BLS International

Lajja_Shah · November 6, 2023, 11:05am

Arka · November 9, 2023, 5:42pm

**BLS International Services Ltd. Unveils Strong Q2FY24 Results and Strategic Milestones! **

Financial Snapshot:

Operational Revenue (Q2FY24): ₹407.7 Cr, a robust 14.3% YoY growth.
EBITDA (Q2FY24): ₹86.7 Cr, marking the highest ever in the company’s history with a stellar 52.7% YoY growth.
PAT (Q2FY24): ₹82.0 Cr, witnessing an impressive 60.8% YoY growth.
EBITDA Margin (Q2FY24): Surges past 20%, reflecting operational excellence.
Cash on Books: ~₹687 Cr, making BLS International a debt-free company.

Strategic Achievements:

Global Ranking: Among the World’s Top 3 Visa & Consular Services companies.
Contract Wins: Secures a global visa outsourcing contract for Slovakia in 18 countries, further strengthening its position.
Financial Metrics: ROCE at 35.5% & ROE at 34.6% (H1FY24 annualized financials), showcasing significant returns.
Market Presence: Processes Visa applications for key countries like Spain, Italy, Portugal, Germany, Thailand, and more.

Quarterly Performance (Q2FY24 vs. Q2FY23):

Operational Revenue: ₹407.74 Cr, up by 14.26% YoY, fueled by growth in Visa & Consular services and the digital business.
EBITDA Growth: Records the highest-ever EBITDA of ₹86.74 Cr, a remarkable 52.71% YoY surge, driven by favorable business mix and operational efficiencies.
EBITDA Margin Expansion: Touches 21.27%, up by 535 basis points from 15.92% in Q2FY23.
Profitability Boost: PBT stands at ₹87.18 Cr, reflecting a 55.07% YoY growth, while PAT registers ₹82.00 Cr, a significant 60.81% YoY increase.

Half-Yearly Performance (H1FY24 vs. H1FY23):

Operational Revenue: ₹791.22 Cr, marking a solid 25.66% YoY growth.
EBITDA Surge: Touches ₹166.79 Cr, an impressive 88.90% YoY increase.
Profitability Acceleration: PBT records ₹167.62 Cr, a substantial 89.11% YoY growth, while PAT stands at ₹152.99 Cr, an 87.28% YoY increase.

Strategic Moves and Collaborations:

Global Visa Outsourcing: Wins Schengen Global Visa Outsourcing Contract for Slovakia, expanding its reach across 18 countries.
Banking Collaboration: Partners with Kotak Mahindra Bank for accessible and affordable banking services in underserved regions.
Digital Integration: Successfully integrates UMANG Services into its digital platform, offering access to over 500 e-governance services.
Global Expansion: Rolls out Visa outsourcing services for Hungary, Italy, Bangladesh, Uzbekistan, Qatar, Senegal, Cameron, and Abu Dhabi.

sajijohn · July 11, 2024, 1:44pm

Nuvama starts coverage with a target of 518 BLS International jumped nearly 80% in a year; is there more upside ahead? Here’s what Nuvama says | Stock Market News (livemint.com)

piyush_narang · August 13, 2024, 8:05am

BLS International
Its not a new Movie, it’s a repeat of already played movie

Table of Contents

What Made Me Look at This Company at First Sight?
How do I rate this company on different parameters?
Investment Thesis
The Story Behind BLS
Business Model and Innovation
Market Analysis
Financial Performance
Industry Dynamics and Competitive Landscape
Valuation Analysis
Risk Assessment
Appendices

What made me look at this company at first sight?

