Okay. First of all, very congratulations on a really good set of numbers, sir. I mean, obviously, on the margins and the PAT front. My question sir, we have seen the Visa and Consular business has shown has a tremendous growth in terms of applications and revenue on all fronts. But the digital business definitely is not on a year-on-year basis, showing the numbers what we are looking at. So first of all, what are the challenges here that we are facing? And second, are we don't want to split this business and completely use this cash, the proceeds of this business so in the Visa business for further acquisitions? That's my first question.
BLS · Quarter ended Sep 2024
BLS International Services Limited analyst Q&A
Nikhil, sir, you would like to take it or?
No, I don't mind. Actually, I just wanted to respond by saying that all businesses have different risks and rewards, as you know so definitely, the visa and consular business has much higher margins because the number of people kind of competing in that space are less and the digital business is a little more competitive. There is no plan right now to completely sell or separate the businesses. As you know, digital business is a subsidiary of BLS International. And we want to find opportunities for growth there because we believe there are opportunities still there in that space.
Okay. So then what are the challenges you're facing, sir? Because we are not, I mean, definitely, the numbers are not reflecting that, right? And what is the challenge you are facing?
Competition. I think also, I can add 1 more point. Basically, last year, if you see one of our contracts that completed and inspite of that contract, not having the revenue from that contract, which was in the state of Punjab, the revenues have increased. So definitely, we have seen a growth, but 1 of the contracts were completed last year. That is the reason you see there is no major growth in terms of revenue, but because the overall revenue reduced from that contract.
And Dinesh, this IPO money, what we have raised is for the growth, and that's what Shikhar said in his speech also that we are doing few acquisitions and the numbers will start showing from Q3 onwards. So you'll see the growth coming in this business also.
That sounds great, sir. The last thing from my end. So we have made quite a few acquisitions in the last few months, right, including the iDATA. So how do we see the things are panning out there? And what kind of numbers we should expect when we end this financial year and maybe the next financial once we have all the consolidated numbers? Yes.
So, the consolidations in this quarter, if you see the iDATA numbers have been added in the current quarter. Therefore, the growth trajectory has been about 22-23% in the revenue, which we have been doing for the last 2 quarters, and we think it will continue with our existing business growing as well as with the acquisitions which are coming in.
Okay. So the kind of numbers we see in the next year I'm asking like say, what was the target and guidance for the next year and -- yes, the next year?
Correct. We want to maintain the numbers that we've achieved in the first few quarters.
Okay. And the same margins, right? We can expect the margins to maybe expand further?
Yes. Our objective is to maintain the same margins.
The next question is from the line of Nihal Shah from Prudent Corporate Advisory.
Congratulations for the great set of numbers. So if I reduce the applications that we had from iDATA in this quarter so we are looking at around 18% volume growth in these applications that we have processed. So what was that number for iDATA? And how has iDATA been growing since the last few years, if you can share some light on it and their margins as well.
iDATA is having a revenue of around INR 200 crores to INR250 crores annually, which is going to be now part of our numbers, further, what we anticipate around 10% to 15% growth going forward in iDATA business that is how we look at it. What was your second question?
So the margins have been around 45%, 50% there since the last couple of years. And for this quarter, if you can give specific margins for iDATA?
As we said, this quarter, they did about INR 60 crores of revenue and INR 23 crores was the EBITDA, about 40%.
Okay. And so are we using their facilities to manage our contracts as well in their existing facilities so that synergies have been set already or that will happen in the coming quarters?
That will happen over the next couple of quarters.
Okay. Okay. So that could improve our margins even more from this level of 33-odd percent, right?
That's right. Once those synergies will come in play, we will see improvement.
The next question is from the line of Vishal Singh from Finvestors.
And congratulations on posting excellent results, sir. My question, although 2 of the questions have been answered. My question would be like what impact of current geopolitical environment or scenarios which are going on, will have on our business?
Shikhar, you would like to take it?
Yes. See, as you know, our company is currently present in 70-plus countries involving multiple governments and geopolitical scenarios year-on-year keep on happening in different pockets of the world, but it does not impact us on an annual basis. Definitely, after COVID certain countries, for example, Russia outbound traffic still has not come up. So once probably the situation stabilizes, we will definitely see numbers coming back from there. But other than that, across the world, we have seen increase in volume since 2019.
That means there would be hardly an impact. Sir, could you just possibly guide us for like the guidance like 25% to 30% of the conservative side, what you are doing currently for this fiscal year?
