BLS International Services Limited (BLS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 and FY '24 BLS International Services Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gaurav Chugh, Head of Investor Relations from BLS International Services Limited. Thank you, and over to you, sir.

Thank you, Rowan. A very good afternoon, everyone, and thank you for joining the quarter 4 and FY '24 earnings call of BLS International Services Limited. To give you all, an overview of the company and to discuss the operational and financial performance, we have with us on the call today, Mr. Nikhil Gupta, our Managing Director; Mr. Shikhar Aggarwal, our Joint Managing Director; Mr. Amit Sudhakar, our Chief Financial Officer; and Mr. Lokanath Panda, COO of our Digital business. The company's investor presentation and press release has already been uploaded on the stock exchanges as well as on the company's website and we hope you all have had an opportunity to go through the same. Let me remind you that this discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It may be viewed in conjunction with our business risk that could cause future results, performance or achievements to differ significantly from what is expressed or implied by such forward-looking statements. Now I would like to hand over the call to Mr. Shikhar Aggarwal for his opening remarks, post which Mr. Amit Sudhakar will discuss the financial performance, and then we'll open the floor for an interactive Q&A session. Thank you, and over to you, Mr. Shikhar.

Thank you all for joining us on this earnings call to review our operational and financial performance for the quarter and full year ended March 31, 2024. We trust you had the chance to review our results, press release and the latest investor presentations, which are available on both the stock exchanges and our company's website. I'm pleased to report that our company has delivered a robust performance in this fiscal year 2024 with consolidated profitability surging by almost 60% year-on-year. As we embark on fiscal year 2025, our commitment remains steadfast to achieving strong financial results through our focused strategy and structural adjustments to our business model, particularly within our Visa and Consular segment. We have transitioned from a partner-backed model to managing our own operations, a move that underscores our dedication to optimizing performance. Our Visa and Consular business has sustained its growth trajectory, experiencing decent increase in both revenue and volumes during the year. The growth as well was supported by the overall expansion in the global travel and tourism industry. Gross revenue in the Visa and Consular business increased by almost 8% to INR 1,361 crores, contributing around 81% of the consolidated revenue. The business generated EBITDA margins of 22.1% in FY '24, up sharply around 726 basis points year-on-year from 14.8% EBITDA margin in FY '23. We successfully renewed and rewon our global contracts with the Spanish government and the contract for the Indian government in Canada, augmenting our service portfolio to enhance our offering. Additionally, we secured another additional global contract from Slovakia and secured visa outsourcing contracts from Germany, Italy, Poland, Thailand, Malaysia, Hungary, Czech Republic and Portugal that we started just last week. A significant milestone in our global strategy was a definitive agreement to acquire a pertinent stake in iDATA, a leading provider of visa counselor services based in Turkey. This strategic move aligns seamlessly with our objective and is expected to enhance our market presence substantially. We expect this acquisition to be completed by 30 June 2024, subject to necessary regulatory approvals. To elevate customer experience, we have implemented several initiatives across our value chain, including a new appointment system with advanced facial recognition technology, a dedicated mobile app for Italian customers and a revamped website platform. Our commitment to providing essential services such as counselor support, passport processing and visa facilitation remains unwavering. In the digital service domain, we have witnessed commendable growth in both revenue and profitability, highlighted by the successful completion of the INR 300 crores IPO of BLS E-Services Limited. The funds raised will fuel the expansion of our digital service arm enabling investments in new technology, service offerings and outright efforts. Our digital business expanded its reach to over 1 lakh touch points and 1,000 BLS stores, reflecting our dedication to promote financial inclusion and digital empowerment. Partnerships with public and private sector banks exemplified by initiatives like Har Ghar Suraksha and DSB Dastak underscore our commitment to extending banking services to underserved population of the country. Our innovative solutions such as the Business Facilitator model and iris scanner have been instrumental in driving success and delivering value to our partners. We have recently launched doorstep banking services tailored for the elderly in 25 states and union territories, making banks more assessable and convenient for them. This service aims to address the challenge faced by elderly in accessing traditional banking facilities. Looking ahead, we are focused on organic growth initiatives and strategic acquisitions to expand our market share and strengthen our competitive position. Our unwavering commitment to generating sustainable value for our stakeholders, underscores our responsible approach to growth. Now I'll turn over the call to Mr. Amit Sudhakar, our Chief Financial Officer, for further updates on financial performance. Thank you.

