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

Ladies and gentlemen, good day, and welcome to BLS International Services Limited Q1 FY '27 Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference to Ms. Deepali Kumari from Arihant Capital Markets. Thank you, and over to you, ma'am.

Thank you all for joining the Q1 FY '27 Earnings Call of BLS International Services Limited. Before we proceed, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. It must be viewed in conjunction with the company's business risks that could cause future results, performance or achievements to differ significantly from what may be expressed or implied by such forward-looking statements. From the management today, we have Mr. Nikhil Gupta, Managing Director; Mr. Shikhar Aggarwal, Joint Managing Director; Mr. Amit Sudhakar, Chief Financial Officer; and Mr. Lokanath Panda, Chief Operating Officer of BLS E-Services Limited. 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 of the company, and then we will open the floor for an interactive Q&A session. Thank you. And over to you, Mr. Shikhar.

Good morning, everyone, and thank you for joining us on BLS International's Q1 FY '27 Earnings Call. We hope you've had the opportunity to review the results, press release and investor presentation uploaded on the stock exchanges as well as on our website. We are pleased to report a strong start to FY 2027, delivering robust year-on-year growth across key financial metrics. Revenue and EBITDA grew by 25% and 24% year-on-year, respectively, reflecting the strength of our diversified business model, global footprint and disciplined execution capabilities. We also achieved 2 significant milestones during the quarter, regarding -- recording our highest ever quarterly revenue of INR 891 crores, EBITDA of INR 252 crores and PAT of INR 202 crores for the first time in the company's history. This performance was supported by healthy contribution from both our Visa & Consular Services and Digital Business, which continued to demonstrate resilient and strong operational momentum. Further, our extensive geographical footprint spanning over 100 countries, together with our strong operational framework and comprehensive suite of global mobility and travel services has strengthened our ability to mitigate the impact of external uncertainties and market-specific challenges. This diversified business model continues to support sustainable growth while enabling us to pursue emerging opportunities across geographies and service offerings. The Visa & Consular service business continues to witness strong traction where we delivered robust growth during the quarter, with both revenue and EBITDA increasing by 22% year-on-year. The growth was primarily driven by strong traction in our Visa business, along with increasing momentum in citizen service business. The performance was well complemented by operating leverage benefits and sustained efforts towards process optimization. Although application volumes in the core Visa and service business remained broadly stable year-on-year, the net revenue per application grew by 11%. The growth was driven by higher pricing from newer contracts and better revenue mix, highlighting our ability to enhance monetization and deliver great value across customer touchpoints. During the quarter, we continue to strengthen our global Visa & Consular platform through a series of strategic initiatives. We commenced Belarus Visa applications in Mumbai, expanding enhance to efficient and seamless Visa application across multiple travel categories. We also launched Visa with Ready BLS International awareness campaign to help applicants navigate better Visa process and introduce an AI-powered bot for our missions globally, enabling 24/7 virtual assistance, reinforcing our focus on technology-led service delivery and customer convenience. Our Digital Service business has also shown strong momentum, with revenue growing by 32% to INR 330 crores this quarter. The growth was led by healthy traction in the BC business and loan distribution business, along with sustained expansion of our assistant digital and service offerings. As the business continues to scale, we witnessed significant operating leverage benefits, resulting in a strong 46% year-on-year growth in EBITDA to INR 27 crores. The BC business is witnessing significant transaction, with GTV increasing to more than INR 29,500 crores during the quarter as compared to INR 26,200 crores during first quarter last year. During the quarter, the Digital Service business secured a contract from the government of West Bengal to undertake beneficiary verification and card approval services under Ayushman Bharat PM-JAY and Ayushman Vay Vandana across the state. Additionally, the company strengthened its presence across banking, insurance, government-led citizen services through key mandates and partnerships, including a fresh mandate from Tamil Nadu Grama Bank and partnered with Coverfox Insurance to provide services through a network of 1.58 lakh BLS touchpoints. We are continually strengthening our technology across both our businesses by leveraging AI, advanced analytics, cloud platforms and automation to enhance security, scalability and performance while delivering smarter, faster and more reliable solutions to partner, customers and client governments. Our continued investment in technology is helping us deepen trust with governments while strengthening our customer-first approach. To conclude, the period ahead presents meaningful opportunity for BLS International. Our diversified presence across geographies and service lines, growing scale in priority markets and strong engagement pipeline positions us well to sustain growth momentum. Now, I'll hand over the call to Mr. Amit Sudhakar, our CFO, to walk you through our financial performance. Thank you.

