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Bls International Services Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of BLS International Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Hemani. Thank you, and over to you, Mr. Parth.
Thank you. Good afternoon, everyone. This is Parth Hemani from Pareto Capital, Media President, Investor Relations for BLS International. On behalf of the company, I welcome you all to our Q4 and full year ended FY '22 earnings conference call. I have with me from the manage{mUHent, Mr. Nikhil Gupta, Managing Director; Mr. Shikhar Aggarwal, Joint Managing Director; and Mr. Amit Sudhakar, Chief Financial Officer of the company. We will have a brief opening remarks from the management, followed by the Q&A session. Please note that certain statements made during this call may be forward-looking in nature. Such forward-looking statements are subject to certain risks and uncertainties that could cause our actual results or projections to differ materially from those statements.
BLS International will not be any way responsible for any action taken based on such statements and undertakes no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. I would now like to hand over the call to Mr. Shikhar Aggarwal for his opening remarks. Thank you, and over to you, sir.
Thank you, Parth. Good afternoon, everyone. I welcome you all to our earnings conference call of Q4 and full year FY '22. I'm very glad with the outstanding performance the team has delivered this year, and our numbers surpassing definitely the levels of pre-COVID in terms of revenue. With the reopening of borders across geographies and increasing business and leisure travel, we are seeing sustained growth month-on-month, which has resulted in revenues of INR 850 crores for FY '22.
During the last quarter, we reported a revenue of INR 254 crore, which is up 75% year-on-year, largely driven by organic growth and strong rebound in our core business of Visa, Passport and consular services. According to our recent report, by World Travel and Tourism Council, a massive increase in the global international inbound travel is expected with a busy summer ahead for key destinations across Asia Pacific, Europe and Americas.
Although there was a short disruption caused by Omicron variant in January 2022, we are very optimistic about our growth prospects and are confident that we can take the company on a new trajectory in the coming quarters. In Visa and Consular business, our growth would come from multiple fronts, new clients, new geographies and enhanced services to the existing clients.
A lot of focus is also on additional services, which help us in utilizing our map network and infrastructure thus enhancing efficiency and margins. With respect to the national business correspondent, Starfin Business, we are currently in panel with 5 banks: State Bank of India, Bank of Baroda, Punjab National Bank, Central Bank of India and Uttarakhand Gramin Bank.
And our short- to medium-term goal is to tie up with more banks and become one of the largest players in the field. There are a lot of tenders that are coming out, and we are eligible to bid for all of them and strengthening our portfolio.
In Citizen Service business, after the COVID effect, we are now successfully building executional capabilities through our projects in Punjab, U.P. and Rajasthan. Here, our growth would come from more such contracts in other states of India as well as international markets. We've already established international experience through our contracts in UAE, Estonia and Afghanistan.
We are further targeting missions and embassies that already we have good relationships and are growing businesses with them. As you know, we have put in a lot of effort over the last few years to strengthen our balance sheet. Our receivables have come down drastically to INR 22 crores, which is a significant decrease. Our net cash position is INR 400-crore-plus. As a way of giving dividends back to our shareholders, we have decided for a bonus and an interim dividend that we declared -- interim and final.
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 contracts where we do upfront collection from our customers and are not dependent on money from the governments. We believe that digitalization will be the mantra and the post-COVID world and are exploring opportunities for inorganic growth, which will give us the next leg of growth.
This is all from my side. I'll now hand over the call to Amit Sudhakar, our Chief Financial Officer, for further update on financial performance. Thank you.
Good afternoon, everyone. Let me brief you on the financial performance for the fourth quarter and full year ended of the financial year FY '21-'22. During the quarter, we reported a revenue of INR 254 crores, a healthy increase of 75.5% Y-o-Y and 11.8% Q-o-Q, mainly driven by bounce back of Visa and Counselor business and outperformance in the Citizen Service businesses.
We are seeing good momentum in all our businesses and are optimistic of sustained growth in the coming quarters. EBITDA for the quarter stood at INR 35 crores compared to INR 10.1 crore in the corresponding quarter last year and INR 25.6 crore for Q3 FY '22.