Proxy to Travel & Hospitality

When you want to play proxies, BLS is one of the unique & niche business models that is listed on exchange

Bridges luxury and essential services i.e. wide array of services to cover the wider spectrum of population

BLS is probably the only company that provides services to people at the top of the income pyramid and bottom of the income pyramid. This is one of the reasons that subsidiary i.e. BLS E-Services got listed separately on exchange

One of its Kind Negative Working Capital B2G Business

Given B2G businesses carry a risk of collections and stretched Working capital, this business has negative working capital.
Given Indian & Foreign government as its clients but given the nature of services & collection process, this risk is mitigated. There are hardly any receivables on balance sheet
BLS E-services carries B2G risk but that is getting mitigated as they are charging service fees from end customer now

Operating Leverage in full swing

The company has been consistently increasing its EBITDA margins from 15% in 2023 to 27% in Q1 FY25.

Cash Generating machine

60% ROCE (excl. cash) business with negligible leverage on balance sheet
Company doesn’t need cash to expand organically

Oligopolistic Industry & High Barriers to entry

VFS Global commands 50-55% of the market share, while BLS and TLSContact each hold approximately 10-15%. This concentration of power can lead to reduced competition and higher barriers for new entrants.

Market Opportunity and Growth Prospects

The global Visa Outsourcing Services market was valued at US$ 3.7 billion in 2022 and is anticipated to reach US$ 8.2 billion by 2028, witnessing a CAGR of 14% during the forecast period 2022-2028.

Tech Driven & Capital Efficient Business Model

Asset light model with low CAPEX requirement on tech and physical office infra

Low-Cost Model

Like IT Services company, BLS also has a similar advantage. All the support services are provided from India which make it a competitive for BLS international

Video Links:

Corporate overview_Oct 2023

                              **Company Rating**

Criteria	Description	Rating (Out of 10)	Comments
Business Model	Evaluation of the company’s business model and market positioning	8-9	BLS is a uniquely positioned B2G and B2B business with negative working capital
Innovation	Assessment of the uniqueness and innovation of the product/service	7-8	BLS is following the best practices and working on enhancing the whole Visa Application process and e-governance services
Market Potential	Assessment of market size, growth potential, and competitive landscape	8-9	BLS has right to win in an oligopolistic and growing market. Digital services also have a decadal headroom ahead
Financial Health	Analysis of revenue growth, profitability, and financial stability	8-9	Double digit revenue CAGR and operating leverage in full swing, the company can grow bottom line at much faster pace in both verticals
Management Team	Experience and track record of the promoters and management team	8-9	Promoters have built the company from scratch. No corporate governance issues yet. No significant RPT. Transparency in report is some that company is catching up on
Capital Efficiency	Efficient use of capital and funding history	8-9	The company raised xx in IPO in 20xx and hasn’t raised any round yet. Company’s propensity to generate cash is very high
Valuation	Comparison of current valuation with industry peers and potential growth	6-7	It is available at 19-21x FY26E EV/EBITDA at CMP of 580. Its expensive w.r.t peers but deserves a premium

BSL International - 2 distinct companies under 1 Umbrella

Both the companies are very distinct from each other due to the following reasons -

Are at different stage of lifecycle
- BLS International is much mature than BLS E-services. It is 80% of the consolidated revenue
- Also, management doesn’t want to fund e-services growth from visa business
Growth prospects and growth levers are different
- BLS international is spread across the globe and has foreign governments as clients. Growth in cross border travel is key lever for growth
- BLS e services is India centric as of now and central/stage govt and banks are customers. More coverage of rural and semi urban areas is the key lever of growth for this segment of business
Key Inherent Risk are different

Since Inherently, both the businesses are distinct and listed separately (recently), we will discuss the businesses separately

The Story Behind BLS

Before we start discussing BLS international, we should look at the journey of VFS global. This will give us an idea of where is BLS placed in the growth cycle.