Thank you, Shikhar. Good morning, everyone, and thank you for joining us. Let me take you through the numbers for the quarter ended 30 June, 2026. I will cover our consolidated performance, the revenue mix, the 2 business segments and finally, the balance sheet and the cash position. The consolidated revenue for the quarter was INR 891 crores, up 25% from INR 711 crores in the same quarter last year. This is the highest quarterly revenue in the company's history. Importantly, the growth was broad-based. Both our businesses contributed, so we were not dependent on any single engine. EBITDA was INR 252 crores, up 24% from INR 204 crores. Our EBITDA margin was 28.3%, which is broadly stable year-on-year basis. We have grown revenue by 25% without giving up margin. It reflects our operating leverage in both our businesses and continued discipline on our costs across the group. Profit after tax was INR 202 crores, up 12% from INR 181 crores last year. Revenue mix. Visa & Consular services now accounts for about 63% of the consolidated revenue against roughly 65% a year ago. The Digital Service has moved up to about 37% from around 35%. Our EBITDA -- Visa Consular business still contributes close to 90% of the total. So, digital is growing faster and steadily taking a large share of our revenue, while Visa & Consular remains the profit engine. Over time, our digital margin improves, we expect the contribution gap to narrow. That is the direction we are working towards. Visa & Consular Services segment revenue was INR 560 crores, up 22% from INR 461 crores. The EBITDA was INR 226 crores, up 22%, with margin of 40.3%. The margin is steady against the same quarter last year, which is the outcome we were targeting. Growth here came mainly from continuous traction in our core Visa business and increasing momentum in Citizenship Invest. Our core Visa operation, we processed 11.3 lakh applications during the quarter. The application volumes were broadly stable year-on-year. The net revenue per application, however, was INR 3,521 against INR 3,167 last year, a growth of 11%. Digital Service segment revenue was INR 330 crores, up 32% from INR 250 crores, our fastest-growing business this quarter. The growth was led by healthy traction in our business correspondent and loan distribution businesses, along with continuous expansion of [Technical Difficulty] 6% from INR 18 crores. Margin improved to 8.2% from 7.2% last year. It is a high-volume distribution-led model. So, we add transactions over our largely fixed cost base. Profitability improved faster than revenue. This quarter, EBITDA grew by nearly 1.5x the pace of the revenue. We expect that the pattern to continue as the business scales, though margins in this segment will remain structurally lower than the Visa & Consular Services. Balance sheet and cash. Our balance sheet remains strong. As on 30 June, 2026, we held a net cash of INR 1,617 crores. It is an asset-light business model that converts profit into cash well, and that is what gives us the flexibility to have it -- have today. To summarize, a record quarter on revenue, EBITDA and profit. Both segments grew. Margin held up in visa consular and improved in digital. And the balance sheet remains strong with no debt -- net debt. We are entering the rest of the year with a good momentum, a healthy pipeline and the financial flexibility to invest where we see opportunities. With that, I will hand over it to the moderator to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of [ Kanish Gupta ] from [ SS Family Office ].

I would like to ask that the company has been a high-return asset-light business. So as the company expands through acquisition and adjacent opportunities, could you explain the capital allocation framework it uses to determine, whether deployment of capital will create more shareholder value than reinvesting in the core business?

I think, first of all, I want to clarify that we have grown more organically than through our acquisitions. That was just utilization of money. But our CFO, Amit, you can explain the capital allocation strategy that we have.

Yes. So see, we have -- capital allocation priority is to give for the expansion of -- organic expansion of our existing businesses. Secondary is for the M&A activities in which we are focusing on, which will improve the ROI of the company. And the third is to pay in the form of dividend to the shareholders. And if you see over the last couple of years, we have utilized the funds for the M&A as well as improve the dividend payouts.

Sir, what return threshold must an acquisition or a strategic investment need before capital is allocated to it?

So currently, what the investments we have done in M&A, all are working on a return of more than, say, early 17% to 20%.

So that's the baseline.

That's right. That's the baseline of a return we are expecting from our M&A.

Okay, sir. And my second question would be on, as we have done a couple of acquisitions and significant goodwill has been created via those, so could you quantify the economic value that these acquisitions has created so far? Hello?

Yes. Amit, can you frame that? I don't know if Amit is audible. What is the question that you have again? Let me try to answer. Economic value of these acquisitions? Hello?

Yes, sir. I was asking a significant goodwill has been created via the acquisition made in the past. So till now, what kind of economic value has been created by those?

I think I will let our CFO answer this question. So, maybe you'll have to come back on this once he's available. We can go to the next question.

Sure, sir. Lastly, I would like to ask your growth expectations over the next 4 to 5 years, excluding any contribution from future acquisitions that's purely organic revenue growth guidance?

Correct. So as we said previously, at an increased base, whatever we have achieved last year, our target is to grow 15% to 20% for the next 5 years. And if you see the first quarter numbers, we have surpassed that. We've grown 25% on revenue and around 25% on EBITDA. So, our target is -- even last time we announced that our target is to grow 15% to 20% organically over the next 5 years. So yes, I feel on track on that.

And sir, what kind of EBITDA margin baseline can we consider going forward for full-year FY '27 and FY '28?