If you see our last 5 years, our CAGR growth has been more than 70% in terms of PAT. Even this first 2 quarters, the numbers that we have achieved compared to last year has been phenomenally higher. So definitely, as we grow more as a company as we are bidding for multiple new contracts, billions of dollars of contracts that we've been bidding for. We have won a few contracts in the last couple of months, we've deployed them, we have acquired a few companies. So definitely, growth can come from multiple areas, existing business growth, new contracts, acquisition synergies. We're also shifting from some of the operations in certain countries. We are taking over fully where we had some local partners. So you will see definitely that we want to maintain whatever we have achieved first.
So as per your presentation, as you said, like you have moat and I think you don't have any peer in our country. As we can see that you have posted that it will be like 20% of CAGR growth in air traffic and passengers will be traveling. So what is your vision on growth trajectory for a longer period, like for '27 or 3 to 5 years like...
Whatever we have achieved in the past year we want to maintain that. And whatever, obviously, industry growth trajectory of 15%, 20%, that is a bare minimum, I feel that we can achieve. But definitely, as in the past also, we want to overachieve then give a high guidance. So definitely, we will be maintaining that.
The next question is from the line of Shrija Pathak from JK Capital.
So my first question is actually about revenue per visit or passport. In the past, it used to be higher than the one that we're seeing right now? Is it because it was actually above 3,000 in the 2015, 2016 years. Have you guys changed the way you calculate it now? Or why is the reason, what's the reason for its decrease?
So frankly speaking, I don't have numbers of FY15-16. But for the last couple of years, if you see, especially post-COVID, the trend has been going up only on a quarter-to-quarter basis. So I'll have to check '15-16 and then come back to you on that number.
Okay. Great. My second question is on the line of EBITDA margin for the Visa and Consular business. I see that over the past couple of years, your operational expenses as a percentage of revenue has been going down. Is it because of the new model as you shifted to the more self- owned model? Is that the major reason for that? And will we see that kind of continue? I understand that a lot of the expansion came because of some of the acquisitions. But will we see this trend as we go forward this factor contributing significantly to your EBITDA margins increasing?
There were couple of reasons for the EBITDA margin. One as you said, that has been one of the major reasons why we changed our model from partnership to our own. Second has been the new contracts we have won at a higher application prices as well as with this acquisition we had just done of iDATA. They were at a 40% to 45% EBITDA margin. So all these factors have improved our EBITDA margin over the last couple of quarters if you see.
Okay. Great. Just my last question is about the bit that are happening right now in the market. How many have you guys applied for? What's the progress? And yes, just a little bit on that.
Yes. Yes. So basically, as we see in the last couple of years, every couple of years, bids keep on coming globally and we have also won a lot of new contracts in the last 1 year. And next few years, also, there are multiple contracts going on in Europe and North America, and different multiple countries that we are bidding for and we are in different stages of bidding. And once the result is out, we definitely as for the guidelines we announced with the market. But definitely, there is a big, big, big scope in terms of growth. We've been winning new contracts. Existing governments are coming out with re-bids, where competitors are incumbent and also newer governments which are outsourcing for the first time. So there is a growth opportunity in both the trajectories.
The next question is from the line of Hena Vora from DAM Capital.
Just one question from my end. So we have attributed the fact that moving towards a self- model has helped us in the margins. I just wanted to understand, is this also ROC accretive if you can just tell me what ROC we will be making under this partnership model and under the self-driven model?
I was asking what sort of ROCs do we make under the partnership model and what we'll be making under the self-driven model?
Our ROC normally is very high because in both the cases, we don't invest in the property, but we do investment in the infrastructure only. Whereas in the case of partnership model, we don't do that also. The whole infrastructure and the logistics are being handled by the partner. So obviously, the margins are much more when you do it on your own versus doing through the partner.
Okay. Just in ballpark number would be as are the ROC similar in both the cases?
It will depend from country to country and the investment in the infrastructure, which we need to invest.
Okay. So is it fair to assume that the partnership model better in terms of ROC or that would not be the case?
So I think ROC will be a much more when we do on our own.
The next question is from the line of Prateek from Morgan Stanley.
Congratulations on a good set of numbers. My question was if we look at the revenue for the existing business, removing the iDATA numbers, I mean Q-on-Q, the revenue is slightly lower. So is there a reason for that?
So one has been that the digital business revenue was lower. And the second, our business is quite seasonal in the sense that Q4 and Q1 are the higher revenues compared to Q2 and Q3. So due to the seasonal nature of the business, as well as...
Sure. And the second question was iDATA EBITDA that got accrued this quarter was around INR23 crores. Is that what...
Yes. That's right. On a INR60 crores of revenue.
Okay. And when I went through presentation this wasn't for the entire 3 months, it's from July 9 onwards that you are accreting.