VFS Global Journey

Key Points to Note –

VFS was also a 15% EBITDA margin business in Nov 2015 but with economies of scale, its now a 27% EBITDA margin business
VFS grew acquiring regional players
Citizen services and other ancillary services is a huge opportunity. E.g., VFS helps with the door-to-door delivery of services in Delhi, sends home birth & death certificates and driving licenses in Mumbai. It also works on establishing the identities of illegal immigrants in South Africa.
The more data you have for biometric enrollments and other related data, the more you can leverage that data to win more contracts. Note- Data doesn’t belong to VFS

**

Where is BLS in the journey

**
• BLS seems to be currently in Phase 2 - Market Leadership and Diversification, were
o They are acquiring regional players
o Diversifying into citizen services and other ancillary services
o Changed the business model from partner led office space to own office space
o Improving margins from 15% EBITDA in FY23 to 27% EBITDA in Q1 FY25
o Bidding for new contracts aggressively

Visa & Consular Services

As soon as you start studying this business, you will be able to easily be able to make out few things –

Industry is Oligopolistic in nature and few companies control the majority of market share
BLS (being 2nd largest) is 1/3rd the size of VFS global
Global Visa Outsourcing services market size – Market growth of 14% CAGR gives a comfort
a. This industry, less than two decades old, currently sees only 40% of the total visa market being outsourced, up from 22% in 2010, indicating significant growth potential.
b. The global Visa Outsourcing Services market was valued at US$ 3.7 billion in 2022 and is anticipated to reach US$ 8.2 billion by 2028, witnessing a CAGR of 14% during the forecast period 2022-2028.
Larger players are grabbing market share. There are 2 case studies to prove the same.

a. VFS global – the company has done more than 4-5 acquisitions across the globe in last 5 years to capture the market share

In March 2017, it took over 100% ownership of its joint venture with TasHeel Group. The JV was the outsourced visa services partner for Saudi Arabia
VFS acquired Al Etimad, a facility management company that operates 90 visa application centers in 4 countries
In August 2017, it acquired UK-based visa service provider TT Services
In 2017, VFS acquired a facility company in the CIS region which operated 550 visa application centers in 8 countries

b. DU Digital Global Ltd – The company has topline of ~INR 29 Cr. The company has just filled a writ petition before the Hon’ble High Court of Delhi. The petition is filed to safeguard against mischievous attempts to scuttle competition and deliberate undercutting and to avail the interim relief.

The smaller players struggle with profitability at a lower scale. The company has an EBITDA margin of 11%

Investment Thesis

There are 4 levers of growth for BLS in this business -
a. Consolidation in industry through inorganic route
b. Increase in new outsourcing contracts by new/existing governments
c. Increase the service charge for Visa processing
d. Increase in visa applications processed by BLS

And for now, all the levers are working for BLS international.

o BLS acquired a regional players called iData with the following credentials –

Turkey based company, founded in 2005
Provides comprehensive visa processing and consular services to various governments
Currently servicing Germany, Italy, and Czech Republic consulates in 11 countries
Operating 37 Visa Application Centres (VACs)

Particulars	CY2022	CY2023
No. of Applications (in Lakhs)	5.12	7.22
Total Revenue (Rs Crores)	168	246
EBITDA (Rs Crores)	94	144

o Due to new contracts won and higher service charges, Number of applications processed and Service charge for processing each application, both the levers are working for BLS International

o Last lever for growth, Growth in Outsourcing of Visa Applicable Worldwide to further fuel up the need for global VISA processors like BLS

Competitive Analysis

Looking at the competition is a major factor in making investment decision in BLS (after iData acquisition)

Parameter	VFS Global	BLS International (Incl. iData)	TLS Contact	VisaMetric	CSC
Incorporation	2001	2005	2007	2005
Headquarter	Zürich & Dubai	Delhi	Luxembourg	London
Parent	Blackstone	NA	Teleperformance SE	NA
Market Share (outsourced Visa)	~50%	~15%	~20%
Annual Revenue	$ 700-800 Mn	$ 250 Mn	$ 330 Mn	~$ 50 Mn	$ 50 Mn
EBITDA	$ 180-200 million	$ 60 Mn	$ 85 Mn	~$ 10 Mn	$ 12 Mn
EBITDA % of Revenue	27%	21%	21%	18%	24%
Annual Visa Applications	~25 Mn	~3 Mn
Visa Applications Processed (Cumulative)	-	360+ Mn	6.5 Mn	7 Mn	2 Mn
Client Govt	68	46
Global Presence (countries)	153	66	62+	16	20
Number of Application Centers	3,500+	2,500+	1,500+	100+	150+
Employees	11,000+	60,000+ incl. Associates	6,000+	500+	500+
Top Countries	UK, Australia, Sweden, UAE	Germany Italy Spain**US