As you said, in the Visa business, we have achieved around 40% EBITDA margin. And our Digital Service business, the EBITDA margin has grown up to 8% now, which was 7.3% before. Our target is to maintain those margins. As we have been saying over the last few years, our margins have increased a lot, but our target is to maintain the margins on the increased revenue and profitability of the company.

And sir, as a consolidated entity, what would that number be?

As a consolidated entity, our EBITDA margin is at 28.3%.

That's the guidance you are giving?

It is what we have achieved.

And sir, for full-year FY '27, what would that number be?

I think maybe you should ask 3, 4 questions. We should limit our questions and should give other people also chances.

The next question is from the line of Shikha Mehta from Time & Tide Advisors.

I just had a few questions. So first, I wanted to ask on the tax rate and on our depreciation and amortization expense for the quarter. So, our tax rate is 14% versus 8% last quarter and 10% last year same quarter. So is that something that will remain in the 14% rate going forward as our Aadhaar business, et cetera, increases? That's first. And second is on the depreciation. So the increased depreciation and amortization cost, is that because of the new acquisitions? Or is it something else? Because again, that is INR 32 crores versus INR 25 crores last quarter and INR 23 crores last quarter -- last year same quarter?

Yes. So, Shikha, as far as the tax amount is concerned, that depends on the profit in the respective countries where we do get the profit from. So if the mix is different, the effective tax rate changes. But our estimate is that we should close the financial year at around 12%. And your second -- and second question was on the depreciation and amortization? That has gone up not so much because of the M&A. It has gone up more because of the -- we are investing mainly on the new contract of Aadhaar project. So because of the accounting standard, the lease accounting standard, it gets reflected in the depreciation and interest.

So, this INR 32 crores broadly can be something that we'll maintain going forward for the next few quarters? Broadly the same?

It may go a little higher in the next quarter because by the time our full investment will be over and then it will gradually remain the same or will come down thereafter.

And on the same -- on the CapEx we've done on the Aadhaar front, which is what's causing this depreciation jump, how long would it take for revenues to come in?

So the revenues have started from the -- it's basically in a 3-phase investment. The first phase we have completed. Second phase is now in the final stages. And in the next quarter, we will complete the whole. And by the fourth quarter, we expect the full revenue will start coming in.

Got it. So maybe around Q4 is what we expect, right?

That's right. That's right. Q4 to Q1, the whole revenue will start coming in.

Start coming in. Okay. All right. Great. And lastly, sir, do we have any new contracts in the pipeline on the Visa front or anything we'd like to speak about on that front?

We have announced that all the contracts that we keep on, we keep on announcing. We recently won contract with the Belarus government. We've announced that we have won contracts with Portugal government, Slovakia government, Italy government. We've announced already. So, we're bidding for multiple tenders.

Anything in the pipeline, sir?

There are multiple tenders in the pipeline that we are bidding and there are different stages. And as and when anything gets finalized, we will announce it.

And this pipeline will be for the next 8 to 12 months?

Correct. Not only 8 to 12 months, but more than that as well.

Also, Mr. Amit Sudhakar is on the line. [Operator Instructions] The next question is from the line of Shrenik Mehta from Indo Wealth.

Am I audible?

Yes, we can hear you.

Okay. So, my question is about the Visa application volume. What we see here is that the volumes were flat year-on-year basis in your seasonally strongest quarter. And this is despite the Slovakia contract where you had almost 80 countries and the Cyprus contract, which had 15 countries. So the question is what was this organic application growth, excluding the acquired entities? And when do you think those 2 mandates actually start contributing to the volumes?

See, if you see in the first quarter this year, there was the impact of the war as well. In spite of that, our volume has increased from our other contracts and we are able to maintain this volume of 11.3 lakhs, which is almost similar to the first quarter last year. So, I feel that we've actually grown this quarter from our other contracts. And despite the war, those are the numbers that we have achieved.

And how are these numbers faring in the current quarter? Do you see still the impact of the war? Or do you think...

I would say that whatever...

Normalized?

Whatever guidance we have given, that's 15% to 20% growth we expect year-on-year for the next couple of years.

This is for the consolidated business, right?

Correct. I'm talking about consolidated business.

Yes. For Visa, I was trying to see...

We are stable in our volume.

Stable in terms of the volumes.

Correct.

Okay. So the growth will largely come from value increase and not so much the volume increase?

I don't know if I can comment on that right now because, obviously, the quarter is ongoing. And I cannot give numbers on the quarter. But as I've told you last quarter, in spite of the war -- but the war is over now. So, numbers have started to come back.

So, my other quick second question. You're holding good amount of cash in the balance sheet. The stock, have you considered a buyback now that those regulations have eased out? Is that something that could be triggered in the next few quarters unless there is some acquisition in the pipeline?

I think this will be taken up with the Board. And if any decision comes in, we certainly will let you know.