Exactly. It is from 9 July onwards.
Sure. And is there some seasonality in that business as well because CY '23, I think the total EBITDA for that business was around INR140-odd crores.
Yes. There is a seasonality in their business also, as you know, during winter, the travel to Europe is much less compared to during the summer. So now this is a lean season, which will slow till December practically, it comes to the lowest level of volumes. And then it starts picking up from January-Feb onwards.
The next question is from the line of Yash from Stallion Asset.
So I think in the first half, you've done 24% revenue growth. And given the strong growth in your visa applications as well, it's up 44% Y-on-Y. Second half, do you think we can grow more than 25%? And even in FY '26, do you think we can maintain this 25% run rate in revenues?
See revenues can go much higher because of the new acquisitions, which are in the pipeline and some have got crystallized. So it will have an impact in the Q3 as well as Q4. We are anticipating the revenue to be higher.
Okay. Okay. Got it. And I think you had acquired this 1 business. I think it's called Aadifidelis sorry, I'm not getting the name right on the loan processing business in the first quarter. I just want to see how large can this be? I think this business is a part of your digital business of loan processing and it had about INR22 crores of EBITDA for FY '24. And I'm just trying to understand how you can scale those businesses up and what would the numbers look like in FY '25 and '26?
We are at the last stage of closing this transaction, hopefully, we should get it closed in this month. There last year, audited numbers were about INR 600 crores of revenue on which they had a INR 22 crores of EBITDA. We see a big synergy with our businesses because we also have more than 30,000 CSPs as well as touch points of over 1 lakh. And if we can work out a synergy between those touch points and the loan distribution company's expertise, we can scale up this business. And hopefully, we'll see that over the next couple of quarters and see how we can scale up this business.
Right. And sir, any sort of new acquisitions similar to iDATA? Because obviously, I think discussion is that you've got a lot of cash on balance sheet. So I mean, if you haven't got any acquisitions similar to iDATA, then any possible dividend to reward the shareholders?
So we just closed another one, which is a Citizenship Invest about $31 million acquisition, which got finalized in the first week of October. And that is in Dubai. They provide residency and citizenship to more than 20 countries. So that is where we have invested, Aadifidelis will be the next investment, which will happen hopefully in this month. So we have a decent, acquisition pipeline. And as and when they get crystallized, we'll be utilizing our funds and dividend we have been paying. So the surplus, we are using it for dividend as well as for the new acquisitions.
The next question is from the line of Anuj Jain from Global Capital.
And congratulations on the wonderful set of numbers. Just want to understand 1 thing this quarter, we have seen significant improvement in the EBITDA margins, right? So I mean this is a combination of 2 things. One is iDATA as well as the second one is where you are moving from partner model to self-managed model. So can you please help me in understanding like what kind of further improvement we can see and how this partner model and self-management model will help us in increasing the margins going forward?
First of all, just shifting from partner to self model is not the answer, there are multiple factors. We have increase in service fees also in many of the tenders even in value-added services fees have been increased. The conversions have also improved. So multiple factors have led to increase in EBITDA margins and definitely moving from partner-run model wherein we have to share some of the revenue. And profitability with them, now 100% of this will be captured by us, will definitely have led to an increase in EBITDA margins. And going forward, our objective is to maintain this EBITDA margins first. As you know, we were at 21% last year when we grew to 27% in the first quarter. Now we have grown 33%. So our objective is to maintain the numbers that we have achieved. I think it's a high number that we have done now 33%. So first objective is just to maintain it. And if we see more synergies that can improve EBITDA margins, then definitely, we will add on. But main objective is to deliver consistent EBITDA margins at this level.
The next question is from the line of Ravi Kumar Naredi from Naredi Investments.
Sir, whatever iDATA and other subsidiaries we bought, we took INR255 crores on borrowing in spite we have cash balance of INR1,000 crores. Any specific reason to borrow?
Mainly because of the better ROI calculation on the acquisition. So the borrowing has been done in Turkey for the acquisition. it's a tax-efficient structure. That was the main reason; we did the acquisition on a small amount of borrowing.
Okay. Okay. Understand. Any new visa application mandate, if we won in this quarter, will you describe it?
See, we are constantly bidding for multiple contracts. In this quarter, we have opened offices in new geographies in Colombia and Peru. We've also rolled out certain contracts that we won, again, for example, in the Poland and Philippines. We recently started Portugal and Morocco. I think it was in the quarter before or this quarter, I don't know. Constantly, we are rolling out newer contracts in newer geographies and also opening new offices for our existing contracts. For this quarter also, we have done the same.
