It is on expected lines. Major revenue and eps impact in foreseeable future.
Don’t think Punjab govt will agree to the receivables calculation of the company. There is a strong probability that dispute will go to court.
The stock may be under tremendous pressure, given the co. specific information and broad level correction anticipated in the markets.
Exited completely for time being at the cost price. Shall add if it corrects significantly from here.
@blueeyedinvestor can you please attach HDFC report if possible?
Bls media department has replied back to mail regarding the recent development, and after taking contact details said will call at 4pm…
Hopeing for some more info!
I received the call from the media department and was taken aback as mr.ajay milhotra was in the conference…
Anyways the update that i got is…
About the receivables, they are receiving small amounts as of q3 but not of the amount they expected…so receivables though increasing , is the balance amount…
As of now they are still in touch with the gov and are optimistic about getting back the money in time forward but as expected there is no timeline to guide…
Also moving the court they say is not an good option as that might affect future bidding prodecures…
As of the afgan project , they have opened few centers and are going to scale it up according to the app flow…it got the sense its still in fetal stage…
As of the other tenders they have bidded for, they are very confident of getting them, as talks with the highest level of officials are going on…
All they can assure to us stakeholders, they will be able to double to triple revenue soon …
As they are in a silent period no numbers were discussed…
Also not only their services are of flawless reports, but the major stakeholders in the state are very impressed with the level of execution…
Disc… Invested… I would have uploaded the audio clip, but as i gained access only after clearing my investment amount, dpid and cliet code with them, i think its better to keep it personal… but this is the best of transcript that i can provide…but for authetication of this cov i can provide this…
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To add a quote…“we are having a good pipeline of projects in visa outsourcing and egov and we are in advanced level of discussion of most of our clients, and most likely the chances are that we will end up with a big win within this calender year”…
What’s your comfort level and confidence post con call?
Atul, they sounded positive enough for me… They didnt want to get legal with gov and also they are not hopeless with punjab project receivables, at one point ajay cut me when i was saying about getting back the receivables within 6 months, and he said we will definitely get back before that period…
They clearly mentioned another win within this calender year and right after that the mention of double to trippling of revenue… The line was bad, so i am not sure, but i think they also mentioned this quarter has already been great, but again a disclaimer the voice broke…
And also said " we will take this lesson and consider our next projects accordingly"
I wanted to ask whts their take on the hdfc report but well it would sound a tad too selfish and unprofessional…
Bottomline… This punjab thing is not an issue at all to them…as much as the market it getting tensed about…
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Vakrangee, a listed player in the similar domain was down almost 20% today. Does anyone know why? Or is the rub off BLS event. Not sure it is coz it fell far sharply than BLS did.
Didnt look into it much, but it was trading at 72x pe multiple… And 26x pb multiple… Thats so damn unstable…
Hi
Hope you have visited Vakrangee thread on this forum. Lot of info and discussion happening on this perspective…
Just did now. Thanks
BLS International 3QFY18 result: Visa business recovered, margin dropped
CMP (Rs 208, Mcap Rs 21bn, SELL, TP Rs 160)
BLS International reported mixed set of numbers with beat on revenue and miss on margin. Revenue in 3Q stood at Rs 2.03bn up 8.7% QoQ (vs our est. of Rs 1.94bn). Beat was due to higher visa revenue (Rs 1.48bn, +10.1% QoQ) led by Spain and Afghanistan project.
EBITDA stood at Rs 0.38bn down 12.3% QoQ vs our expectation of Rs 0.44bn. EBITDA margin stood at 18.7% (vs our expectation of 22.7%), down 450bps QoQ. Drop in margin is due to 14.3/12.9/23% rise in cost of services/employee exp/other operating expenses. In 9MFY18 margin stood at 21.3% +1,036bps YoY.
PAT stood at Rs 0.21bn (below our est. of Rs 0.27bn) down 23.1% QoQ but up 23.6% YoY.
Tax rate in 9MFY18 increased to 11.1% vs 5.3% in 9MFY17 due to higher profit contribution from India e-governance business which attracts full tax rate.Tax rate for 3QFY18 stood at 18.5%.
Receivables stood at Rs 1.45bn in 9MFY18 vs Rs 1.33bn in 1HFY18. There is uncertainty related to the recovery of receivables as the Punjab government has cancelled the contract in Jan-18. We still await clarity on this front and thus have downgraded our rating to SELL recently. However we continue to like the Visa processing business which has bright prospects.