Thank you, Shikhar. Good afternoon, everyone. I'm pleased to present the consolidated financial performance for the fourth quarter and full year ended March 31, 2024. During Q4 FY '24, our revenue from operations stood at INR 447.7 crores. Our Visa and Consular business remained steady in this quarter. Our EBITDA surged to INR 88.7 crores from INR 66.5 crores in Q4 FY '23, showing a robust growth of 33.3% Y-o-Y, primarily due to reduction in service costs. However, employee costs and other expenses was higher this quarter due to change in our business model, including transition from partnership model to direct operational management. This transition resulted in increase in our workforce and expenses on refurbishment of our new offices, contributing to higher other expenses. Our EBITDA margin expanded significantly by 534 basis points to 20.2% in FY '24, indicating an effective cost management and better revenue mix. PBT before exceptional items stood at INR 93.5 crores, up from INR 65.2 crores in Q4 FY '23, marking a 43.4% increase. PAT reached INR 88.5 crores showing a growth of 15.3% Y-o-Y compared to 76.7% -- INR 76.7 crores in Q4 FY '23. In Visa business, the gross revenue for Q4 FY '24 stood at INR 370.4 crores while EBITDA grew by 40.5% in Y-o-Y to INR 77 crores from INR 54.8 crores in Q4 FY '23. Our digital business revenue stood at INR 77.3 crores with EBITDA of INR 13.3 crores in Q4 FY '24. Moving on to full year financial performance. We witnessed a 10.6% increase in revenue from operations, reaching to INR 1,676.8 crores from INR 1,516.2 crores in FY '23 driven by a higher revenue in both the segments. EBITDA showed remarkable growth increasing by 76.4% to INR 345.7 crores compared to INR 221.1 crores in FY '23. Our EBITDA margin improved to 20.6% in FY '24, up from 14.6% in FY '23, indicating a significant expansion of 603 basis points. PAT for FY '24, experienced a robust growth of 59.4% to INR 325.6 crores compared to INR 204.3 crores in FY '23 with marginal improvement by -- with improvement by 595 basis points. The earnings per share for full year for FY '24 was at INR 7.6 per share against INR 4.89 per share in FY '23, registering a growth of 55.5%. In Visa business, the revenue for FY '24 stood at INR 1,361.8 crores, up from INR 1,259.9 crores in FY '23, while the EBITDA grew by 61% Y-o-Y to INR 300.5 crore in FY '24 with a margin of around 22.1%. Our digital business demonstrated a strong performance. For the full year the revenue increased by 22.9% Y-o-Y to INR 315 crores in FY '24, up from INR 256.3 crores in FY '23. EBITDA also increased by 31.3% Y-o-Y to INR 45.1 crores in FY '24. We took pride in being a financially strong company, supported by our low-cost and asset-light business model. As of March 31, 2024, our cash balance stood at INR 1,135 crores, including proceeds from the IPO of BLS E-Services Limited. Further, our esteemed Board have recommended a final dividend for financial year 2024, of INR 1 per share to the shareholders, including an interim dividend of INR 0.50 per share. With that, I would request the moderator to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investments.

Fantastic result you have posted for financial year '24. Sir, iDATA, you mentioned by June '24, we complete acquisition. Can you tell top line, bottom line, our margin of data of iDATA for calendar year '23 or financial year '24?

So see, iDATA, the last audited balance sheet for calendar year '23, they had a top line of EUR 20 million and -- EUR 22 million and EUR 10.5 million EBITDA.

For calendar year '22.

'22. This is calendar audited numbers.

Okay, okay. So after acquiring this company June 30, with complete formality, we are seeing any top line growth in financial year '25?

