Investing in the stock market can be highly rewarding if the right stocks are chosen, but it also carries the risk of disappointing outcomes if investments are made unwisely. Shareholders of BLS International Services have much to celebrate, as the company's shares have experienced a significant surge in recent years.
The shares, valued at ₹120 each two years ago, are now trading at ₹384.50 apiece, marking a substantial gain of 220%. The performance has been even more impressive since July 2020, with the shares skyrocketing by 1850%. Between March 2022 and February 2024, the stock experienced a continuous rally, resulting in a 700% increase.
Looking at the yearly performance, the stock surged by 124% in CY21 and continued its impressive rise with a 246% and 93% increase in CY22 and CY23, respectively. In the current year so far, the stock has yielded a return of 20%.
BLS International Services, with a market cap of ₹16,000 crore, is a global tech-enabled services provider with a strong track record of offering government-related services. These services include visa, passport, consular, e-governance, attestation, biometric, e-visa, and retail services, and the company has been operating since 2005.
BLS International collaborates with over 46 client governments, including diplomatic missions, embassies, and consulates, and maintains an extensive network of more than 50,000 centers globally, according to the company's website.
The company reported a stellar performance in the June quarter. It saw its revenue from operations grow 28.5% year-over-year to ₹493 crore in Q1 FY25. This growth was primarily driven by the visa and consular (VC) business, which grew robustly by 36% year-over-year due to an 18% increase in both volumes and net revenue per application. However, the digital business posted tepid revenue in Q1 FY25.
EBITDA surged by 66.3% year-over-year to ₹133 crore, benefiting from the transition to self-managed centers from partner-run ones in various locations within the VC business, and a better service mix in the digital segment.
The EBITDA margin expanded by 615 basis points year-over-year to 27%, due to a greater contribution from the high-margin VC business, which accounted for 91% of EBITDA, up from 89% year-over-year and 85% quarter-over-quarter. Consequently, PAT rose 70% year-over-year to ₹114 crore, driven by strong operational performance.
The company recorded over 3.5 crore transactions in the business correspondent segment, with a gross transaction value exceeding ₹20,000 crore in Q1 FY25. The digital business maintained more than 27,000 customer service points (CSP) and 1.1 lakh touchpoints.
Additionally, the company signed a service provider agreement with Axis Bank and generated leads worth approximately ₹1,000 crore for private banks such as HDFC Bank and Kotak Mahindra Bank in Q1 FY25, compared to ₹602 crore generated in FY24.
It also completed the acquisition of iDATA in Q1 FY25. iDATA generated revenue of approximately ₹246 crore and EBITDA of about ₹144 crore in CY23. This acquisition enhances BLSIN's operational scale and profitability in the VC services market.
Domestic brokerage firm Nuvama Professional Clients Group has maintained its positive outlook on the company, noting it exceeded their expectations in the June quarter. Nuvama highlights that the company is the only listed Indian entity in global visa processing and G2C services outsourcing, operating on an asset- and capital-light model. This ensures strong cash generation with minimal growth-related costs.
New visa contracts and the expansion of digital services across India are expected to boost business correspondent (BC) revenue and profitability. The company has a history of strategic acquisitions that have enhanced its offerings and facilitated market entry, it noted.
The management plans to raise ₹2,000 crore via equity, despite already having a strong cash balance, to fund further acquisitions and accelerate growth in the medium to long term.
Although the company's earnings performance in Q1 exceeded expectations, the brokerage has kept its FY25/FY26 estimates unchanged. It projects a revenue/EPS CAGR of 30%–35% over FY24–26E. Therefore, it retained its 'buy' rating with a target price of ₹518 apiece.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
