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Bls International Services Ltd
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Ladies and gentlemen, good day, and welcome to the BLS International Q3 and 9 Months FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Shikhar Aggarwal, Joint Managing Director of BLS. Thank you, and over to you, sir.
Good afternoon, everyone. I welcome you to all the conference -- earnings conference call of Q3 and 9 months financial year '20. I have with me on the call, Nikhil Gupta, our Managing Director; Amit Sudhakar, our CFO; and Pooja from Pareto Capital, our IR Adviser.Let me briefly update you on the recent developments and our business strategy going forward. We are glad to report 11% revenue growth in Q3 FY '20 and 12% growth in 9 months ending FY '20. This was driven by organic growth in our core business of visa, passport and consular services. This quarter, we commenced accepting visa applications for Brazil embassy in Beirut, Lebanon and continued to see organic growth in our existing centers. Along with healthy growth in revenues, our EBITDA during the quarter also improved, and our EBITDA margins were higher. This is a reflection of the fact that we've streamlined all loss-showing contracts, our operations have stabilized. As you all are aware, we have renegotiated the Punjab contract and it's now fetching us good margins. We are also in a better position to leverage our centers more efficiently while optimizing resources and margins.I'm honored to share that during the quarter, we were awarded with the Brand Excellence Award in Visa Outsourcing Services Sector by ABP News. Going forward, we would continue to focus on growing both our business, visa-related and citizen services. In our visa and consular business, our growth would come from multiple funds, new clients, new geographies and enhanced service to existing clients. A lot of focus is also on value-added services, which help us utilize our existing network and infrastructure, thus enhancing efficient margins. In the citizen services business, after initial hiccups, we have now successfully built execution capabilities through Punjab contract. Here our growth would come from more such contracts in other states of India as well as international markets. We've already established experience in international markets through citizen services contract in UAE and Afghanistan. We are further targeting missions and embassies that we already have relationships with.Lastly, I would like to conclude by saying that all our businesses are now generating profit. And going forward, we will continue to focus on contract where we do upfront collection from customers and not depend on receivables from government or any other agencies. That's all from my side. I'll now hand over to Amit for updates on financial performance. Thank you.
Good afternoon, everyone. Let me take you through the financial performance for the quarter and 9 months ended December 2019. During the quarter, we reported revenue of INR 204 crores, a growth of 11% year-on-year basis. 9 months FY '20 revenue totaled to INR 635 crores or 12% growth. This has driven by growth in our core businesses of visa, passport and consular services. EBITDA in Q3 FY '20 stood at INR 20 crores as compared to INR 12 crores in corresponding quarter last year, which is 67% growth. EBITDA margins in Q3 FY '20 stood at 9.9%. For 9 months FY '20, EBITDA stood at INR 76.3 crores. EBITDA for 9 months FY '20 was impacted by operating loss incurred in UKVI project of amount 12 -- INR 17.4 crores. Reported PBT for Q3 FY '20 is INR 22 crores against INR 24 crores in Q3 FY '19. However, we look at the adjusted PBT, it stood at INR 22 crores against INR 16.5 crores for Q3 FY '19, a Y-o-Y growth of 33%. For 9 months FY '20, reported PBT is at INR 46.7 crores compared to INR 104 crores in 9 months FY '19. However, if we look at the adjusted PBT, it stood at INR 92 crores against INR 90 crores in last year 9 months. We reported a net profit of INR 21.2 crores for Q3 FY '20 as compared to INR 21.5 crores in corresponding quarter last year. PAT margin stood at 10.4% in Q3 FY '20. We have also declared an interim dividends of INR 0.50 per share of the face value of INR 1 each. That is all from my side. I would now request the moderator to open the call for Q&A. Thank you.
[Operator Instructions] We take the first question from the line of Sanjay Dam from Old Bridge Capital.
I just wanted to know, in the base quarter, December '18, what were the losses from discontinued operations at the EBITDA level?
So INR 7.5 crores was the loss in last corresponding Q3 of last year from Punjab operation, which we closed down in Q3 last year.
So INR 7.5 crores was Punjab loss. And was there -- there was -- so UKVI was making a profit then?
We have just started that. That was the time we started in the month of November, December, basically.
Okay. And so UKVI did not contribute to any profit and loss in 3Q. In 4Q, UKVI had a loss of how much?
About, I believe, at INR 7.7 crores or so.
And Punjab contributed to how much loss in 4Q?
Punjab, there wasn't any loss in Q4.
Okay. So Punjab only contributed to INR 7.5 crores...
That's right, when we closed the old contract.
