BLS E-Services(BLS) is a digital service provider. The
Delhi-based company offers services such as business correspondence services to
major banks, assisted e-services and e-governance services at grassroots
levels. It also provides the delivery of essential public utility services,
healthcare, financial, agricultural, educational, and banking services for
governments in urban, semi-urban, rural and remote areas.
The company offers digital and physical products or services in Business to Business
(B2B), Business to Consumer (B2C), and Banking Services for Governments (G2C)
in semi-urban, rural and remote areas, where penetration of internet is low and
citizens need assistance in availing basic technology enabled services. It aims
to promote economic independence and sustainable livelihood for the rural
population, women, and un-banked individuals by connecting them with financial
services.
The company provides e-services through partner
retailers and stores called BLS Touchpoints, including ticketing services, PoS
services, and assisted e-commerce. These partners allow BLS E-Services to
provide citizen-centric services. There are over 200 government services it
provides to departments like Housing & Urban Development, Health &
Family Welfare, and more.
As of the end of September 30,2023, the company offered
its services via 1016 BLS stores and 98,034 BLS touch points.
Object of the
offer
The IPO consists of a fresh issue of 2,30,30,000
equity shares. There is no offer for sale. From the fresh issue, the company has
reserved 10% (23,03,000 equity shares) to BLS International Services
shareholders.
Out of the proceeds from the fresh issue, Rs 97.59
crore will be used to strengthen its technology infrastructures to consolidate
its existing platforms, Rs 74.78 crore will be used to fund organic growth
initiatives mainly by setting up BLS Stores, Rs 28.71 crore to fund inorganic
growth through acquisition and the balance for any other general corporate
purpose.
The company raised Rs 13.75 crore from investors in a
pre-IPO placement, which reduced the fresh issue size in the IPO. The company
has allotted 11,00,000 equity shares at a price of Rs 125 per equity share
pursuant to the resolution of the IPO Committee of the Board, dated January 04,
2024.
Strengths
BLS E-Services follows an asset-light business model.
The company has its own technology platform and is continuously developing the
same for further innovations and improvements. It allows the company to cater
to a wide range of merchants and their diverse requirements.
The company provides easy access to technology at the
very grassroots level so that its services and opportunities drive financial
inclusion and trust. The company‘s resources and understanding of regional
needs make it the perfect choice for implementing different government schemes.
The company is operational across various models such
as B2B, B2C and G2C. As a result, it is exposed to plenty of cross-selling and
up-selling opportunities along with a wide reach for customer acquisition.
The company has designed its business model in a way
that provides it with diverse sources of revenue along with negligible customer
retention and acquisition costs.
The company has a successful track record of acquiring
complementary businesses that complement its existing capabilities, revenue
streams and marketing presence. For instance, (i) the company acquired in June
2022 Zero Mass Private Limited, a business correspondent of banks for financial
inclusion across the country extending basic banking services to
underprivileged and unbanked populations by operating micro-banks in
semi-urban, rural, and remote areas of India, which have traditionally
struggled with financial inclusion. It is the largest business correspondent
for the one of the largest public sector bank, it has more than 12,784 active
BCs as on September 30, 2023; (ii) the company in August 2018 acquired Starfin
India Private Limited, a business correspondent of banks for financial
inclusion; and (iii) the company on October 29, 2022, acquired BLS Kendras
Private Limited by entering into an equity swap agreement with its promoter. It
had 365 Sewa Kendras in Punjab at the time of acquisition.
Weaknesses
A significant portion of the company‘s revenue comes
from fees and commissions. If BLS E-Services is unable to generate income from
such sources, it can greatly hurt its financial performance.
As the company has limited experience, it might not be
able to compete successfully with other players in the market.
A significant portion of its revenues are generated by
the B2C segment from its banking partners. As the banking sector is entirely
governed by RBI, therefore any changes in the RBI policies can adversely affect
its overall profitability.
The company has entered into a master service
agreement (MSA) with its promoter, i.e., BLS International Services, on
November 19, 2020, to secure all e-governance contracts awarded and contracts
that may be awarded in future to its promoter through competitive tendering
process from the various State Governments. The company entered a non- compete
agreement with its promoters. In view of the MSA and non-compete arrangements,
the company cannot assure continuity of such contracts or ability to renew such
contract upon expiry at the favorable terms or at all, which may adversely
impact on the performance of the company.
