted to ask was on the fixed assets, we have seen an approximate INR 24 crores, INR 25-odd crores of difference. So how much of a more CapEx for fixed assets and other equipments are we looking right for the H2 and FY '25 also if you can?
So Omkar, this is -- the CapEx, which is showing in the balance sheet for the increment is mainly during this half year is mainly due to the accounting standard of use of assets which we have leased.
Okay. So the lease liability, okay, it's back, okay.
Otherwise, we normally have a normal operation CapEx in the range of INR 15 crores to INR 20 crores in a year.
Okay. So that would be the steady state INR 15 crores to INR 20 crores CapEx that we do annually that we just continue.
Exactly, exactly.
And with respect to -- I was not able to catch the number. What was the volume growth in the number of visa applications that we did for the period?
Volume, we don't normally declare the exact volume. so we need to check this we can tell you.
Okay, okay. As a suggestion, just if you could -- if it is possible, if you could add that bit on the investor presentation, that would be very helpful. I mean we...
Sure, we'll keep that in mind.
Then what would happen is because we can see in the EBITDA that the EBITDA margins have increased and because the high-margin business of the e-services is increasing, so we could break it down as to how much of the revenue...
High margin is in the visa business.
So that is actually if the volumes there are also going to pick up, the margins would also meaningfully pick up. So that would become...
Volumes there will increase further.
So the analysis becomes much easier for us, so that's it.
[Operator Instructions]
The next question is from the line of Rajiv Venkatesh, who's an individual investor.
A couple of questions from my side. I want to know on -- from the tender pipeline for the visa business, would you be able to provide the split on the retenders and the new tenders that we are in?
And secondly, would you be able to provide the split in EBITDA for visa and the e-business? And would you be able to provide more details on the ZMPL business? Like I think before we had like Punjab, UP and all this. To provide some details, some color on that. So would you be able to -- yes, sorry.
Whatever tenders that we're currently doing, we have retained and we have rewin of our tenders. So if you see Spain tender also, we again rewon in April for the next 5 years at the increased service charge. And we recently won tenders like the Slovakia government, there's a global tender that we won for visa. And we won tenders for Portugal, Poland, Germany, Italy, a couple of governments that we started working for within this year.
So definitely, there has been a growing in number of governments that we're working for. And going forward, as I've been telling, there are multiple opportunities in these outsourcing, different governments are coming out with tenders and different geographies, which we're eyeing for out of which some of them announce the results Slovakia, which we have announced. So other governments as and when we are working on it as and when results are announced, we'll be announcing, but the opportunity size is quite huge.
So many governments which are outsourcing for the first time and many government which are coming out for the retenders. That is on the visa business.
And on the ZMPL, ZMPL which is part of BLS e-services, as we have declared that you have already grown, I think more than 100% in that business compared to last year. We see -- we have already won a lot of contracts with new banks like Kotak Mahindra and different banks.
We have tied up with different government, things like Umang and also we see further growth happening in that. We are now started before year already public sector business. Now we are also starting the private sector business with HDFC, Kotak, a couple of other banks.
So we see huge growth coming in that business. And from that reason only, we wanted to leave that company separately. And as in the growth capital comes, it will be utilized for growing the company further.
Great. And I have one request from my side. Like would you be able to provide some sort of -- during the IPO, some sort of the employee or for free investors who are already invested in BLS and the priority for getting the IPO?
See, we have to follow SEBI rules. So whatever SEBI rules allow, we can only work on that.
Okay, great. And what is the growth guidance for the next year for the FY '25? I think last call, you had iterated that it will be like somewhere north of 50% or 60%.
We have not given any guidance I think until now, but of any a percentage terms. But as you know, whatever growth that we've achieved in the first 2 quarters, we wish to maintain that.
[Operator Instructions] The next question is from the line of Dhvani Shah from Investec Capital Services India.
My question was on digital services. You saw the highest margin this quarter growth to 14%. So can you explain the drivers for the same and the sustainability aspect?
So in digital business, this quarter, there was a new contract which we have won. And under that, they have given us an advance, which was part of the new revenue in the business. So that will -- that has increased the revenue in the current by about INR 3 crores, and that has impacted the bottom line.
Okay. So the cost for that will be booked in the future.
It's regular CapEX cost which we have done in this case.
Okay. Got that. And also just to confirm the previous participant asked about ZMPL. It seems that the growth has been 100% Y-o-Y. If I'm not wrong, the Y-o-Y-- the previous quarter that was reported as close to INR 40 crores from ZMPL. So the 100% growth on that is around INR 800 million. Is that correct? Or can you just...
If you see this quarter, the revenue that we've done on digital business is around INR 82 crores, I think, if I'm not...
INR 90 crores for the...
So digital business, we have done INR 85 crores, which is compared to INR 68 crores -- no, this is quarter 2 FY '23.
Yes, quarter 2 is [ 90.1 ] as reported.
I think we have some segment -- intersegment, I don't know which number, I don't run it can we say exactly...
As reported in your MDA segmented revenue of INR [indiscernible].
Oh, exactly. This may have intercompany netting off in that because the intercompany segment under that you write that minus.
Fair enough. So how much of the ZMPL of this?
I can't hear you, how much of the ZMPL...
Yes.
ZMPL is for the quarter, Q2 is about INR 49 crores.
Got it. So that's over last quarter, which was a last year there which was 40%...
45% last quarter. Q1 it was 45%, last year was 40%.
Okay, understood. And in terms of the visa volume recovery for the year FY '24, do you expect to close around at least 75% to 80% of the higher rev of FY '19 considering China has opened up and Russia as in an initial stages?
Correct. I think we definitely expect the numbers to be higher than last year. And last year, I think we have achieved around 65% to 70% of the numbers. So this year, it should be closing at 75% to 80%.
Okay. And just one more question. On the realization for visa application, are you seeing significant growth there after the Spanish contract, which has that increased level.
So actually, what -- this is not because of any particular contract. Definitely, our service charges from contracts have gone up in the last few years, but also the consumer pattern has changed. So demand for different kind of services will also increase. So in the last few years, after COVID constantly, we try to offer more services. We have seen increase in revenue per application from the last 2, 3 years.
Understood. And sir, one more question. This quarter has witnessed some kind of seasonality in the visa and counseling a little bit higher international or like higher European country visa applications. And that could be a reason for the higher gross margin, is that a correct assumption?
See, definitely within this business, seasonality is there. But since we are operating in a global environment, now seasonality does not impact usually in terms. But if you talk about EBITDA margins, they are particularly not because of seasonality because the EBITDA margins we accounted for application basis. So we have seen rationalization of cost and increase in revenue. That is why there has been a higher EBITDA margins.
Okay. [indiscernible] referring market gross margins and EBITDA margin, I understand. I just wanted to add a bit more color on the gross margin improvement.
Sorry. Amit...
I want more color on the gross margin improvement.
So gross margin has been on the similar line, if you see Q1 versus Q2, they have been on the same line of, I think, around 57% or so, the cost will be around that.
Ladies and gentlemen, due to time constraints, that was the last question. Request participants to get in touch with Investor Relations team for further queries. I now hand the conference over to Mr. Shikhar Aggarwal for his closing comments. Please go ahead, sir.
Thank you, everyone, for taking your time out to participate in BLS International's earnings call today. Wish you all very happy and prosperous Deepavali. In case of any further queries, you may get in touch with Gaurav Chugh, our Head of Investor Relations or ADFACTORS PR. We look forward to interacting with you next quarter. Thank you so much.
On behalf of BLS International Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.