BLS International Services Limited analyst Q&A

Thank you very much. The first question is from the line of Hatim Broachwala from JM Financial. Please go ahead.

Sir, I want to know that how much is the contribution from the acquisition done in the Visa segment for iDATA and the other company which we had acquired, Citizenship company. So how much is the contribution in the Visa segment?

So, if you look at iDATA in the current quarter, they have contributed about INR 25 crores. And Citizenship Invest has contributed about INR 4.75 crores of the net profit.

The INR 25 crores is from iDATA and...

INR 4.75 crores from Citizenship.

And sir, can you provide same data for the revenue?

Yes. So, the revenue in iDATA was around INR 59 crores and Citizenship was about INR 13 crores.

Sir, if let's say, if I adjust INR 59 crores plus INR 13 crores, so it comes to –INR 72 crores. Let's say, if I reduce from the current number to just see the organic number, then I see a de - growth in the number. But the visa count have increased by 27%. So, I'm not able to understand that, on one hand, the count is increasing.

Yes, I think, we have understood the point. So basically,Amit, you can add. And this is, if you talk about year-on-year, if you see the net revenue, that has actually increased.

So basically, we look at the net revenue growth, as we have talked about, the change in the business model.

Yes, sir.

Can you check that there is a Net Revenue growth matching with the growth in the EBITDA numbers?

Is your top line impacted by the business model change?

No, no. Top line has not affected, because of the change. But mainly, it is more on the net revenue.

Okay, sir. Sir, also in the E-Service segment, how much the acquired company has contributed?

It's about Aadifidelis , has contributed about INR 49 crores.

The next question is from the line of Sandeep Agarwal from Naredi Investments.

Sir, my first question is regarding we have categorized three type of services: Core Services, Value-Added and Personalized Citizen Services. Sir, can you provide the bifurcation of turnover and margin between them?

Can you repeat the question?

Sir, we have categorized our services in three types of services: Core Services, Value -Added services and providing Citizenship Services.

You're talking about BLS E-Services?

Yes. So, can you bifurcate the turnover and margins between them?

I think that were three lines of business that we are doing, that we are providing banking correspondent services. We are providing e-governance services and we are providing assisted e-commerce at the time of IPO we had mentioned. But the margins are pretty similar in all these segments. Till now, we don't bifurcate. Because the same state, we are doing multiple things. We are also running banking correspondents. We are also running e -governance using the same centres. We're also providing assisted e -commerce using the same centres. So tha t is why we don't bifurcate the numbers.

Okay. Okay, sir. Sir, just another one. Sir, other income down from INR 23.4 crores to INR 14.7 crores Q-on-Q basis.

Shikhar also talked about that we have done the investment in the new businesses. So, the interest from fixed deposits have come down.

Okay. And sir, our net operating margin and operating profit margin also down on Q -on-Q basis. And what will be the sustainable margin?

See, we have been saying that we want to maintain over 30% margin in our Visa business. And Digital business will change because of the mix of Aadifidelis and the other businesses. They have a different percentage of margins. So, there will be a change happening depending on the revenue mix in that particular quarter.

But if you see our Visa business, our margin has grown over 36% in the last quarter. And it was 20% last year. But now it has grown to 37%. So, there are little change in the e - governance business, because of Aadifidelis business that we acquired at lesser margin. But profits overall are growing, if you see. So definitely, Visa business s pecifically, we want to maintain the margins. And E-Services also, probably it will maintain at this level.

The next question is from the line of Arpit Shah from Stallion Asset.

Yes. Just I had a question around, if we see the seasonality part, if I see last year, number of visa application is around 7.14 lakhs applications in Q2, Q3 and Q4. And this year, you have seen a dip on Q-on-Q basis. From 10 lakh, we have come to 9 lakh v isa applications. So how should we read these numbers? And what kind of numbers should we expect for quarter 4? Should we expect 1.2 million applications for quarter 4? How we should read that number?

So, see, if you see this quarter, we have done around 9 lakh applications. Correct? And if you see the same quarter last year, December '23, we had around 7 lakh applications. But if you see previous quarter, we had done 10 lakhs. So obviously, since this quarter, there is seasonality. People travel less during November, December. So that is why we have done lesser numbers compared to last quarter. Still, because of the acquisition of iDATA and new contracts that we had started, there has been an addition in the numbers. And it has actually increased from 7 lakhs that we did last year. There were some organic growth, some because of the acquisition, some new tenders. And that is the reason we have done 9 lakhs in this quarter. And going forward, quarter 4, January is also a little less. But February, March, we start seeing numbers coming up. And quarter 1, we see good travel going on. So definitely, going forward, we feel the numbers should go up.

