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  • 29 Jan 2024
  • ICICIdirect

BLS E-SERVICES LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

 

January ends with BLS E-Services Limited (BEL), the fifth IPO of the month. BEL is a digital service provider that offers Business Correspondence services to major banks in India. It opens for subscription on the 30th of January and closes on the 1st of February.

In this article, we look at the various aspects of BEL's business to help you decide whether to subscribe or invest in the IPO.

BLS E-Services IPO: Key Details

Below are the key details related to the BEL IPO:

  • Issue Size: Rs 310.91 crore
  • Price Band: Rs 129 - Rs 135
  • Lot Size: 108 Shares
  • Issue Details: Only Fresh Issue
  • Market Cap: At the upper price band, Rs 1,226.56 crore
  • Minimum Investment: Rs 14,580
 

BLS E-Services IPO: The Business

BLS E-Services is a technology-enabled digital service provider that provides three main services:

  • Business Correspondent services to major banks in India
  • Assisted E-services
  • E-Governance Services at grassroots levels in India.

They have a robust network through which they provide access points for the delivery of essential public utility services, social welfare schemes, healthcare, financial, educational, agricultural, and banking services for governments (G2C) and businesses (B2B) alike in addition to a host of B2C services to citizens in urban, semi-urban, rural and remote areas.

Their merchants act as their interface with the consumers and play a critical role in the delivery of goods and services on the ground. Presently, their merchants are organized into two categories i.e. BLS Touchpoints and BLS Stores.

 

 

They also have a history of acquiring complementary businesses and integrating them into their eco-system. BEL typically can achieve growth and improved performance of the newly acquired business within a relatively short timeframe.

BLS E-Services IPO: Listed Peers

The company has only one listed peer - EMudhra Limited. Let us compare the two on FY23 financials to give you an idea of where BEL stands. Here is the comparison:

  • In revenue terms, there is not much to choose between the two companies. EMudhra has marginally higher revenue in FY23.
  • EMudhra has better earnings per share compared with BLS E-Services
  • Return on Net Worth (RoNW) is higher for BEL compared to EMudhra.

You can check the table below for exact numbers.

 

               

 

BLS E-Services IPO: Financials

Let us look at BEL's financials to give you an idea of how the company has grown in recent years. Below are the recent years' financial numbers of HFL:

  • The company has reported a revenue of Rs 64.49 crore, Rs 69.70 crore, and Rs 243.06 crore for FY21, FY22, and FY23, respectively. Revenue has grown at nearly 100% CAGR in this period. The revenue for H1FY24 was Rs 156.18 crore, which suggests growth in FY24 as well.
  • For FY23, the Business Correspondent (BC) business contributed more than 50% of their total revenue followed by E-Governance and Assisted E-Services.
  • BEL has reported an EBITDA of Rs 5.47 crore, Rs 8.62 crore, and Rs 36.29 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 8.39%, 8.76%, and 14.73%, respectively. The margins have remained stable in this period.
  • They have reported a net profit (PAT) of Rs 3.15 crore, Rs 5.38, and Rs 20.33 crore for FY21, FY22, and FY23. The profits increased due to better topline and increased margins. The trend continued in H1FY24, the company reported a PAT of Rs 14.68 crore.
  • For the last three financial years, BEL has reported a fully diluted average of Rs 1.89 and an average RoNW of 26.26%.
  • If we attribute FY24 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 41.80.
  • Return on Capital Employed (ROCE) has increased from 29.68% in FY21 to 30.62% in FY23. ROE has reduced from 38.91% in FY21 to 33.33% in FY23.
  • Debt to Equity ratio has come down significantly from 1.14 in FY21 to 0.05 in FY23.
 
 
                 
 
 

BLS E-Services IPO: Competitive Strengths

As per the company, their competitive strength is as below:

  • The merchant-led model is a capital-light business strategy with respect to network expansion.
  • BEL enables social and financial inclusion in India with a strong focus on targeting women entrepreneurs.
  • They have multiple cross-selling and up-selling opportunities, network effects, and wide reach for customer acquisition.
  • Their business model has diverse sources of revenue and negligible customer acquisition and retention costs

 

Risks associated with the BLS E-Services Limited

Below are the risks associated with the BEL:

  • They predominantly undertake fee and commission-based activities, and their financial performance may be affected by their inability to generate income from such activities.
  • None of the e-governance projects are awarded to them directly. All of their contracts with respect to E-Governance projects are awarded to their Corporate Promoter, BLS International Services Limited by governmental agencies for providing G2C services to the citizens and to BLS Kendras, their subsidiary for providing E- E-Governance.
  • A substantial portion of the revenue is generated by BC business operated by their subsidiaries, ZMPL and Starfin for banking partners.
  • They are dependent on and derive a substantial portion of their revenue from, a single customer, one of the largest PSU Bank (59.47% in FY23).