Okay. And this investor presentation, you mentioned ongoing transition from partner model to self-managed model. What is the difference?
Difference is that there are still certain countries that you see that we have the opportunity to transition. So we are evaluating that in certain geographies of the world. So that is what it means.
The next question is from the line of Ankush Agrawal from Surge Capital.
Within our visa business, as far as we move to iDATA revenue number of INR 60 crores. Sequentially, our revenue numbers are lower within the visa business despite the fact that the number of application process is similar. Like in now visa business, the EBITDA margins are primarily higher because EBITDA is similar, while revenues are lower sequentially. So can you explain why this has happened while the revenues are low sequentially within visa business, excluding iDATA.
This has been mainly on account of consular numbers being much higher, where the revenue per application is much lower. Wherein we have passport renewals services and the others services were much higher compared to the Q1. Therefore, the mix has been a little different. That's why.
Okay. Okay. It doesn't have any impact of accounting, I think in FY '24, we take this accounting change wherein the embassy fees, which was a pass-through was directly being passed and was not being booked. Has that also impacted a bit in this quarter or that hasn't been done in FY '24, '25?
So nothing in this quarter.
Okay. The second question is around iDATA. So iDATA margins are about 37% this quarter and the revenue run rate of INR 60 crores is similar to the numbers that we shared at the time of acquisition for 2023. So wanted to understand why the revenue has not grown plus why the margins are lower than, say, 55%, 58% at iDATA did in 2023 to now, 37% in this quarter.
Nikhil sir, you will take it or?
I can take that. Two things have happened. One is that there has been some changes in certain countries where we are operating, where the volumes of transactions have come down because of things like e-visa, we've compensated some of that with higher volumes and new additional volumes in other countries. And you'll keep seeing this improvement as we decided that we will do synergies with BLS where 9 centers were to be done in 9 months. We've already completed 4 of them, and therefore, you will start seeing improvements coming in, in the quarters ahead.
Okay. But do we expect that we will be able to achieve like similar margins as per their pre- acquisition like now?
We expect to improve the margins, as I said and achieve the kind of margins that we were doing earlier.
Okay. The last question is would it be possible for you to share how much of our visa business is dependent upon the Spain contract? I know it's a large number but for a ballpark of how much of our revenues and profitability would depend on Spain contract.
Spain will be around, say, 25% to 30%.
Just 25% to 30% of overall revenue you are saying?
That's right. That's right.
But the applications to sales will be much higher because of the data that we have shared earlier.
No, the application ratio will be same or similar.
The next question is from the line of Ishika Bajaj from Helios Capital Asset Management.
So bookkeeping questions. So for cost of service in Q2 FY '25 is going down by around INR63 crores. So is there a particular reason for this? Or is it just because of the model shifting from partnership to self.
Yes. That's been the major reason and what the commission we were paying to the partner were booked under cost of service directly, which is not there, and that expenses are being booked under employee costs and the administrative costs.
Other expenses, that's also gone up by INR 50 crores. What is the reason for that?
Exactly the same reason that it has moved out of the cost of sales and the expenses have been under other expenses and the employee costs because now all those offices are being maintained by us.
Yes. Understood. And one more thing, when this iDATA acquisition was announced, it was said that initially, you're going to pay EUR 50 million and then go on a milestone-based payment structure. So is that still something that you're doing or you paid out the entire INR720 crores?
So we have paid the entire amount, except a small, I think, EUR 4 million, which is to be paid over the next 1 year or so.
The next question is from the line of Ruchita Ghadge from I-Wealth.
So my question was on the partnership model. So have you converted all our centers from partnership into self-made or there are still a few models which are remaining.
Yes. There's still a few pending but depending on the operational requirements we are analyzing whether it is feasible enough to convert or not, but most of them have been converted.
Okay. So we expect the margin to further increase from your 34%, 35% PBT margin that we've made during this quarter. We see a further improvement once we convert those models as well?
As we said, like we have really grown from 21% margin level to 27% and now 33% so on an increased revenue that you expect in the coming quarters and years, consolidation with all the companies. Our main objective is first to maintain the margins that we've achieved. So as of now, our objective is just to maintain the margins that we have achieved. And if we grow further, that will be a bonus. But our objective right now, consolidation that we plan to do in the next few years is to maintain the margins.
And this Aadifidelis acquisition, when do we see these numbers coming in our books?
We are planning to see that it gets closed in the coming months. And hopefully, we will see the numbers reflecting in our Q3 numbers.
And what is the kind of growth that we see in this business?
I think once we get into the business, we will have a much better idea of how we can grow it further.
The next question is from the line of Chandan Mishra from Finvester.