No, I was referring to Q2, Q3, Q4 FY '24. The numbers are broadly the same. There was no seasonality impact in FY '24. In FY '25, you have seen a dip of 10% Q-on-Q in Q3 FY '25. How we should read the Q4 numbers?

Actually, last year, what happened was one of our contracts that we have done for the Indian Embassy in Canada, there was a major surge in Q3 in terms of revenue. There was a change in the policy over there, wherein people had to come to the centre, becaus e of some change in regulation in the local laws of the country. So that is why for that quarter last year, we had seen a certain surge in revenue. But now it has come back to normality this year. So that is why normally, on an ongoing basis, quarter 3 seasonally is less for us as a company.

Got it. So now, if I have to see FY '26, what kind of PAT guidance you would like to give to the market? Because this year, probably you are going to close around INR 520 crores to INR 550 crores kind of a number on the PAT front in FY '25. So, FY '26, youcan still think that the growth would be, let's say, more than 30% on the PAT front, FY '26?

See, if I talk about the past and tell you about the market where it is heading, if you see in the last 5 years, we've done 70% CAGR growth in terms of profitability. In this year, in 9 months, the entire profits of the last year, we have surpassed already. We have already spent INR 1,000 crores on acquisition. If you see in the future many new tenders that we are bidding for, there are billions of dollars of tenders that are coming out on an organic basis. Then inorganically, also, we're looking at acquisition opportunities. So definitely, first of all, our objective is to maintain. Whatever number that we have achieved, we want to make that a new base. Whatever margins we have achieved, we want to make that the new base. And going forward, definitely there are multiple opportunities both on the organic and inorganic front. So definitely, we would want the company to keep on continuing to grow. We have not given any projection or such to the market that this is a percentage you want to grow at. But as having seen our past, the potential is there. Only 50% of the market is outsourced. Billions of dollars of contracts are coming up for renewal. We are eligible for all these tenders. There are multiple other countries which have never outsourced oroutsourced for the first time. We're also looking at inorganic growth, both in BLS International and BLS E -Services. So definitely, I think, if you combine all those multiple factors, there is good leeway for growth in the future.

So, you believe INR 700 crores is a reasonable estimate to make for FY '26 as a PAT number?

Sorry, can you repeat?

INR 700 crores, is that a reasonable estimate to make for FY '26?

See, actually, what I've told you is that, I don't want to comment on any specific numbers. But what we have done in the past, we want to maintain. Whatever number, we want to make that as a base. And then, as I have told you, there are many opportunities , both on organic and inorganic front. And definitely we, as a company, negative working capital cash flow in company. So definitely, we feel that we will grow as a company. But the exact numbers, I cannot mention at this stage.

Sure, sure. I completely understand. In the Visa & Consular business, what percentage of business is now not directly dependent on visa? Like what percentage would be visa, and what percentage would be non-visa in the Visa & Consular business?

See, that percentage, normally we don't take out. If you see in the COVID period, we did about INR 50 crores of profit each year. Still, that was only on the back of Consular Service business. Obviously, that has also grown. So, I don't know the exact mixof how much is exactly Consular, how much is Visa. Because in many countries, the embassy outsources all the services to us. It is including Consular and the Visa. So, there is no specific mix that we have taken out.

The next question is from the line of Ankush Agrawal from Surge Capital.

Firstly, just a clarification. The INR 25 crores and INR 4.75 crores number that you gave for iDATA and Citizenship, these are EBITDA numbers, right? Not net profits?

These are profit numbers.

Last quarter, you gave INR23 crores EBITDA for iDATA.

Yes. So iDATA, the revenue was about INR 59 crores. And the profit of INR 25 crores in this quarter.

No, no, no. I think, you're very confused. We only mentioned about this current quarter. , we have done a profit before tax of around INR 25 crores in iDATA and INR 4.75 crores in Citizenship Invest.

Okay. What would be the number of applications for iDATA during the quarter?

I think, that we have to find out. That, I don't think we have the bifurcation right now. But we'll get back to you on that.