India|France, Switzerland, Italy||US|
|Valuation|$2.5 Bn in 2021|$2 Bn in 2024||||

Management Commentary*

Shikhar Aggarwal; Joint Managing Director

“We have transitioned from a partner-backed model to managing our own operations, a move BLS International Services Limited that underscores our dedication to optimizing performance”

Acquisition

“A significant milestone in our global strategy was a definitive agreement to acquire a pertinent stake in iDATA, a leading provider of visa & consular services based in Turkey. This strategic move aligns seamlessly with our objective and is expected to enhance our market presence substantially”
“We’ll continue to focus on our inorganic growth initiatives, wherein we would be targeting synergistic tech-enabled businesses.”

Annexure

**BLS E-Services**

Shikhar Aggarwal; Joint Managing Director

“The funds raised (INR 300 Cr through IPO) will fuel the expansion of our digital service arm enabling investments in new technology, service offerings and outright efforts”
“Partnerships with public and private sector banks exemplified by initiatives like Har Ghar Suraksha and DBS Dastak underscore our commitment to extending banking services to the 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 accessible and convenient for them. This service aims to
address the challenge faced by elderly in accessing traditional banking facilities. Looking ahead,
BLS International Services Limited we are focused on organic growth initiatives and strategic acquisitions to expand our market share and strengthen our competitive position.”

Acquisition

“We signed a definitive share purchase agreement to acquire 55% controlling stake in Aadifidelis Loan Solution and its affiliates, which is one of the largest loan distribution processing companies in India with Pan-India presence. Anetwork of 8,600 plus channel partners enabled Aadifidelis to facilitate average monthly loan disbursement of more than INR1,500 crores”

“On the digital service front, we secured a significant contract from state health agency Ayushman Bharat, Pradhan Mantri Yojana, Uttar Pradesh. This partnership involves handling of Ayushmann cards on behalf of the National Authority IT platform.”
“Being chosen as being chosen as a Empaneled Service Provider reflects based international reliability in delivering crucially, governance Services.”
“The company was awarded another significant contract from UIDAI to conduct a comprehensive data quality check for Aadhaar information. The project, spanning over three years, is extendable by another two years”

Key learnings from the Punjab contract

Post the Punjab contract, BLS has decided that it would not pursue any Govt. business where receivables are due from the Govt. The company will participate in contracts only if the revenues are to be collected from Citizens, with a share of revenue going to the Govt.

Post re-contracting of the Punjab contract, the company has entered into two additional contracts with the states of Rajasthan and Uttar Pradesh. In both these contracts, BLS has provided the software necessary to provide services to local entrepreneurs and charges a fee per transaction, making the model even more capital light

Investment Thesis

There are 4 levers of growth for BLS E-services in this business -
- Consolidation in industry through inorganic route
- Increase in new outsourcing contracts by state/central governments
- Increase the service charge for the services
- Increase in volume of services provided
- Addition of new services to create a complete ecosystem
Idea to create one stop shop for all services & Eco-system that’s been created, will make this business on the same path to visa services business.
This business also has potential to generate higher EBITDA margins
Management has guided for >25% growth in this business for next 4-5 years which is possible by creating one stop shop
Given the past learnings, Management know how to grow this business vertical

Estimated Financials

Year to March (INR Cr)	FY23	FY24	FY25E	FY26E

Income from operations	1,516	1,677	2,250	2,700

Cost of services	1,029	965	1125	1350
Employee costs	140	208	270	324
Other expenses	125	158	202.5	243
Total Operating expenses	1,294	1,331	1,598	1,917

EBITDA	222	346	653	783

piyush_narang · August 13, 2024, 8:08am

Investment Thesis_BLS international.pdf (734.5 KB)