Will revise estimates post concall on 14th Feb 2018 at 02:30 PM Dial in 022 3300 2300
As expected…receivables shot up to 145 cr. Margins declined and profitability dropped sequentially…Remember this business was all about the QoQ growth given the nature of business and materialisation of new contracts - Spain.
All the while the management has always been maintaining that all new contracts secured so far are value and margin accretive…So here again they made bully of investor sentiment. The fall in QoQ came in the Qtr which also has the holiday and festival season leading to higher traffic.
Although I have no hopes and mercy for either management but saw today Vakrangee front full page ad in Mumbai ToI edition. Why should BLS enjoy premium valuation for the business which is sitting in overseas subsidiaries and where cash flows are restricted and cannot be repatriated without incurring extra cost back to India.
Disclosure: Exited 100%
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i am sharing my concall notes…
Punjab…
- Out of 202cr of topline punjab was 50cr…
2.Total 50cr was received from the gov till date…
3.In dec 10cr has been received and in jan 5cr received form the gov
4.present receivabes stands at 145cr
5.the punjab project is operational till next six months, that is july and all 2147cr kendras are operating
6.now total services offered is 169 …
7.the gov is obligated to release receivables before ending the contract and they are hopeful
8.the employees have not got their full compensation as of yet…
9.145cr of receivables is inclusive of gst, that is at 18%, gst part is 70cr (citation needed due to poor connection)…true receivables is 75cr (there was a huge confusion about the gst part in concall, the management concluded the gst portion wil not be received, still why they are booking it as receivables is not making sense)… this receivables are to be paid at 1percent interest cost per month
10.they have the approach to talk with the gov to continue the project on a reduced scale and the terms of contract will be different , else they will continue to provide services in punjab in terms of non government application, which they are not providing a of now… - after this experience they will focus on international egov space rather than domestic but mentions that domestic tenders are also under consideration and this is a totally new concept to the gov so initially these problems do occur in business and to be ignored
I missed noting the spain contracts … will update once the tape is available in researchbytes…
other aspects…
1.I asked about evisa being a disruption risk to the current business to which they replied that govs are taking initiatives in evisa but svice providers like bls will process them only and margins can be even higher in evisa…
2. the current debt is 100cr from 98cr in nov ppt… the long term debt has been reduced but there is some uptake of short term debt also so the finance cost has increased…
3.10percent of the current visa contracts are expiring and will be up for renewal, but they mention they are gong to add new contracts fast than expiring ones (hopefully not face saving)…
4.the afgan contract has generated 5 million usd as revenue in total
5.they presently have 6 new offices and 2 mobile units in UAE for the afgan project and this is just a start… the afgan gov has made it mandatory for all afgan nationals in UAE to enroll in the program
6.algeria is still a start and revenue cannot be quantified
7.They also mentioned they are currently in talks with a lot of government internationally for egov projects, but cannot give disclosures due to sensitive information…
8. 1.5 million Spanish applications have been processed in q3…
9.coming to the big question of margins…
cost of services have increased as a employee conpensation hike due to both new recruits and hikes as they need better servic providers and prevent attrition … this should be the new normal in cost of services if not increasing…
also the other expenses have increased as they have travelled and took services of lot of experts and diplomats regarding the new upcoming visa tenders and processes…
10.They are still expecting a big win this calendar year and next year too, but did not specify visa or egov segment , but did mention schengen space is one of them…
11. 115cr is the present cash balance from 101.6cr last q end
please add or correct if possible , the connection at the company side was very bad…
But thats the outlook, so post july we are definitely losing 25percent of the topline + 10percent of the contracts are expiring(no estimate how much this 10percent contributes to topline)
as the debt is lesser than the recivables and cash balance individually i have no worries
Longer term view is still attractive in both egov and visa space , they have improved their service quality both technologically and by man power, we they maintain a clear edge over compititors …
In the short term after 2 quarters there is serious threat to the topline …
Disclaimers… Invested and trippled stake compared to q2, will add more if comes down to 150 to 160s
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I would like to add to the concall notes or correct them as follows…
- in fy18 total punjab revenue is 144cr, and in fy17 100cr…Plus gst and service charge
total 244cr…exclusive of gst and service charge …
But the billing to the gov is 291cr which includes the gst and service charge…
Out of that 291cr the current receivables is 145cr (includes gst)…
rest 146cr has been received from the public and the upfront charges from the customers…
So as the total service charge +gst is 19.26 percent , of the 145cr receivables , 117cr is the true receivables and the gst portion is not going to be received…