Okay. So, the second question was basically this year, if we look at our growth, the growth has probably come from substantial increase in our margins and some of the inorganic acquisition that we have done. Now going ahead next year, do you think there ismore room for us to expand our margins from where currently it is and to be able to do certain big ticket size of acquisition? Because, otherwise, I mean, do you think organic-wise, you are looking at some of the contracts that will close, that will deliver you the kind of growth that we have been seen? Because otherwise, sequentially, there is hardly any growth in the core business.

If you see last year, we have done INR 88 crores of EBITDA on a combined level in December quarter. And this year, we have done INR 140 crores of EBITDA.

Yes. That's what I'm trying to say. This year, obviously, we have seen a substantial increase in our margin.

If you see, we subtract the iDATA and Citizenship number from INR 140 crores, the number comes to around INR 110 crores. So, compared to INR 88 crores, we have got INR 110 crores of EBITDA only on organic basis. So, there has been a surge of 30%, 40% evenon the organic business.

I'm not denying that. Obviously, you have delivered a substantial increase in the core business margins, those were like low 20s, besides that going to 30s. But from here onwards, do you still believe we can expand margins from here? I think that will be difficult, right?

See, first of all, we as a company want to operate as a sustainable basis. We are always aiming for obviously more efficiencies that we can bring into the business. If you see last year, we were doing 20% of the EBITDA margin at consolidated level. This year, we have reached 30% level. From last quarter, there has been a little dip, because of the acquisition of our subsidiary, and our subsidiary acquired this company Aadifidelis Solutions, which is at a lesser margin. So definitely, our o bjective, as I've said in the past, is to maintain the margins that we have achieved. Whatever quarter, whatever margins we achieved, we want to maintain that. And we keep on striving for bringing in efficiencies in our business that may or may not lead to increase in margins in the future. But definitely, whatever we have achieved, we wan t to maintain that. That is what I want to specify.

Okay. Got it. Just the iDATA application number for the quarter, if you got it.

Sorry?

The number of applications for iDATA, if you have got it.

That we can send you this separately. Because we don't have those numbers handy right now.

The next question is from the line of Tanish from Beas Capital.

Do you have any data on what percentage of your existing contracts are up for renewal in the next 2, 3 years?

We have renewed 90% of our contracts. So, as we have said in the last 1, 2 years, after COVID, a lot of these contracts came up for renewal. Spain, we have won the contract again. Last few years, we have won the contract with Indian Embassy in Canada again . So, 95% of our contracts, 90% of the contracts we have renewed.

What percentage will be renewal next year, next 2 years?

Next 2 years, see, all these contracts are 5 to 7 years. Some are 10 years, I think. So, as I said, most of the contracts we have renewed. Next 2 years, probably 5%, 10% of the contracts might be coming up for renewal.

And what amount of new contracts are you looking to bid in next 2, 3 years, bifurcated by geography, if you have any data? Where is the traction?

No. We have already specified that there are multiple tenders that we are bidding for a multi billion dollar worth of opportunities that we are bidding for. There are different stages of bidding. A lot of this we have won. If you see the press releases and announcements that we have done in the last 1 year, we have added new contracts with Portuguese, Poland, Italy, Hungary, Czech Republic, many governments that we've added. So, there are multiple other tenders also that we are bidding for. And some of the countries which are outsourcing for the first time also. So, there are multiple opportunities that we are looking at.

Okay. Just another bookkeeping question. What is the difference between the net revenue and the revenue from operations in the Visa & Consular segment? Like what line items are not included in the net revenue?

Yes. So basically, the direct expenses and like commissions, when we had the partner model, what we used to pay them was a direct expense. For example, courier charges. So, the blue dart payment has been netted off. And , it's the net revenue which we earn per application. And that is what we focus on, and we strive to increase that.

The next question is from the line of Akshat Bairathi from RSPN Ventures.

Sorry, this question is being reiterated. Just wanted to understand on the sequential revenue. So then, we have seen the number of applicants and the revenue per applicant dipping this quarter sequentially, which has impacted our revenues. But in Q2 as wel l, if we remove the iDATA revenue, sequentially, we saw a dip of almost 13.5% to 14%. So, any colour on that will be really helpful. And the second part of the revenue is that we have done three acquisitions in the previous couple of quarters. So, when do we see this revenue growth kicking in sequentially?