Perfect. Perfect. And gentlemen, if I look at between your September '19, that is 2Q and 3Q, if I normalize at the EBITDA level, so the loss from UKVI in the second quarter was INR 10 crores?
Right.
Which means that your normalized EBITDA for 2Q was INR 38.9 crores? As if that I believe, in this quarter, there is no extraordinary item. And at the EBITDA level, we've got INR 20 crores of EBITDA. So could you kindly explain to me why this...
Yes. So one, I would like to explain that our business is a bit seasonal, especially with respect to Spain and India missions. And we make much more EBITDA percentage in the Spain operations, which are at the lowest during this quarter. So if you see seasonality, you can check it from the Q3 of last year versus this year Q3, the EBITDA margin normally comes down in this quarter. So that is a seasonal impact basically.
And Punjab still continues to contribute about INR 15 crores per quarter?
Correct. Yes, that's right. That's right.
Okay. And if you could tell me, I have not followed BLS for about a year or so. But post you getting the Spain order sometime at the end of December '16, has there been any large order win since then?
Since then, we won the Italian contract in Singapore. Recently, we won the Brazil contract in Lebanon. And we started for the Cyprus embassy in one of the Middle East countries. And last contract was the U.K. contract, after winning the Spain contract. And we, again, won this Punjab contract. And the U.K. contract, as you know, unfortunately, things didn't go well, as you know, regarding the services we wanted to do. So that is all the contracts that we have done.
Sure. Sure. So Italy, Brazil and Cyprus put together would be how big?
10%.
10% of the revenue.
So about INR 20-odd crores?
Correct.
That is quarterly?
No. Annual basis. Yes, quarterly, annually...
Yes, I mean, roughly that much. And Punjab is INR 15-odd crores per quarter?
Correct. Correct.
Okay. So if I look at Spain, it was EUR 175 million contract for 5 years. So would this be ending somewhere around FY '22? That would be the end of it?
It's a 3 plus 1 plus 1.
So that's right. It will end by...
Not FY '22, FY '23.
No. December '16 is -- December '21. So basically...
Yes. Okay, you can say that. But we don't know. Because right now, the existing tender also is valid. And with the situation, I don't know, political situation there, what is the time line of the new tender.
Okay. But if things were to go by the contract, then it would basically come up for renegotiation or rebidding in FY '20 to end. So what is the visibility, gentlemen, of -- because this is a pretty large chunk of whatever you do annually. So what is the -- and apart from Spain, of your -- if I look at your annualized run rate of about, say, INR 870 crores, INR 880 crores or, say, roughly around INR 900 crores of revenue, barring Spain, what part of the revenue goes up when?
Barring Spain, what part of the revenue?
So when does it -- what is the time line for when your existing contracts would come up for renegotiation?
See, next 2 years, nothing is coming up for renewal, at least.
Okay. So Spain would be the first one that would come up for renewal.
Correct, correct, correct.
And rest of them would...
Continue.
Further continue.
Okay. Okay. And...
See, also -- and you must understand that always while we are looking at new contracts -- now we had placed our bet on the biggest contract, U.K. And now still there are, again, tenders going on, on which we are in advanced stages of negotiation with the government. The year had started, the government is back, now decision-makings have happened. And we will be announcing few tenders. So the existing business goes on, we are doing a growth of the same trajectory of growth that we've been doing from last few years. And then we are focusing on new contracts with new governments also.
May I interrupt to suggest the moderator give opportunity to the others also, there are 30 people waiting.
[Operator Instructions] We take the next question from the line of Ravi Naredi from Naredi Investment.
Sir, we have -- with due respect of you, I would like to ask -- since I'm shareholder since last 5 years of the company, you are doing a very wonderful monopoly business, but now good quality of business seems disappeared, will it really want to tell when we start to do again in charming way of the business?
See, we got listed in year 2016. So it's been 3 years since we've been listed as a company. So I don't know how, first of all. So as a company, last few years, we have grown really. We have got added new contracts. We have learned from our mistakes. Punjab contract was also a very profitable contract for us. Still, the new contract is profitable with a new thing that there will be no receivables from the government now. So that is a added advantage for us. And we have been -- we are adding contracts -- every year, we are adding new contracts. The size may differ. And again, this year, we've been working on some contracts last year. So we're going to start to see results this year. We are on the same trajectory of growth that we're planning.
But it is not reflecting in share prices and bottom lines, something is happening, some losses are coming from anywhere. So when everything will be sorted out, can you tell in that way?