Also the revenue which was booked in the financials was not inclusive of gst but the receivables are…
Presently the total debt is 100cr, 60cr short term from 52,5 in q2, and 40cr long term from 45.4cr in q2…
So 100cr debt, 115cr cash balance and 117cr receivables(salaries will be paid from this receivables, so there is going to be an exceptional expense when the salary will be paid )…
Also, out of 223 services initially planned the gov didnt have enough backend support and started with 60 services and max went upto 160 as at present, so the footfall didnt happen as expected…bls initially though they wont have to epend on the gov so much and the upfront charges will suffice the reveue target per year, but in practice this happened and now they have to depend on the gov receivables for the revenue target…In redemption they say they are going to keep a criteria of adequate backend support inproject before bidding for next tenders in indian egov space,…
The punjab gov can act on 2 clause, either the contract can be terminated after 1 year of operation without giving any reason or they can terminate of there is any breach of contract from bls …
And under the terms of contract they are obligated to receive the receivables plus the interest on the receivables (as on date…10cr), before termination of contract… 80-90cr of money has been received from the gov till date and 117+10cr is total outstanding …
Plus there is presently or at the current footfall levels not much working capital gap is there, as the upfront charges they receive from the customers in punjab egov is enough to service the working capital so going forward to the next six moths issues will not come out as such
they also mention there is no dispute with the receivables as every of the process is going according to the contract
Internationally they said they there is not much difference in service nature between visa processing and egov both in nature of services and margins… Also internationally the market in more matured and they are in talks with Europe and America but refuses to name specific countries where the egov outsourcing is already there…
They give hints of the future projects int he following lines…
- 3 to 4 new tenders are going to be added soon in coming few quarters…
- The other expenses have increased as they have consulted diplomats, consultants and legal offices regarding these new countries to understand the demographics and technicals…
3.they are setting the target of winning new contracts every year…
The expiring contracts form 10percent of the revenue , bbut also these contracts have a low margin of 8 to 9 % compared to spain where margins are higher than 15%…
the application charge per visa app is 15.45EUR in spanish contract , plus the value added services VAS they have introduced along with that are increasingly being used like mobile biometrics and primetime? and other IVR services…so that is also aiding margins per applications but they could not give the margin in numbers because they consider the whole business at large and the average would not refect the correct numbers (face saving?)
I have covered 90percent of the concall i think or more…!
I have a hunch hdfc securities who had a unreasonable knee jerk reaction in there targets post the punjab news will revise the target upwards in the long run although in the short term there is a bit of uncertainty as expected with the government projects there is a silent period until official announcement , and all the sellers of the stock, have given the long term buyers are beautiful opportunity… thank you 
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a minor point i missed…
the cost of services was increased due to end of year incentives to compensation towards the employee base…
And the other expense hike was a one time thing…
you wanna explain that?
the other expenses increased by virtue of consultation services accessed to gain knowledge about the new contracts that are soon to be finalized.
the finance cost increased on account of short term loans.
Th value added services like mobile biometrics requires new skill to be recruited, while the potential of VAS is more and it is aiding margins per applications and yet to increase…
It satisfactorily explains the margin contraction…
The topline has not disappointed either…
Judging a business in just one quarter is requires unimaginable capacity…
And the market still values bls even at the face of a quarter of revenue impending slash down and the market is the ultimate judge…
What is going to be stated if 4 news contracts are signed?
Frankly disappointing remarks from the originator of the thread, specially when i was impressed with the initial presentation, ofcourse exception to generally impeccable standards of valuepicker thread makers do happen…
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Market is all about perception about business - which may change for someone with a single event. Its good that one is flexible in his/her approach and changes opinion based on changed facts. Irrespective of whether that judgment is perceived correctly by others.
Every business becomes a buy at sufficient MOS, currently with the uncertainties around the business in short term may trigger a correction. Its upto each investor to decide whether to get out or ride out the correction.
The video interview of BLS international after Q3 results. Big takeaways…
- A few large international tenders are going to be finalised very soon.
- Company also plans to do acquisitions…At an advanced stage.
https://www.youtube.com/watch?v=wunz0SppF-g&sns=em
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