See, I think, we did not understand your questions properly. But from what we've understood is that quarter -on-quarter, as we have explained, there's dip in the volume, because of seasonality impact. Still, if you see our net revenue per application has actually gone up, right? So actually, quarter-on-quarter, year-on-year, both the parameters, our revenue per application has gone up. Only the overall revenue has dipped, because of the volume drop. And I think, that is what was the first point.

Second, how we look at it, our existing business growth depends on the growth in the travel industry. And if the travel industry overall grows at around 11% CAGR, then, we work on, say, 15% as a growth in our numbers and revenue.

All right, sir. Sir, second question is on the cash. We are carrying around INR 700 crores of cash balance. So, are we planning any more acquisitions going further?

See, this year, this financial year, we already spent upwards of INR 1,000 crores in acquisitions. And definitely, we have spent a major chunk. Still, we have INR 700 crores of net cash on the books. Going forward, as we have explained in the past, we are constantly looking at value- accretive opportunities for the company, both from an organic and inorganic basis. But definitely, we are open for inorganic opportunities as well as when we win new tenders, technology, we need to deploy cash. So, we are very open for more opportunities in the future.

The next question is from the line of Manish Choraghe from KJMC Capital.

Mr. Aggarwal, I believe that you have given a number of INR 49 crores as a revenue for Aadifidelis. Is that correct?

Yes, correct.

I think, this is some part of November and December.

26th November onwards.

Okay. So, if I'm not wrong, in FY '24, this company has done a revenue of INR 577 crores. So, can I assume that in quarter 4, the number could be around INR150 crores for Aadifidelis?

Yes. That is what we are expecting, yes.

The next question is from the line of Gopal Krishnan from Uthranush Investments.

Yes. Fantastic. Actually, sir, I found that this iDATA and Citizenship Invest the EBITDA is phenomenally higher by around 50% from the data that we have provided in the investor presentation. So, going forward, the 30% EBITDA that we have achieved will d efinitely be more, right? So, for example, in FY '26, can I say that your EBITDA will be close to 40%, something like that?

See, if you see the actual numbers that we have given you, at Citizenship Invest our EBITDA is close to 37%. And at iDATA, the EBITDA is close to 41%. And these companies are operating in specific geography for specific governments. We have been operatingas a global company across the world. So, some countries, margins are lesser and some countries, the margins are more. And from that point of view, if you see, we have reached from a 20% last year now to a 30% consolidated margins. And our main objective is to maintain this number. We don't want to have haphazard growth. So, our objective is to maintain the number. And weare looking at cost efficiencies and economies of scale in the future.

And if you see our quarterly Visa segment EBITDA margin, they are nearing 37%. So, in Visa business, because of these companies are coming under Visa & Consular business segment, we are achieving those 37% EBITDA.

No, actually, the iDATA, the EBITDA is 59% and Citizenship, the EBITDA is 45%. As you said, okay, it is on a specific geography. But going forward, I thought it might average down to around at least 40%. I mean, correct me if I'm wrong.

No, actually, you're wrong, because iDATA EBITDA is at 41%, and are in our numbers that we have achieved this quarter and Citizenship Invest is at 37%. And if you see our visa numbers, we've achieved an EBITDA margin of 37%.

See, first of all, we do not believe it's a drag. If you see retail business, it is a volume-generating business. And since it is a business mostly operating in India, we get paid in INR. It's a volume business. So, if you see our overall profit this quart er is at INR 18 crores compared to INR 9 crores last year same quarter. So actually, we have doubled our profits in this business. And going forward, we feel that there's a big opportunity. We have done 87% of revenue growth in this business. So, I feel definitely this business also has a big potential in the next few years. And as we add more value -added service spectra, I think, in the long run, the margins will also go up in this business per application. But if you see in total basis, total revenue is growing, total profits is growing. So definitely, I feel that this is also a good synergistic business for our company.

The next question is from the line of Dinesh Kulkarni from Finsight.

Really good set of numbers. Sir, my question is, where do you think the next phase of growth would come for our company, assuming, as you just mentioned that we already have done INR 1,000 crores of acquisitions, and we have a cash balance close to INR 700 crores. So, I just wanted to know like whether it will be more of organic or inorganic, if you could elaborate on that?