The EBITDA margin for the quarter stood at 13.8% which was 680 basis points higher compared to the corresponding quarter last year and 250 basis point jump when compared with the previous quarter Q3 FY '22. This is a reflection of the fact that our operations have stabilized. PAT stood at INR 35.2 crores for FY '22 as compared to INR 28.3 crores in the previous quarter and INR 23 crores in Q4 FY '21.
PAT margin for Q4 FY '22 stood at 13.9% compared to 12.5%, a jump of 140 basis points compared to the previous quarter FY -- Q3 FY '22. For full year ended 31st March '22, we reported a revenue of INR 849.9 crores as compared to INR 478.4 crores for the same period last year, a healthy increase of 78%. EBITDA for FY '22 was INR 106.9 crores, while it was INR 39.8 crores for FY '21.
EBITDA margins have increased to 12.6%, a jump of 430 basis points from FY '21. PAT for FY '22 was INR 111.2 crores when compared to FY '21, it was INR 50.3 crores. PAT margins for FY '22 was reported at 13.1% compared to 10.5% in FY '21.
Please note, the company has surpassed its pre-COVID level of profitability, which was INR 105 crores in FY '19. The net cash bank and equivalent balance stood at over INR 400 crores as on 31st March 2022.
In line with our focus on rewarding shareholders, we implemented a bonus issue of 1:1, that is on bonus equity share of each for 1 fully paid equity share held. Board has considered and recommended a final dividend of INR 0.25 per share post bonus aggregating to INR 5.12 crore. This, together with the interim dividend of INR 1 per share, the aggregate to INR 15.4 crore of dividend payout for FY '22.
This is all from my side. I would now request the moderator to open the call for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investments.
Indeed, it is a very fantastic result and so many congratulations, all of you, for this hard work. Sir, when we are -- where we are planning to reinvest money, INR 400 crore which we are having? Are we looking for organic or inorganic growth. Secondly, such enhanced margin and growth possible in current year, if you give few words, it will be helpful for us.
Correct. So Amit, I will take this. This is Shikhar this side; and Amit, you can add on. So as you know, this money that we have got INR 400 crores upwards of cash has been 10 to 15 years of hard look of the company had generated this cash, and last year has been the biggest in terms of profitability and revenue for the company in spite of only 60% of the application count.
As a way of rewarding shareholders, we've already announced buyback. Dividend also interim plus final has been the highest in the history of the company. We are looking at inorganic growth opportunities, both in the visa outsourcing and citizen service space, banking correspondent space, and we have started due diligent on some companies.
Also important point to note is that in the next 2 years, we are already working on a lot of bigger contracts, wherein money will be required to be deployed. So that is the reasoning that what we will do with the money. Currently, Amit, you can please answer about the margins and what we are doing in the fixed deposits...
As Shikhar said, they are -- we are working on these new contracts, which are going to be of a big size, which will require initial investment in the CapEx and making these different centers all globally. Over and above that, what we are trying to work is on the inorganic growth, wherein we have shortlisted companies in our field and are in a very advanced stage of discussions with them. So hopefully, in the current financial year, you will, say, a few [ years ] we are able to close those. So we are -- where we are looking at using the surplus cash which we have on the books.
Yes, yes, yes. I'm the shareholder of this company since 5 year and attended to AGM also. Really, I knew you are doing very hard work.
Thank you, sir.
Thank you.
[Operator Instructions] The next question is from the line of Nitin Padmanabhan from Investec. As there is no response from the participant, we'll move to the next question, which is from the line of Adithya, an individual investor.
Hello? Can you hear me?
Yes, go on.
Yes. Sir, first of all, congratulations on a good set of numbers. Sir, I had a couple of questions. Sir, on the margin front, gross margin trends, as I can see that we have been around 32% to 33% during the year. So going forward, is this margin sustainable or will be around 29% to 30%? What is your take on this?
Should I -- Shikhar, should I take it?
Yes, Amit. Yes.
Okay. So Adithya, the margins of 32% to 33% is what we are able to do because of the improvement in our efficiency, cost efficiency as well as rationalization of some costs. Going forward, we are very optimistic that we will be able to maintain this. And hopefully, by year-end, we may improve it by another 100 to 200 basis points. So that is our internal target.