Sri_73 · August 13, 2024, 10:41am

Hi, you seem to be confused between BLS international and BLS E services (citizen services) in which BLS international holds 51%, BLS international thesis is simple, it is in visa and consular services with tourism theme and they are acquiring companies like iDATA for good valuation, I have been invested since 2019

Avigyan_Mitra · August 15, 2024, 10:03am

Few of my takeaways from Q1 FY25 of BLS International

BLS International has kicked off FY25 with a bang, crossing the INR 500 crore mark in consolidated total income for Q1. The company’s revenue from operations grew an impressive 28% year-over-year, driven primarily by its Visa & Consular segment. With 18% growth in visa application volumes and a 36% jump in segment revenues, BLS seems poised for continued momentum. The management exudes confidence about sustaining this growth trajectory, buoyed by new contract wins and expansion in existing markets.

𝐒𝐭𝐫𝐚𝐭𝐞𝐠𝐢𝐜 𝐁𝐥𝐮𝐞𝐩𝐫𝐢𝐧𝐭:

The company is pulling multiple levers to drive growth:

Shifting from partner-run to self-run model: This transition is already yielding fruit, with margin expansion visible in Q1.
Acquisitions: The recent 100% buyout of Turkey-based iDATA and 55% stake in Aadifidelis Loan Solution showcase BLS’s appetite for inorganic growth.
Geographic expansion: New contract wins in 14-15 countries over the past 18 months signal aggressive market share gains.
Value-added services: Increased focus on ancillary offerings like travel insurance is boosting realizations.

𝐌𝐚𝐫𝐤𝐞𝐭 𝐃𝐲𝐧𝐚𝐦𝐢𝐜𝐬:

Global travel rebound: Post-pandemic recovery in international tourism is a major tailwind.
Government outsourcing: More countries are embracing outsourced visa processing, expanding the addressable market.
Digital transformation: BLS’s e-services arm is riding the wave of financial inclusion and digital empowerment in India.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐓𝐚𝐢𝐥𝐰𝐢𝐧𝐝𝐬:

Pent-up travel demand: After years of restrictions, there’s a surge in international travel.
Visa policy liberalization: Some countries are easing visa norms to boost tourism.
Government push for efficiency: Outsourcing non-core functions like visa processing is gaining traction globally.

𝐈𝐧𝐝𝐮𝐬𝐭𝐫𝐲 𝐇𝐞𝐚𝐝𝐰𝐢𝐧𝐝𝐬:

Geopolitical tensions: Conflicts or diplomatic spats can disrupt visa processing in affected regions.
Economic uncertainties: Recessionary fears might dampen discretionary travel spending.
Cybersecurity concerns: As a handler of sensitive data, the industry faces constant security challenges.

𝐈𝐧𝐯𝐞𝐬𝐭𝐨𝐫/𝐀𝐧𝐚𝐥𝐲𝐬𝐭 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬:

Margin sustainability: Management attributes margin expansion to multiple factors beyond just the self-run model transition, instilling confidence in its durability.
Cash utilization: With a INR 1,290 crore cash pile, analysts questioned the need for further fundraising. Management clarified it’s an enabling resolution for potential future acquisitions.
Seasonality: While Q1 is traditionally strong, management believes the business is becoming more evenly spread across quarters.

𝐂𝐨𝐦𝐩𝐞𝐭𝐢𝐭𝐢𝐯𝐞 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞:

BLS positions itself as a challenger to established players like VFS Global. The company’s aggressive contract wins (14-15 in 18 months) suggest it’s gaining ground. The iDATA acquisition further solidifies its European presence. Management’s confidence in winning contracts at higher service charges indicates strong competitive positioning.

