BLS E-Services
- BLS E-Services is coming out with a 100% book building; initial public offering (IPO) of 2,30,30,000 shares of Rs 10 each in a price band Rs 129-135 per equity share.
- Not more than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
- The issue will open for subscription on January 30, 2024 and will close on February 1, 2024.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 10 and is priced 12.90 times of its face value on the lower side and 13.50 times on the higher side.
- Book running lead manager to the issue is Unistone Capital.
- Compliance Officer for the issue is Sanjay Kumar Rawat.
Profile of the company
BLS E-Services is a technology enabled digital service provider, providing (i) Business Correspondents services to major banks in India, (ii) Assisted E-services; and (iii) E-Governance Services at grass root levels in India. Through its robust network, the company provides access points for 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. The company’s merchants act as its interface with the consumers and play a critical role in delivery of goods and services on the ground. Presently, the company’s merchants are organised in two categories i.e. BLS Touchpoints and BLS Stores. All merchants registered with it is treated as BLS Touchpoints and they have access to offer multiple services being extended by us. BLS Stores are BLS branded stores which offer its entire suite of offerings to the consumers including availability of select goods on a sample basis supplied by e-commerce players which can be ordered and procured by its consumers after having a touch and feel experience of such goods.
Through its tech-enabled integrated business model, the company provides digital and physical products and services in the G2C, B2C, B2B categories in semi-urban, rural and remote areas where penetration of internet is low and citizens need assistance in availing basic technology enabled services. The company organizes its business along three primary business segments, (i) Business Correspondents Services; (ii) Assisted E-services; and (iii) E-Governance Services. A key stakeholder in each of its business segments are merchants, with whom it collaborates for delivery of its products and services to the citizens.
As a part of its operations, the company acts as business correspondents (Business Correspondents) to provide banking products and services on behalf of banks to people while performing a variety of services including opening savings, recurring deposit accounts, cash deposits, withdrawals, remittance, transfer, bill collection services, through its Subsidiaries, namely ZMPL and Starfin. The company generates revenue from monthly commission; transaction-based commission; and registration Fees. Further, it also provides a variety of Assisted E-Services through retailers and digital stores also known as BLS Touchpoints, including PoS services, ticketing services, assisted e-commerce services, etc. The revenue generated under this business segment is through registration fees; transaction-based commission on goods & services supplied; and support service charge. The company also provides a variety of assisted e-services through retailers and digital stores also known as BLS Touchpoints, including PoS services, ticketing services, assisted e-commerce services, etc.
Proceed is being used for:
- Strengthening its technology infrastructure to develop new capabilities and consolidating its existing platforms.
- Funding initiatives for organic growth by setting up of BLS Stores.
- Achieving inorganic growth through acquisitions.
- General corporate purposes.
Industry overview
Business correspondent (BC) is an entity which acts as a teller for the bank and carry out a full range of transactions on behalf of the bank, in return for commissions on the services rendered. It is a model that enables people in remote areas of India to access formal financial institutions. With the objective of ensuring greater financial inclusion and increasing outreach of the banking sector, the Reserve Bank of India has allowed banks to use the services of intermediaries operating, among others, as common service centers as retail agents who represents banks and are responsible for providing financial and banking services at locations other than bank branch / ATM. The concept of BCs is to address the needs of banks, which need to reach out to a wider section of society, as well as underprivileged people with no access to credit. With no access to credit, underprivileged people often have to invest their personal savings in health and entrepreneurial activities, leaving them highly vulnerable to adverse circumstances. BCs support banks in providing its limited range of banking services at affordable cost. Thus, they are pivotal in promoting financial inclusion. The BC model helps banks in bringing door-step delivery of services especially 'cash in - cash out' transactions in rural and remote areas, thus resolving the issue of last-mile delivery.