And this will be able -- we will be able to achieve once the economy of scales kick in, that is with the volumes going up, which we anticipate with the global unlocking of travel will help us in achieving this improvement on the margins.
Okay. Okay. And is it like -- do you foresee that, I guess, in the last call, you had mentioned about the 50% capacity that you are working on, right? So, like, based on the improvement on that level, we see that going up, the gross margins?
That's right. That is what we are anticipating. Correctly, as we said last time, it was about 50%, now we are at around 60%. Hopefully, as it goes up, this margin will go up.
Okay. So this year, what is the target? Would be at around 70%, 80% or more than that?
See, we think that in the current next couple of quarters, we should reach that 80% to 90% of the turnover volumes in the Visa business.
Okay. Okay. And sir, like on the balance sheet side, we see an investment of around INR 70-odd crores. If you can just help us understand the breakup of that?
Okay. So in our balance sheet, if you see the cash and equivalent what we have -- the INR 70 crores is basically -- there's an old investment, the incremental investment of INR 48 crores has been in the new bonds which we have invested of blue-chip Indian companies, the dollar bonds, which are from Tata Motors, Tata Steel and JSW, and other Power Finance Corporation just to improve our yield on our treasury's income. So those are the incremental investments which we have done during the year.
Okay. And what is the yield amount that we'll be expecting out of this?
The yield?
Yes.
On these bonds, the yield is about 3.5%.
Okay. Okay. And this amount, do we plan to further invest any more amount as we have cash available with us or is it the maximum?
Yes. So we are trying to do that. We'll be working out right proportions which we should keep in bonds versus the fixed deposits, which we currently have, just to ensure that we have a decent amount of return on our treasuries.
The next question is from the line of Nitin Padmanabhan from Investec.
Am I audible?
Yes, very much.
Okay. Wonderful. So, a couple of questions actually. One is if you could give some color on -- you did mention that the recovery in visa is around 60% versus 50% last quarter. But you also won a couple of contracts over the last year and so on and so forth. Could you give us some sense in terms of all the new contracts, have they really started in terms of flowing through into revenue? And when we -- this recovery is obviously for the old contracts, but for the new ones, have they started flowing into revenue?
Correct. So Nitin, Shikhar this side, I will take this question up. So see, as we discussed in the last year, only 50% of the visa account had come back if we talk about 2019 level. And BLS had achieved the revenue, which is highest in the history of the company, even on the 50% visa account because of increase in margins and decrease in cost. So right now, the numbers have increased from 50% to 60%.
Majority of the contracts that we won in the last 2 years, for example, Brazil Government in China or the Portuguese Government in Russia or the Italian Government in Russia, unfortunately, are in currently in territories, which are still kind of closed down. So if we talk about Russia, numbers are not increased because of the geopolitical scenario in that region. And if you talk about China, the country is still semi-closed.
So majority of the contract that we won were -- typically, these have been the biggest markets in terms of visa outsourcing numbers globally, Russia and China. And these 2 markets are still kind of closed. So all the contracts that we won, the revenue has still not started to flow in. That is why we expect a good boost in revenues as soon as these countries open up from our existing contracts as well as the new contract that we have won in the last 2 years.
Sure. And when we look at this delta on revenue, which is this year is around INR 850 crores and FY '19 was around INR 800 crores that -- what explains that delta? Because if visa is down, is it primarily D2C or how should we think about it?
Correct. So the delta, the primary reason is there has been an increase in account of visa consular services -- some services account has increased, whereas visa has dropped. And plus the revenue per application has increased. We have got increase in service charges in certain contracts, plus there's a change in the mindset of people. People have started buying a lot of extra services like mobile biometric or premium services, and that definitely gives us a higher revenue per application and higher margin also. So this is, I think, primary reason why the revenue has increased.
Sure, that's helpful. Just 2 quick questions as well. One is you alluded to the D2C opportunities in other states and possibly other countries as well. Anything that you could highlight that are standout at this moment? And are there business models in those contracts similar to what you have currently? So that was 1 question.
And second one was on the CapEx. CapEx looks slightly higher than what it was historically, just broad thoughts there as well? And how should we should think about the absolute CapEx number on a going forward basis?