I think, as I've already mentioned in the last couple of questions, the same answer I can give you again, that we are looking at both the opportunities. There are multiple billion dollars of contracts that are coming up for renewal, multiple services, mult iple geographies that we are bidding for and different services. So organically also, we have been winning a lot of tenders and next few years also, we expect the same. Inorganically, also, since we've acquired this three, four companies only in the last 1, 2 years. Next few years also, we are looking at different inorganic opportunities. So, both the places the growth will come from.

So, my question is more on terms of, like say, whatever growth we have achieved in the last, like, 20%, 30% CAGR growth, is that achievable again? Or are we like fully penetrated now and we don't see this kind of high double-digit or 20% plus growth?

As I said, we are still at the tip of the iceberg. There is full potential in the market, only 50% of the market is outsourced. 50% market is still getting outsourced. And out of the 50% market, which is outsourced, multiple tenders are coming up for renewal, in which we are eligible, and we are bidding for. So definitely, there are still huge potential in this Visa & Consular Services and many other services that we can get into.

The next question is from the line of Arpit Shah from Stallion Asset.

I just wanted to understand, we have seen a stellar EBITDA growth and stellar net revenue growth of the Visa business. But when it comes to the PAT numbers, we have a bit lagged on the PAT number. So, when will it converge to EBITDA growth numbers, the PAT growth according to you?

Sorry, you're talking about taxes?

No, the PAT number or the PBT number. The PBT number has lagged the EBITDA growth and the revenue growth number in the Visa business. So, when can we see it converging going ahead?

I think, over the period,you will see, currently, the numbers look a little subdued as far as PAT is concerned. But PBT is going up, there's a tax element which is increasing, because of taxation has come in Dubai as well as our expansion in Turkey and India businesses. There, the tax percentage is much higher. So, if you see as a percentage of tax over PBT is going up.

Okay. So, what kind of tax numbers we should build in for FY '25 and FY '26?

So, what we are working on last year,the tax percentage was around 9%. This year, we think it will go to around 12%.

That is FY '25 expecting 12%. And FY '26?

12%. I said, 12%.

12%. Okay. And how are we looking to utilize the cash, theINR690 crores? How are you looking to utilize it? Is it going to be dividends?

As Shikhar said, we are seriously looking at new opportunities and acquisitions as well as expansion of our existing business with new contract. So those will be there and dividend, obviously, will also be part of it.

The next question is from the line of Aahan Tulshan from Trivantage Capital.

I just wanted to understand what the approximate market shares would be for VFS Global and BLS International?

See, exact numbers, the market is not very structured in terms of any market report or study. So, we don't know the exact numbers. But after this acquisition of iDATA, et cetera, probably we should be globally at 15%, 20% market share in terms of the clien t governments. And we don't know the exact numbers the competition is at. But definitely, we are much ahead.

Ladies and gentlemen, due to the time constraint, this will be the last question for today, which is from the line of Mayur Bapodra, an individual investor.

Congratulations for the great set of numbers. Sir, all my questions have been answered. Just one question regarding capital allocation. So, what is the thought process when we acquire any company? We are like for the past 3 quarters, we are on acquisitions spree, and we invest INR 1,000 crores in different new companies. So, what is the thought process behind INR 1,000 crores like ROCE, ROE requirements? Or what is your thought process behind allocating capital for acquisition?

See, if you see from a business point of view, we have acquired companies that are in our line of business. They are synergistic businesses, high profit point businesses with good government, they are working where we can go globally, we can combine other offices, et cetera. So definitely, whatever margins that we are doing, we can sustain them and learn from them. So that was the strategy from a business point of view, and we will recover our money within a matter of a couple of years. Interms of ROE, ROCE, Amit, if you want to add?

So, we ensure that our return on investment is much higher compared to what we earn on our dividend, or interest from the banks. So, we currently work on ROE of around 15% or so.

Okay, okay. Great, sir. And sir, I heard Shikhar sir, Amit sir's show on Josh Talks and I enjoyed it thoroughly, like the understanding of business you provided on that. So, and congratulations for the future endeavours. Best of luck.

Thank you.

Thank you.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, everyone, for joining our Q3 FY '25 earnings call. We hope all your queries were answered. In case of any further queries, please free to get in touch with Mr. Gaurav Chugh, our Head of Investor Relations, or the Investor Relations team at E&Y. We look forward to interacting with you next quarter again. Thank you, and goodbye.

Thank you. On behalf of Nuvama Wealth Management, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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