First of all, congratulations on posting good set of numbers. My first question is, if you please quantify the organic business growth in the current and coming years leaving the acquisition...
We couldn't get your question.
Sir, please quantify the organic business growth in the current and the coming years...
This is sir, leaving the acquisitions aside?
Correct. In terms of volume applications.
And sir, my next question is what are the acquisitions planned in the near current future?
Right now our aim is to consolidate the acquisitions that we have done and streamline the operations. And then going forward, as you know, we are constantly looking for growth opportunities for both organically and inorganically. So if good opportunity arises, then we can definitely look at further acquisitions.
One last question, sir. As it is being asked, but my question is just follow-up to digital business. As we have seen some flat dip in digital business year-on-year. Do we expect some improvement in upcoming quarter on the year-end?
Definitely, as we said that digital business, we have actually internally seen a growth only because one of the contracts that we are running was completed last year. So that is why the revenue was not taken from that contract. In spite of that, our other business and digital business have grown. So we do expect growth coming in digital business in the coming quarters and years.
The next question is from the line of Balu from Parami Financial Services.
Congratulations on the good set of numbers. I have one question. I think in the month of August, we had announced for the QIP. So your views on those. Where are we in terms of our QIP?
I think we had just announced enabling resolution as a company that what our plan knows that every year we do enabling resolution, depending on the requirement, we will announce the QIP. Right now, there is no requirement but that was just enabling resolution. As and when there is a requirement where we have a big acquisition opportunity or requirement of funds, we will be announcing that.
The next question is from the line of Dinesh from Finsight.
Sir, I think most of my questions have been already answered, but can you just tell us like the cash, which is approximately INR 900 crores, right, all inclusive where is this cash? Is it in India or is it in foreign operations?
So basically it's all over the world, but a major portion is in India and the second highest amount is there in Dubai because there we consolidate.
Okay, India. And sir, sir, like, say, as you mentioned, we have already done a few acquisitions and a few are maybe under pipeline, I'm assuming that. So the cash which we have is after paying all the current acquisitions which we have already done, right? Or are we expecting any draw down from this cash for any of the pending acquisitions?
No, we will be using this for the pending acquisitions.
Okay. And how much is that amount? And what is the amount we are expecting there?
See, actually, if you see our results, we are generating about INR500 crores to INR600 crores a year of cash in the company with the current run rate. And we have used out of this money $31 million for the Citizen Invest, which we announced in the first week of October. And now we are going to even pay for the Aadifidelis in a month's time. So these are the current investments and others, which are in the pipeline. Once they get crystallize, we will know how much we need to pay them.
Okay. So there is certain pending amount is still we are expecting, right?
That's right. And we are generating also. So it's both.
The next question is from the line of Yash from Stallion Asset.
So I think last time, you had mentioned that you have about $1.5 billion to $2 billion of opportunity. And I wanted to understand how many tenders are now like going to be renewed? What is like a bidding pipeline for the next 2 years?
Yes. The answer is out of those we already announced that we won Slovakia Global in the last one year, Hungary, while multiple contracts, Italy government, Poland, Portugal. So we have won multiple contracts and also we are bidding for newer contracts and as and when we win more contracts we’ll definitely announce.
Okay. So I mean, is it possible to quantify like what...
Opportunity is much bigger. It's definitely upwards of $1.1 billion, $1.5 billion. In Europe, there are multiple countries that are coming in for renewals, in North America also. And we are actively now as we grow as a company, as we mature as a company, even with this acquisition of iDATA, not only that we've added geographical presence, we've also added some good people who had good presence in different geographies that where we were not present. And they have good relationships in those territories. So definitely, we see good opportunities coming in, and we are hopeful that we will win certain market share as we are performing our existing contracts well re-winning them as well and governments are taking notice and they have good reliance on us. So definitely, we see that government wants to change the market scenario globally and stop the over reliance on one monopoly player. So that is why we see growth coming in, in our company.
Right. And sir, second question is that as you said that you have about INR500 crores to INR600 crores of cash generation. So after the acquisition as well. I mean is just to the Board as a suggestion, would it be possible to open for a buyback?
I think we can consider it. We are looking at multiple options right now. Our main focus is to deploy the cash in terms of either acquisitions or dividend to the shareholders that we've been doing. We're also investing in technology and also opening of newer centers consolidating our operations. We're also spending on business development and getting more quality people on board. Definitely, we have not explored that, but we can discuss it on our next Board meeting.
Due to time constraint, 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 the Q2 FY '25 Conference Call of BLS International. We look forward to talking to you again next quarter.
Thank you. On behalf of Nuvama Wealth, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
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