Correct. So I will take the first question up, Nitin. So as you know, conventionally, BLS 85% to 90% of our revenue has been from visa consular business, and 10% to 15% having from e-government or the G2C business. As we've started a contract with the Punjab government a couple of years back, it has performed very well for us. We are getting a good profit, although the revenue is around INR 60 crores to INR 70 crores a year.
So we expect it to implement the same things in U.P. and Rajasthan, but the model is very different, but we do not want to risk any collection of money from the public -- from the government directly. So that is why all these models are collection of money from the citizens. So as you know, we also started our visa outsourcing business on the behalf of the Indian government.
As we grew, we first got the government contracts and then we eventually started off with the foreign governments. So that was the main objective. We also want to grow with the Citizen Services in India and then take it global. We've already, as a matter of fact, already start looking for Estonia, UAE, Afghanistan on the basis of that.
So that was the reason for starting with Citizen Service business. And we expect definitely not the same amount of margin like Visa Consular business, but the numbers are very high in Citizen Service business. So that was the reasoning. And going forward, we feel the ratio would be maintained because of the growth opportunities of $1.5 billion to $2 billion contract in this visa outsourcing and a lot of opportunities in citizen service. We will maintain the ratio and visa outsourcing will always be at 85% to 90% of our gross revenue. Regarding the second question, Amit, can you please answer, then I can add in.
Yes. so as Nitin the -- as we mentioned in the earlier quarterly calls also, our normal CapEx range is about INR 7 crores to INR 12 crores a year unless there's a big project comes in and then there is additional CapEx. On the running contracts, normally, it remains around INR 10 crores or so.
But this year, because of the COVID and we've gone into a new -- we've changed our offices and realigned our expenses, so there was a higher CapEx in that context as well as we have spent a major portion in the current year on improving our IT-enabled systems and platforms.
So on that, we have spent, during the year, about INR 15 crores-or-so, which will get another INR 5 crores, INR 6 crores will get further paid and then the setup of IT-enabled systems will get in place.
So on a going-forward basis, it should be around the historical run rates, roughly?
That's right. That' right. INR 10 crores to INR 12 crores, but any new project will require an additional -- depending on the size of the project.
[Operator Instructions] The next question is from the line of Rahul B, an individual investor.
Congratulations on a very good set of numbers. I hope I am audible?
Sure. We can hear you well.
Yes, you are.
So my first question was actually on Starfin. I just wanted to understand more on how is the subsidiary doing? What are your growth plans? And how do you see the subsidiary going ahead? Any kind of opportunity that you can throw light on in this space?
Sorry, can you please repeat this question?
Yes. So the question is on the subsidiary, Starfin. I just wanted to understand what are the growth plans for this subsidiary and any kind of opportunities that you can throw light on?
Yes. So sure, so as you know, a couple of years back, we've bought a company, Starfin, which was a banking correspondent for State Bank of India. So essentially, our model as a company has been to collect money from the citizens. So on the same model as RBI has a policy of opening bank margin in Tier 2, Tier 3 cities, which banks are not opening themselves, so hence, this model of banking correspondent.
So this is a wonderful model where we get annuity income and fixed transactions, banks, SBI gives us commission on every transaction. After we won that contract, we also additionally won 4 new contracts with other banks which were Central Bank of India, Punjab National Bank and a couple of other banks. So our reach has grown to 5,000 branches within India.
And I think going forward, this is a very good model in which bank is increasingly pushing to open more bank correspondent points across India, wherein there is no upfront major investment from the company point of view, and there's only OpEx expenses and we get every month, every transaction we get revenue. So this is the model. Amit, do you want to add anything on that?
Yes. And see, as you said, we are very positive on this sector. And as a vertical, we want to grow this. We are looking at expanding as Shaker said, we are looking at new tenders where we can enhance the size of the business. On the other hand, we are also looking at a noting growth where we are looking at if we can find good companies and their business where we can add to the existing network of our -- by adding more of CSP, we call them, in the system. So we are seriously looking at both the options of growth in this area.
So to add on to that, what you just mentioned, any kind of -- anything that is in the plans for -- in the sense of inorganic expansion? Anything that we are close to or any light that you can share on that?
