Bls International Services Ltd

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Bls International Services Ltd

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Earnings Call Analysis

Despite a drop in volume because some countries didn't open up, the company maintained revenue levels and expects to continue its trend of over 50% CAGR growth. Margins in the Digital Service segment are around 14.5%, with an overarching objective to grow margins across all business areas. The recent acquisition of a niche player with higher margins than BLS is expected to deliver returns within 5 to 6 years while providing opportunities for further growth and qualification for more tenders. The acquired entity posted EUR 20 million in revenue and EUR 10.2 million EBITDA last fiscal year. Overall profitability has increased, and minor quarterly fluctuations are anticipated, particularly in digital services.

A key takeaway from the earnings call is the company's capability to maintain revenue, even though there was a significant drop in volume. Despite this downturn, they managed to deliver more than 50% CAGR growth over the last three to four years.

The company is strategically focused on expanding its margins across all verticals, including the newer E-services, fulfilling a critical business objective.

Through the recent strategic acquisition of iDATA, a niche player with operations in certain geographies like Germany and Italy, the company gains higher margin potential. The expectation is to recover the investment within 5 to 6 years due to the high-commission government contracts and the operational economies of scale after later integration.

Thanks to new contracts with higher service charges and an increase in additional services, such as biometrics and premium lounges, there has been an increase in profitability. The company plans to sustain this enhanced margin level going forward.

BLS International has seen its EBITDA margins jump from 15% to over 20%, citing this improvement as a point of consistency they aim to maintain.

The company raised around INR 300 crores, earmarked for growth avenues such as banking correspondent, e-governance, assisted E-services, and existing technology infrastructure. This fund will also support the launch of BLS stores within the network.

BLS International's R&D budget stands around INR 20 crores annually, with expectations to increase investments in technology parallel to revenue growth. Meanwhile, the company has a steady-state CapEx of approximately INR 15 crores per year, with additional CapEx stemming from new contract requirements.

Upcoming strategies include the consolidation of iDATA’s profitability into BLS’s financials and geographic expansion to leverage iDATA’s established market positions.

Significant market components, such as China and Russia, which make up about 20% of the company's global volume, have seen differing impacts. While China is showing signs of recovery, Russia remains stagnant.

Leadership has expressed confidence in sustaining strong financial metrics such as EBITDA and PAT. They have reassured the commitment to continued growth and encouraged investors to reach out for any further queries.

Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the BLS International Services Limited Q3 and 9 Months 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 that 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 Managing Director, BLS International Services. And over to you, Mr. Aggarwal.

Good afternoon, and good evening, everyone. Welcome to our earnings call for the quarter and 9 months ended 31st December 2023. I have on call with me today Mr. Nikhil Gupta, Managing Director; Mr. Amit Sudhakar, Chief Financial Officer of the company; Mr. Gaurav Chugh, Head of Investor Relations; and Adfactors, our IR team.

I'm glad to share with you all today what we all have done lately and what we aim to do in the near future. We have made good progress in the past few months, crossing significant milestones and have entered the last quarter of this fiscal on a strong note.

Talking about our strategy. We have been speaking to you regarding our strategy of focusing on both organic and inorganic growth opportunities and utilizing our cash in an efficient manner and generating significant returns. And in line with our strategy, we had acquired Zero Mass in 2022, which significantly expanded our operations. And in January 2024, we have announced signing of a definitive agreement for acquisition of 100% stake in iDATA for an enterprise valuation of EUR 50 million. iDATA is a prominent player in visa and consular services and is based out of Turkey.

Interestingly, iDATA has been the exclusive provider of visa and consular services to the Italian diplomatic mission since 2006 and German government since 2012 in certain geographies. The acquisition will be funded primarily through internal accruals of the company and would be EPS accretive from day 1 of the acquisition. We expect the acquisition to be concluded by end of the fiscal, subject to government and regulatory approvals.

iDATA operates more than 37 visa application centers across 50-plus countries, serving diplomatic missions of Germany, Italy and Czech Republic. We believe this acquisition will mark a significant milestone in BLS International journey. This strategic move underscores our commitment to becoming a global leader in tech-enabled services for government and citizens.

We believe that this acquisition will further expand our operational footfall as well as market share in the visa service segment. Post consummation of this transaction, we work towards integration of the business, keeping in new various synergistic aspects, including achieving operational efficiencies and exploring new opportunities.

On the operational front, let me highlight various awards we have won during the period. We have been re-awarded the contract for visa services for the High Commission of India and Canada. This includes operation at HCI in Ottawa and CGI in Toronto and Vancouver. We will continue to provide services like consular support, passport processing and visa consultation.

On Digital Service front, we secured several contracts from State Health Agency-Ayushman Bharat-Pradhanmantri Jan Arogya Yojana in Uttar Pradesh. This partnership involves handling Ayushman cards on behalf of National Health Authority IT Platform being chosen as a [indiscernible] liability in delivering crucial government services.

Company was awarded another significant contract from UIDAI to conduct a comprehensive data quality check for Aadhaar information. The project spanning over 3 years and is extendable by 2 years.

Last but not the least, it is a momentous milestone. We recently completed the IPO of our subsidiary, BLS E-Services successfully. As BLSE makes a debut in the public market, it provides an opportunity for us to participate in the company's growth trajectory, while enabling BLSE to expand its operations and enhance its offering in the business segments. The proceeds will be utilized towards growing our E-service business, both organically and inorganically.

We see tremendous headroom for growth in this business in the coming years. Our endeavor is to continue to expand our operations through both organic as well as inorganic growth of initiatives and serve people across the globe. Technology and process-oriented approach will remain a key focus area, and we will continue to innovate and strengthen our business operations for the government and serving them in the best possible manner.

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.