𝐅𝐮𝐭𝐮𝐫𝐞 𝐏𝐫𝐨𝐣𝐞𝐜𝐭𝐢𝐨𝐧𝐬:

The management expressed optimism about sustaining the growth momentum. They expect further margin expansion, especially post the iDATA integration. The digital business (BLS e-Services) is also projected to maintain its growth trajectory.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐃𝐞𝐩𝐥𝐨𝐲𝐦𝐞𝐧𝐭:

BLS is pursuing a balanced approach:

Organic growth: Reinvesting in existing operations and new contract bids.
Inorganic expansion: Strategic acquisitions like iDATA and Aadifidelis.
Shareholder returns: While not explicitly discussed, the company’s strong cash generation could potentially lead to enhanced payouts in the future.

𝐎𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 & 𝐑𝐢𝐬𝐤𝐬:

Opportunities:

Untapped markets: Countries like Philippines and Brazil outsourcing for the first time.
Cross-selling: Leveraging Aadifidelis’s network for financial products distribution.
Tech integration: Potential for AI/ML adoption in visa processing for efficiency gains.

Risks:

Execution challenges: Rapid expansion and acquisitions need seamless integration.
Currency fluctuations: While natural hedges exist, extreme volatility could impact margins.
Regulatory changes: Shifts in visa policies of client governments can affect volumes.

𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐂𝐥𝐢𝐦𝐚𝐭𝐞:

The visa processing industry operates in a complex regulatory landscape, with each country having its own rules. BLS’s ability to win and retain government contracts across 70+ countries suggests strong regulatory compliance capabilities. The management’s emphasis on upfront cash collection and negative working capital in government projects indicates a prudent approach to navigating bureaucratic challenges.

𝐂𝐨𝐧𝐬𝐮𝐦𝐞𝐫 𝐏𝐮𝐥𝐬𝐞:

The 18% growth in visa application volumes suggests positive customer sentiment. The company’s expansion into value-added services like travel insurance also indicates growing customer trust and engagement. The rapid scaling of the digital business, especially in loan distribution, further points to favorable reception among end-users in India.

Disclaimer: This is a general analysis and does not constitute financial advice.

Rahul_Agarwal1 · August 29, 2024, 1:56pm

How is Aadifidelis acquisition related to existing business?

banjobaj · August 30, 2024, 6:16am

Precisely my question. Q1 concall mentions the reason of this acquisition as alignment with company’s portfolio of Business Correspondents-led citizen centric last mile banking delivery and to provide ample cross-selling opportunities. Still trying to understand the merit of acquiring a stake in an online loan distribution platform under the commitment to promote financial inclusion and digital empowerment,

Vineet_Khatri · September 12, 2024, 1:24pm

Vineet_Khatri · September 12, 2024, 1:27pm

BLS acquired a Dubai based company for 260 Crs at almost 3.2 times price to sales ratio and EV EBITDA ratio of 7 times.

shankarnath · September 13, 2024, 7:55am

A PS ratio of 3.2 times seems OK – BLS itself operates at a PS ratio of 8

piyush_narang · September 14, 2024, 8:18am

45% EBITDA

piyush_narang · September 15, 2024, 5:45am

VFS is probably 3x bigger than BLS after iDAta…

Rahul_Singh_Dhek · September 15, 2024, 6:18pm

Brilliant analysis from Shankar Nath on BLS.

rookie_investor_1 · October 3, 2024, 1:23pm

While they do the bidding for new contracts are service charges also fixed across the term of the contract.
Do they have the ability to increase the service charge to keep up the operating margin in case of a volume drop in visa applications?

dark_hunter · October 6, 2024, 12:59am

History of BLS

piyush_narang · October 8, 2024, 10:54am

Yes, they are…it can be slab based…they don’t have that ability… This is my understanding

JR_R · October 13, 2024, 4:35pm

[

Shikhar Aggarwal discusses the company’s latest quarterly …
www.youtube.com › watch
](https://www.youtube.com/watch?v=N1rcf-yat_Y)

gane1990 · October 14, 2024, 9:17am

@shankarnath : Read your blog post. Thank you for the insights.
Just had a query: As I understand, the overall tax rate is less since the international operations pay taxes as per the respective jurisdiction. However, why is the standalone tax rate also less?
Would appreciate answer from @shankarnath or anybody following the company. TIA