Yes. So just to give you a background, we have 3 verticals. One is our Visa Consular, one is e-governance and the third is a banking correspondence. So we are seriously looking at all the 3 verticals and expanding their sites. And here also, we are looking at a couple of companies. Again, nothing has finalized. Therefore, we cannot talk about it. But we are looking at all the possibilities.
Okay. Fair enough. Okay. So I was just going through your financials historically, especially, and I just wanted to get some sense from you, like I understand currently, I'm sure we are confident enough to say that the worst times of COVID are behind us, and I think we are well into the pre-COVID times on the revenue front. But I just wanted to understand also on the margin front, we've done previously also something close to 20%. Is that something that is achievable again in the future and your thoughts on that?
See, Rahul, that 20% when we did, we had a Punjab contract, wherein it was an annuity-based business and those margins may not be practically workable, but we are looking at a 100 to 200 basis point improvement over the last year on our margins going forward. Again, it will be subject to the reopening of all the global travel business and economic scale will be able to give us that higher margins. because we have rationalized our cost during this COVID period. So we don't see the cost rising on the same basis as the revenues will move forward quarter-to-quarter going forward.
But these cost rationalizations that you've taken probably in the last 2 years or so, won't these be reversed going ahead? Or is it just like -- of course, there will be some costs that now with reopenings and even just with everything opening up once these costs again come back into play?
Yes, they will. But what has happened, I would say, the positive side of COVID is that we relooked at all the costs which we had, and we have realigned that coming back to that pre-COVID level, we may not have the same cost which we were incurring earlier. So that is something which we have done.
We have rationalized it, and the rentals have rerationalized the HR, we have looked at people where we have rationalized that we can do higher volumes with less people than the rentals and others have been renegotiated. So those benefits will come once the volumes come back.
Okay. And so you said something like 15%, do you think is sustainable in margins, operating margins?
That's right, once the volumes comes in.
[Operator Instructions] The next question is from the line of Sumit from [indiscernible] Capital.
Congratulations on a good set numbers. Two questions. First 1 is around your Dubai operations. I believe bulk of the profits are generated in Dubai. So can you tell us a little bit about the kind of setup you have in Dubai in terms of number of people and some of the contracts that you had there, both for on the sales side and also on the cost front, what kind of contracts or if you are outsourcing some of your costs to other vendors?
So let me take this up. First of all, to correct you, bulk of our revenue is not generated in Dubai. So basically, when we started the -- sorry.
I understand your revenues are not in -- sorry, I meant profits.
Correct. So yes, so as you know, when we started the company, BLS International started with 100% of the revenue generated was abroad. So -- because of the Indian Embassy outsourced contracts. So as we also started with different embassies, we also started with Indian in UAE. And right now, we are working for a couple of governments, the Spanish, UAE government and the Indian embassy in UAE.
On top of that, we have stepped down subsidiaries all around the world where we are actually doing the work, be it in Russia or Canada or U.K. So money, whatever is generated over there on profit is generated is consolidated in UAE since this is the holding company of the ultimate parent company, which is in India. So that is the reason why -- but the bulk of the money is not generated here.
We are generating money through our contracts all across the world.
No, I just want to understand, what I understand is that you have operations in Dubai which build to your operations in Russia or Spain or wherever they are for services that you are providing from Dubai. And that's what I want clarity on. What kind of services are you providing from Dubai and what kind of manpower do you have? What kind of services are you providing? So I need clarification on that.
So we have back-office support, we have call center support. We have technical team who sits out of here to support all our operations globally.
So how many people do we have in Dubai?
Amit, would you like -- would you have a number on that?
I don't have the figure in front of me, but I can come back to you on that later.
No, why I'm raising this question is that because Dubai is now getting fairly strict in terms of creating enough substance in Dubai or UAE, in case you are billing from UAE, right? And that's why a lot of companies are now even creating enough substance in Dubai, so I wanted to understand what is the approach that you are following?
Sumit, our business model, the Dubai company provides all the logistics as well as technical support to the global subsidiaries. For example, the IT setup is all being managed from Dubai and the operations are being handled at all the respected countries. So what happens at whatever volume of business they do they build them for their technical support on their revenues.