Yes, that this revenue will get added to our existing growth. Whatever we're doing with our existing business, this will add to that and they are also growing at around 15% every year.

15%. Sir, any modification in the business will happen due to iDATA, so many offices of our other countries will merge with this iDATA in future.

Yes, see the whole advantage is that we will realign our offices with their offices. They are present in more than 10 countries and 5 countries are the common countries where we also have our offices. So the whole idea is to align those offices and get the economy of scales from there.

Okay. And sir, last, our enhanced EBITDA margin, which rises by 600 points, it will be continuing financial year '24, what is your -- financial year '25, what is your prediction?

See, this 20 is now the base, and we are now looking at improving it in the current year and you will see that happening because of the business model we are trying to change from partnership to our own management, which will improve our EBITDA margins going forward as well as the acquisition. This company is generating an EBITDA of around 50%. So the overall EBITDA margin will move up in the current year. We expect that to start happening from the first quarter onwards.

The next question is from the line of Avnish Khara from Investec.

My first one is on the gross margins. So you had a decent quarter-on-quarter improvement, so maybe you can provide some sort of color on why exactly that has happened and whether it's sustainable moving forward?

Yes. As we explained in the previous question, that the business model, the way we are changing it, our margins will go on increasing now because the margin we were paying to the partners will come down. And hence, as we start operations on our own, these margins will start improving. And that we have seen in the last financial year also.

Right. So then is it safe to assume that incrementally, I mean, can you provide some sort of an internal target as to where they'll sort of level off?

Our intention is to be in the, say, around 25%, 27%. That is our target to immediately to reach. And then let's see from there further how we can improve it further.

Right. And what are your effective tax rate expectations for the next 2 years?

We are now around 7% to 8%. It will go to around 12-ish.

Okay. 12-ish in FY '25. Is that fair to assume?

That's right. That's right. Because of -- in the current year, there will be a higher tax in Dubai because of the tax -- they come up with a 9% effective tax. So we'll have some impact of that coming in.

And maybe if I can squeeze in one last question. You've spoken about volumes going down because of Ramadan festival, but that ended in April, right? And we've had sort of 1.5 months of Q1. So maybe you could throw some sort of color on what kind of volumes we're seeing right now? And another question in relation to that, are we also may be planning any price hikes in the visa business?

So taking the second question first, the price rises are not there because the contracts have a fixed price rates, which have been fixed. So we don't have an option of just changing the pricing. But as you said, because of the festival reason, which started from 10th of March, those 20 days, which in the -- I would say, in the last year, it was in the month of April. So now that we have seen the volumes have come back and we'll see a better Q1 on volumes compared to the Q4.

Got it. And on the iDATA front, what kind of ramp-up in revenues do you think is possible for FY '25, given that in '22 calendar year, they've done about EUR 20 million, so any sort of color on where that can be for FY '25 for us?

Again, we are looking at scaling those operations by at least 25% to 30%, both on the top line as well as on the bottom line.

Got it. And in relation to that, so your other expenses have spiked up because of the business model change, right? But do you think that because of the iDATA acquisition and then sort of -- since you have offices in similar geographies, there is a scope for reducing other expenses as a percentage of the revenues?

Yes, it will be. But again, once we get the -- get into the operations, we will know much better.

Also because of the increase in other expenses, the EBITDA has also shot up.

Got it. I guess the reason that I'm asking this question is that I'm trying to ascertain whether your margins will be pulled up because of the gross margins or because of the OpEx that we're able to get under control. Which one will...

The gross margin will improve much more because of the improvement, and that would reflect in the EBITDA margins improvement.

[Operator Instructions] The next question is from the line of Anuj Jain from Globe Capital.

Congratulations on the very good set of numbers. So just want to understand, regarding that iDATA acquisition, I mean, what kind of delays -- I mean, due to what kind of delay, I mean, the problem, this acquisition is being delayed?

