Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BLS International Services Ltd (BOM:540073, Financial) reported a consolidated total income of INR510 crores for Q1 FY25, marking a 31% growth from the same quarter last year.
- The company achieved its highest-ever quarterly profit with a profit after tax (PAT) of INR121 crores, reflecting a 70% year-on-year growth.
- Revenue from Visa & Consular Services grew by 36% to INR414 crores in Q1 FY25, driven by an 18% increase in the number of visa applications processed.
- The EBITDA surged by 66% to INR133.2 crores, with the EBITDA margin improving to 27% in Q1 FY25 from 21% in Q1 FY24.
- The company completed the acquisition of iDATA, a leading Turkey-based Visa & Consular service player, which is expected to further solidify its presence in the European geography and contribute positively from Q2 onwards.
Negative Points
- Despite strong financial performance, the company plans to raise INR2,000 crores, which may indicate potential future dilution of equity.
- The transition from partner-run models to self-run models has increased depreciation and employee costs, reflecting a shift towards a more asset-heavy model.
- The Digital Service business revenue remained flat at INR78.5 crores in Q1 FY25 compared to INR78.7 crores in Q1 FY24, indicating stagnation in this segment.
- The company faces potential risks from geopolitical tensions and global economic uncertainties, which could impact its operations in certain regions.
- There is a lack of specific guidance on the expected blended EBITDA margin post the integration of recent acquisitions, creating uncertainty about future profitability.
Q & A Highlights
Q: Hi, sir. Congrats on a strong set of numbers. My question is on margins. So we have witnessed substantial growth in the EBITDA margin in Visa & Consular business. And as I understand, number of iDATA is yet to be added to the numbers. So what led to this growth? And I mean, how much of our partner-based centers are transitioned to the company-owned model? And what is key even behind the growth in the EBITDA margin in Visa business?
A: Yes. Thank you, Nikhil. So as you know, we grew 600 basis points in EBITDA margin level, now we are standing at 27%, 28% EBITDA margins from 21%. And there are, I think, a couple of factors for this growth. Definitely, if you see that in some countries, we have transitioned to our one model, I think four, five countries have already transitioned, more three, four, five countries are expected to transition. We have gotten an increase in service fee. We have won new contracts at higher service charges, even though existing contract that we re-tendered we have won at higher service charges. So the service fee has increased. Also, there has been an increase in some conversions of different services across the world. So I think that is the reason for increase in EBITDA margin. And yes, we have also seen a growth in revenue of 36%. Volume of applications have also grown by 18%. So I think those are some of the factors that have led to increase in EBITDA margin, and we think that this is sustainable and it can grow further. And yet acquisition of iDATA, the numbers will be added from second quarter.
Q: Okay, sir. And lastly, sir, despite having INR1,300 crores-odd on our balance sheet, we are planning to raise INR2,000-odd crores. I believe this is for acquisition as well. So is it fair to believe you have already identified the target company?
A: So Nikhil, first of all, this money as of the INR1,200 crores that we have on the books is as of first quarter end and post that the acquisition of iDATA was done, so money was paid from that. Also, Aadifidelis Loan Solution that we've announced, we will be using this cash. So cash level definitely will be in the short term, will be utilized in these acquisitions. Obviously, in the next few months, years, we expect more cash to come into the company. But see, this was an enabling resolution that we passed in the Board meeting because in the followup AGM that will happen, we wish to take that up. But definitely, we are constantly looking at growth opportunities of the company. Organically, we are looking at new contracts, newer geographies and inorganically these acquisitions. So definitely, we are talking constantly to different outsourcing companies, not only in Visa, but allied sector as well. So this was an enabling resolution, and that is why we passed it. But definitely, we have planned in the future as and when companies that we're talking to, one of it gets closed, the bigger acquisitions, then we will be accordingly raising the funds.
Q: Mr. Aggarwal, you did miracle in company. Congratulations. And we are a shareholder more than 5 years, so we knew this company throughout. We wish all the best to you and your employees. Sir, my question is 55% controlling stake you bought for loan distribution, so it is for BLS or BLS E-Services?
A: Thank you, first of all. I think the entire team of BLS International is working hard to deliver good growth on a sustainable basis. So definitely, the future also, we expect good growth coming in. BLS E-Services, this company has been bought the loan distribution business. It will be a subsidy of BLS E-Services, 55% will be held by the BLS E-Services.
Q: Okay. Secondly, after 100% acquisition of iDATA, how much cash we have or we raised some debt?
A: As of first quarter, we have given the numbers of INR1,200 crores-odd that we had in the first quarter. Post that, we have utilized certain cash in the acquisition of iDATA, I think we will get the exact numbers that we can -- we will find out the numbers, yes.
Q: So on the margin expansion, obviously, the margin expansion has been pretty decent and it has been the highest margin. So we said that transitioning from partner centers to self-managed centers as the main reason. So if you can throw some more light here in terms of how many centers we have in terms of self-owned and outsourced as of now? And as far as my understanding goes, shifting to the self-management also involves the CapEx, like only center. So is it turning towards more asset-heavy kind of a model?
A: So Amit, first of all, this increase in margins, one of the reasons is the shift from partner-run models to self centers, but there are multiple other factors. If you see, we have got increase in service charges from our existing client government, new tenders, we have won at good higher service charges. There has been increase in different value-added service fee also, increase in conversion as well. So there were multiple factors that has led to an increase in margin, and that is sustainable. The CapEx that pertains, I think Amit can add on that, yes.
Q: Okay. And we have also seen quite substantial increase in the number of applications and also the revenue per application has been increasing. So, in terms of the total applications, if you can provide how much has been from Indian and foreign centers or missions, what is driving this higher realization and higher volume growth? Is it some specific center, specific countries? Or is like widespread?
A: So see, this is coming from new contracts which we have won. And in India, we do not more than 10% of the total revenue. So 90% is all outside India. And the growth is coming from India as well as from outside India in these numbers. It is on higher volumes from the existing centers as well as the new centers, which we have opened for the new contracts which we have won over the last one year.
Q: Thanks for the opportunity and a wonderful set of numbers. If you can just talk a little bit about cash flow, the EBITDA growth and how much of that EBITDA has translated into cash flow from operations would be very helpful?
A: So Samir, if you see our numbers and the growth in cash flow, more or less the EBITDA will match with our incremental in the cash. If you see the -- we have given our quarterly cash balances, the increase if you see is
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