Since past few decades, both Central and State governments have strived to deliver its services to citizens online at their doorsteps. The delivery of government services using technology is known as e-governance. There are several government initiatives, such as Passport Seva, DigiLocker, online public distribution system, UPI, and Aarogya Setu, etc. which have earned universal accolades. The initiatives have been highly successful; however, a need was felt to develop a holistic view of various e-governance initiatives that are implemented across the country. To improve the delivery of government services, government of India came up with National e-Governance Plan (NeGP) in 2006. The key elements of NeGP include common support infrastructure, mission mode projects, Public-Private Partnerships (PPP), centralized initiatives and decentralized implementation etc. Since the implementation of NeGP, the e-governance has been made efficient by involving private players in the delivery of citizen centric services.
Going forward, with the increase in digital adaptation, the demand for various other services have also increased. The increasing digitalization is boosting the market for insurance services, online ticketing, assisted e-commerce, bill payments, tele medicine, tele agriculture, digital learning, etc. in urban, semi-urban and rural areas. With huge touch points of the business correspondent companies, they can provide these services to even remotest areas. Additionally, even retail/wholesale stores can distribute and/or sell their products through these companies’ touch points. It will pave way for additional income for business correspondent companies.
Pros and strengths
Asset light business model: The company’s merchant led models are a capital light business strategy in respect of network expansion. It has developed its own technology platform and continue to invest in it for further improvements, which allows it to service a wide pool of citizens and merchants and cater to their diversified requirements. The premises from which BLS Touchpoints and the BLS Stores operate are owned / leased by its merchants and it provides them with necessary technology and other infrastructure (as applicable) enabling them to extend its services to the end consumers. The success of its reliance on these merchants emanates from a robust mechanism of background checks and minimum qualification criteria, it undertakes and their respective position in the local societies which acts as a deterrent for such merchants from delinquencies in its arrangement with them.
It enables social and financial inclusion in India: Access to technology and financial services gives power to citizens to improve their lives and impact its communities in positive ways. Semi urban, rural and remote communities are being connected with services and opportunities through digital and financial inclusion. Started in 2006-07, the company’s Material Subsidiary, ZMPL was the first ever business correspondent in the history of Indian banking system. It provides a variety of products and services in India through its BLS Touchpoints and BC network, including PoS services, ticketing services, assisted e-commerce services, etc. Its presence in the local market and community help it to connect with citizens easily giving them better access to social and financial inclusion making it easy to establish trust and ensuring the sustainability of its business model. Through its business model, the company is able to provide a wide range of products and greater avenues to increase client penetration and stickiness.
Multiple cross-selling and up-selling opportunities: The company’s ability to bring together the advantages of G2C, B2B and B2C models within a single platform, provide many touch points for the consumer and back-end entities, thereby enhancing the customer footfall by 4,04,153 consumers at its BLS Touchpoints and BLS Stores and to increase scalability. This, coupled with its wide range of products and services that complement each other, results in multiple cross-selling and upselling opportunities, network effects and wide reach for customer acquisition. Due to its ability to cross-sell various complementary products and services, in addition to its presence in multiple industries, it typically has low marketing and business promotion expenses and thus, improved opportunities for profitability and unit economics metrics. Accordingly, it has a high operating leverage business model, allowing it to reduce customer onboarding costs over time.
Successful track record of its acquisitions: The company has a history of acquiring complementary businesses, that complement its existing capabilities, revenue streams and marketing presence. For instance, (i) the company acquired Zero Mass Private Limited in June 2022, 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 BC for the one of the largest public sector bank, it has more than 12,784 active BCs as on September 30, 2023; (ii) it acquired Starfin India Private Limited in August 2018, a business correspondent of banks for financial inclusion and (iii) it acquired BLS Kendras Private Limited on October 29, 2022, by entering into an equity swap agreement with its Corporate Promoter which had 365 Sewa Kendras, in the State of Punjab at the time of acquisition.