Everything is sorted out now, practically. There is no problem in the previous contracts. U.K. contract is closed down. Punjab outstanding, as we speak, as we declared, we are receiving money from the government on the plan that they are giving us by this year-end. Money should be -- whatever was left -- only INR 68-odd crores is left. So everything is on track. We are on a growth trajectory. We are bidding for new contracts. Everything is profitable as of date. All the contracts that BLS is doing, we are operating at margins.
Because I personally have bitter experience to attend your AGM. You never reply any question of mine, and you finish the AGM in 5 minutes. So you see the -- what impact will come when you are not investor-friendly?
Can I suggest that, sir, if you don't mind, if we can meet you sometime, we will discuss one-to-one on what else we should be doing according to the...
We tried. We tried. So many investors try -- we -- so many investors try in your daily AGM, and you were so reluctant to reply even single question, and you have finished the AGM in 3 minutes then went away from the venue. We were thinking how -- what's happening to you?
We will -- we made a note of your concern, and we will meet you personally and understand from your end.
[Operator Instructions] We'll take the next question from the line of [ Shikhar Mundra ], Individual Investor.
Yes. Sir, I just wanted to know about your cash balance? And then what's the cash balance on date?
Yes. See, the cash balance as on 31st December, it was about INR 215 crores, all in cash and FDs. So we have not invested anywhere.
Okay. So -- and so what are the plans of using this cash because from what I believe, we have a very high, I think, ROC business, so we don't require that much cash. So -- how about increasing the dividend payout? Or what are your plans for that?
See, as we are a growing company, we are looking at opportunities constantly for acquisitions, for M&A. Also, there are now -- with a new scenario, there are some outsourcing companies in our segment up for grabs. So we can increase our market share with their acquisitions. So that is the opportunity. And with the new tenders also coming up, that we have filed last year, that is -- I think, cash will be deployed in those.
But apart from the inorganic acquisitions like -- because in the existing business also, as of now, we have a fixed asset base itself is, I think, something around, I think, INR 50 crores, right?
Yes.
So we don't require that much cash in the business.
So we have a very light asset model, as you are aware of our business. Our aim is to continue to look at opportunities. And as we get into that, we'll deploy the funds in a manner that is very value-accretive for the shareholders. That's our aim.
[Operator Instructions] Next question is from the line of Sanjay Dam from Old Bridge Capital.
Yes. So have you received the INR 25 crores that you customarily receive from Punjab government every quarter?
Sanjay, let me -- I'll try and answer that. See, you must be aware that because of issues relating to GST, et cetera, many of the governments -- state governments are in very difficult financial positions, and that includes the state of Punjab. So while we've been assured that the funds would be available to us on a quarterly basis, they've missed the last quarter payments. We hope to be able to make it up in this quarter. There is no dispute in terms of doubtfulness of the receivables. And as you know, with the government, the main benefit is that you rarely have a bad debt. You may have delayed payments, but not denied payments. So we are still expecting the money, but a little delayed.
In the last year, in FY '19, you had recognized 33 -- almost INR 34 crores of profit on sale of assets, on which there was some part of it where recognition of -- recognition from the government was required. So has there been a development on that?
That continues to be the same position. In fact, we're having a meeting with the government later this week on the same subject. But we are reasonably confident that there will be no issues with regard to that.
If this were not to come, would you have to reverse some of the profit that you recognized?
Firstly, we don't have any doubts, as I said, on the recoverability of the amount. And we are even hopeful that whatever is in the books, we might actually collect more than what's given there, not less.
And what is the quantum out of the INR 33.8 crores, which is contingent on this recognition?
That's about INR 19 crores, which is remaining due out of that.
Okay. So basically, this is what you have recognized, but cash has not come from the government?
That's correct.
Last year, we also received INR 200-odd crores from the government of Punjab regarding our outstanding.
Sure, sure. And what is the total receivable as on date?
INR 65 crores.
INR 65 crores.
No, total receivable. That is -- INR 65 crores is Punjab versus total receivable, which is INR 119 crores.
There is no other receivable, since all our other businesses, we are collecting upfront cash from the public.
No, no. Your pick-up was INR 119 crores at the end of September. Out of this, INR 67.5 crores was -- that was from Punjab. So what was...
It was INR 119.4 crores as on September.
What is it now?
Currently, it is approximately on the same level. It's around INR 125 crores or so.
[Operator Instructions] Well, ladies and gentlemen, that seemed to be the last question for today. I would now like to hand the floor over to Mr. Shikhar Aggarwal for his closing comments. Over to you, sir.
Thank you, everyone, for your participation in our Q3 FY '20 earnings call. In case of further queries, you may get in touch with Pareto Capital or feel free to get in touch with us. We look forward to interacting with you next quarter. Thank you.
Thank you very much. On behalf of BLS International, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.