See, basically, we are doing a multi-jurisdiction acquisition. This company we're acquiring is present 15 countries. So as a precondition, we have to get certain regulatory approvals from different countries. So those formalities are going on. And that is the reason the acquisition time line has shifted. Otherwise, the entire due diligence, everything is completed. But since we are a listed company, we cannot acquire a company without all the compliances.

So right now, we are comfortable with the date that you have given like 30 June. So we are comfortable with that date or it can be extended further?

I think we are working towards according to that date. But you can understand this is a multi-jurisdiction acquisition, that is how we want to -- normally, we have -- so I think so we are on track.

Okay. Okay. And I just want to understand one more thing. I mean, if we add up the iDATA numbers for FY '25, we'll get some growth. So let's say, for example, without iDATA, what are the -- I mean, growth we are expecting from this visa business? I mean, any...

I can tell you the past historical figures, we did. 3 years back, we did a INR 50 crore EBITDA, then we did INR 100 -- I'm talking about PAT, sorry, then we achieved INR 100 crores and last year, we had INR 200 crores. And now for FY '24, we closed at INR 325 crores of PAT, so which was a 60% growth compared to last year. So we have been growing quite, I think, above average, I would feel. And our objective always is to maintain whatever we achieve first, so whatever we have achieved last year, our objective will be to maintain that. Now last year, we won a few contracts with different governments. We renewed some contracts like the Spanish government, with Indian government. We won a few new contracts with Portugal government, Poland, Czech Republic, Germany, Italy. So all these contracts revenue came in last year, but majority of the revenue will start coming in this year. So definitely, there will be a good growth in terms of the organic business that we have. On top of that, if you add the countries that have not fully opened up, if they open up, numbers should increase further. New tenders that we are bidding for. If you add on these acquisitions of iDATA and other companies also that we are looking at. So definitely, we are -- as you can see, in the last 2, 3 years, we are in a growing space right now, and that is the trajectory we want to scale.

Yes, that is very exciting, Shikhar. I just want to understand one more thing. I mean, like VFS Global, that is the major player. What kind of market share they are commanding and what is our market share?

See, the market -- there is no proper market share available in the world. So definitely what we know is VFS is probably double or more than that, maybe 3x our size. That is what we feel in terms of the market share that they are handling globally. But there is no proper numbers to find that out.

Got it. Got it. Got it. And one last question. I just want to understand like when you are planning to utilize -- this is for this BLS E-Services, when you're planning to utilize the IPO proceeds?

So if you see in our DRHP, we have worked out a plan of investing this money over the next 1.5 years. So we have started the process and a couple of acquisition is also part of the object of this money. Those are also in advanced stages. So as and when we go on doing those, the money will get utilized.

Okay. And for the cash portion that we are holding, I guess, we are running 5%, 5.5% on those cash levels, if I'm right. Is that correct understanding?

So it depends. The money, which is in dollar terms, will be around 5.5%, as you said, to 5.5%, 5.75% maximum. And in Indian -- in India, the deposits are at the range of around 7%.

[Operator Instructions] The next question is from the line of Priyam Poddar from Value Equity.

So this is with regard to the revenue. If you can share the revenue breakup of digital business between the V&C and E-assisted and E-governance for the full year?

So yes, for digital, for the year, it was INR 315 crores. And visa business for the year was INR 1,361 crore.

Okay. And secondly, which are -- like if you can share, which are the top 3 to 4 countries for our visa and consular business revenue-wise?

Now there basically, we have -- we are working in more than 66 countries globally, and we work with more than 46 client governments. So as of now there is no top country, but I could say that regions, in terms of region, we get a good amount of revenue from our operations in North America, wherein we have renewed our contract with Indian embassy. We get a good amount of revenue from Gulf coming in. From Africa, Northern Africa, also our revenue is quite good. From the European countries, from U.K., so these are 4, 5 regions wherein we get good amount of revenue.

The next question is from the line of Sakshee Chhabra from Svan Investment.

Yes. Sir, I wanted to just understand that for Q1, what would be the sort of volume increase that you are witnessing in the visa issuances?