And therefore, the money is then moved from there to as a technical support and other logistics supports the funds comes to Dubai from there and they are built there. So it's basically a complete support function.
How many people do you employ in Dubai?
I'll check out, but it will be in the range about 200 to 250, but exact number I don't have at the moment in front of me.
Okay. Sir, next question is around what kind of -- since let's assume that FY '23 and then going on to FY '24, we are -- COVID is behind us and we are -- should see normalized operations. So what kind of revenue growth are you seeing, given the current contracts that you have on hand for FY '23 and what -- and FY '24?
See, I think where we are today, as you know, last year numbers, which we have achieved is in the history of the companies have been achieved at only 60% of the annual application count that we did in 2019. So as the number grows, we expect the number to grow going forward. From our organic business, where we are currently running contracts, we expect growth to come with those increase in application counts when exactly those increase in accounts come, we don't know. But we are focusing on increasing revenue per application. Inorganically, we are looking at a lot of other contracts that we are bidding currently after the COVID is Cycled 2 year, everything was stopped. A lot of governments have started working, and we are in different processes at different stages with different governments. So once that comes in, I think our revenue should grow further. So I think next year, definitely, we will see a further increase in whatever we have achieved this last year. So that has become the base for the company now.
So there should be a further increase. I do not know exact percentage. We are sitting in May right now, but there will be a different increase both in 2023 and '24.
So sir, you mentioned that Visa services, you are still at 60% of pre-COVID levels, and you expect it to go to 80% in the current year. So should we assume that you'll see a 30% growth in your Visa services business in FY '23?
Yes. See, I do not give an exact percentage because we don't know if this 80% comes in because we are assuming a lot of countries like Russia and China, which have been closed, things improve there and the numbers start coming from there. So a lot of it depends on that. But if that happens, definitely, I think you will see the numbers that we are discussing right now.
The next question is from the line of Akhil Hazari from RoboCapital.
Am I audible?
Yes, you are. Please go ahead.
Yes.
Yes.
Sir, most of my questions have been answered. I just wanted to know regarding other expenses this quarter, so in the last conference call, it was mentioned that there was a one time INR 6 crore that had been put into other expenses, and that's why it was so high. But this quarter, we also saw other expenses has been quite high, like it was reduced, but not by much. So I just want to know what is the reason behind this high other expenses currently?
Yes, Amit, go ahead.
Akhil, the main -- I will have to come back to you on the breakup. And if you can send me a mailer, I will give you a breakup also of this.
Okay. Okay. Fine. No problem. No problem. That's it from my side.
The next question is from the line of Ravi Naredi from Naredi Investments.
[indiscernible] which comes after a long time. So how we changed working with the U.P. and Rajasthan government or Punjab government currently?
Sorry, I could not hear the first part of the question. Can you please repeat?
Our fund struck with the Punjab government, is it correct in past? So how we managed...
Yes. Correct.
So how we manage this time with Rajasthan and U.P. our funds do not block there?
So as a company, we decided that we are not going into any contract wherein receivable is due from the government. So all the work that we are doing either in U.P. or Rajasthan is also upfront collection of money from the citizen. So no fund will be stuck with the government.
Okay. Okay. And anything we are doing with Punjab also?
So Punjab, we already got a new contract last 3, 4 years back. And wherein we are collecting upfront money from the citizens. And there is a change in the contract that we did 4 years back, and this is what's happening. Okay.
And are we aggressive in the Indian state or in Visa service?
We are more aggressive in Visa services, as you know, it's 85% to 90% of our revenue globally. So definitely, we are more aggressive, but we are open -- yes, we are looking at opportunities for citizen services globally, that was the aim of starting citizen services in India also to gain experience and volumes as we did with even the Visa business. We started in Indian government same model we are offering here.
Okay. And the similar work Punjab, Rajasthan, any other states that are in our list where we may start any...
Yes. We are talking to a couple of states, but the model -- when the model is similar to what we are doing in all these 3 sets only then we will go ahead and bid. So currently, we are discussing with a couple of states on the model.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you everyone for joining the conference call of the BLS International. We did our very best to achieve these results this year and this is what we expect to do better next year, this financial year. Thank you so much.
On behalf of BLS International Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.