Some of the company‘s operations involve handling
significant amounts of cash, making it susceptible to operational risks,
including fraud, petty theft, negligence and embezzlement by its employees or its
merchants, which could harm the financial position of the company.
The company provides e-Governance services only in the
states of Punjab, Uttar Pradesh, and West Bengal, and accordingly any adverse
changes in the conditions affecting these regions can adversely affect the
company‘s business.
The company significantly depends on its merchants for
its product and service distribution network. Changes in its relationships, or
adverse conditions (such as COVID-19 pandemic), could impair their respective
operations and therefore their ability to meet their obligations under the
company‘s agreements, which in turn could have an adverse effect on the
company‘s growth.
The company relies extensively on its information
technology systems and any failure, disruption or weakness in such systems, or
breach of data, could adversely affect the operations and reputation of the
company.
Contingent liabilities as on September 30, 2023, stood
at Rs 22.74 crore.
Valuation
For the six months ended September 30,2023, the
company earned net profit of Rs 14.68 crore on sales of Rs 156.18 crore.
In FY2023, consolidated sales were up by 151.4% to Rs 243.06
crore as compared to FY2023. The OPM increased by 644 bps to 13.60%, which led
to 377.5% increase in operating profit to Rs 33.06 crore. Other income increased
90.7% to Rs 3.24 crore. Also, interest cost increased 283.9% to Rs 3.93 crore
and depreciation increased 239.2% to Rs 2.78 crore. PBT increased 298.2% to Rs 26.98
crore. Tax expenses were Rs 6.65 crore as compared to tax expense of Rs 1.40
crore in FY2022. Net profit increased 278.0% to Rs 20.34 crore.
The FY2023 EPS on post-issue equity works out to Rs 2.24.
The company issued 11,00,000 equity shares on January 04, 2024,on a pre-IPO
placement to institutional investors at a price of Rs 125 per equity share. At
the upper price band of Rs 135, the P/E works out to 60.31 times.
The company does not have any listed peers.
BLS E-Services: Issue highlights
|
For Fresh Issue Offer size (in no
of shares )
|
|
- On lower price band
|
2,30,30,000
|
- On upper price band
|
2,30,30,000
|
Offer size (in Rs crore)
|
297.09-310.91
|
For Offer for Sale Offer size (in
no of shares )
|
|
- On lower price band
|
-
|
- On upper price band
|
-
|
Offer size (in Rs crore)
|
-
|
Price band (Rs)
|
129-135
|
Minimum Bid Lot (in no. of shares
)
|
108
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
90.86
|
- On upper price band
|
90.86
|
Post-issue promoter & Group
shareholding (%)
|
68.9%
|
Issue open date
|
30-01-2024
|
Issue closed date
|
01-02-2024
|
Listing
|
BSE, NSE
|
Rating
|
45/100
|
BLS
E-Services : Consolidated Financial
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2309 (6)
|
Sales
|
64.49
|
96.70
|
243.06
|
156.18
|
OPM (%)
|
7.33
|
7.16
|
13.60
|
13.21
|
OP
|
4.73
|
6.92
|
33.06
|
20.63
|
Other inc.
|
0.75
|
1.70
|
3.24
|
1.87
|
PBIDT
|
5.47
|
8.62
|
36.29
|
22.50
|
Interest
|
1.48
|
1.02
|
3.93
|
0.34
|
PBDT
|
4.00
|
7.60
|
32.37
|
22.15
|
Dep.
|
0.07
|
0.82
|
2.78
|
1.38
|
PBT Before EO
|
3.92
|
6.78
|
29.58
|
20.78
|
Exceptional items
|
-
|
-
|
2.60
|
-
|
PBT After EO
|
3.92
|
6.78
|
26.98
|
20.78
|
Total Tax
|
0.77
|
1.40
|
6.65
|
6.09
|
Net Profit
|
3.15
|
5.38
|
20.34
|
14.68
|
EPS (Rs)*
|
0.35
|
0.59
|
2.24
|
#
|
EPS is on post issue equity capital
of Rs 90.86 crore of face value of Rs 10 each
|
Figures in Rs crore
|
# EPS not annualized
|
Source: BLS E-Services Issue
Prospectus
|
|