Risks and concerns
Significant portion of revenues is generated by BC business operated by its subsidiaries: A substantial portion of the revenue is derived from BC business operated by its subsidiaries, ZMPL and Starfin for its banking partners, which primarily consist of opening of savings account, fixed deposit including term deposits, recurring deposits etc. The company’s banking partners are subject to certain regulations by various government authorities, including the RBI. Introduction of new laws or regulations by the RBI in respect of its arrangement with its banking partners, if promulgated, could adversely affect its business, financial condition and results of operations. Compliance with new regulations governing its banking partners could also result in significant expenditure for them that could cause them to renegotiate or terminate existing agreements, or curtail their operations, which could adversely affect its business and financial performance. Furthermore, any adverse regulatory action that changes a banking partner’s business or adversely affects its financial condition or results of operations, may adversely affect its partnership with such banking partner thereby adversely affecting its business, financial condition and results of operations.
Substantial portion of revenue comes from one of the largest PSU Bank: The company is dependent on, and derive a substantial portion of its revenue from, a single customer, one of the largest PSU bank. In the six months’ period ended September 30, 2023 and in Fiscal 2023, Fiscal 2022 and Fiscal 2021, its largest customer accounted for 59.75%, 59.47%, 14.89% and 27.27% respectively, of its revenue from operations. It does not have long term arrangement with its customers. It cannot assure that whether these agreements will be renewed in a timely manner. To the extent it is unable to enter into arrangements with new banking partners, and/or maintain its relationships with its existing banking partners, its operating results and financial condition could be impacted. Furthermore, the termination of its relationship with any of its banking partners may adversely affect its business, cash flows, results of operations and financial condition.
Limited operating history: The company has limited experience, having begun its operations as a special purpose vehicle (SPV) in 2016. Thereafter, it acquired Starfin in the month of August 2018 and ZMPL the month of June 2022, which had 1,384 active CSPs and more than 11,500 active CSPs, respectively at the time of acquisition. Prior to commencing BC, G2C and B2B2C operations, the company was incorporated as a SPV for executing G2C contracts and providing citizen centric services in compliance with terms of tender documents by the Corporate Promoter, BLS International Services Limited. Its limited track record in BC segment, such as opening of savings account, fixed deposit including term deposits, recurring deposits etc. and B2B2C operations, such as BLS edutech services, domestic money transfer, pan card application, bus and air ticketing services, railway ticketing services, banking services, AePS enabled cash services, recharges, demat account opening, bill payments, exposes it to risks that more experienced competitors may not face. As a result of its relatively shorter operating history, the limited historical data that is available may not be indicative of its financial position or results of operations for any future periods.
Geographical constrain: The company’s E-Governance Services business accounted for Rs 4,426.41 lakh, Rs 8,258.27 lakh, Rs 7,073.66 lakh and Rs 4,612.02 lakh representing 28.34%, 33.98%, 73.15% and 71.52%, respectively of its total revenue as of the six months’ period ended September 30, 2023 and Fiscal 2023, 2022 and 2021. The company provides E-Governance Services only in the states of Punjab, Uttar Pradesh and West Bengal. In the event of a regional slowdown in the economic activity in Punjab, Uttar Pradesh and West Bengal or any other developments including political unrest, disruption or sustained economic downturn or natural calamities in those regions affecting the ability of its merchants to continue their operations within their respective communities, or that make its services and/or products in these states less available or attractive and beneficial to the customer, it may experience an adverse effect on its financial condition and results of operations, which are largely dependent on the performance, geo-political and other prevailing conditions affecting the economies of the state.
Outlook
BLS-E Services is a digital service provider that offers Business Correspondence services to major banks in India, Assisted E-Services, and E-Governance Services at the grassroots level in India. The company being a subsidiary of BLS International Services Limited provides visa, passport, consular, and other citizen services to state and provincial governments across Asia, Africa, Europe, South America, North America, and the Middle East through its technology-enabled platform. It is the only listed company engaged in this domain in India. On the concern side, none of the e-governance projects are awarded to the company directly. All of its contracts with respect to E-Governance projects are awarded to its Corporate Promoter, BLS International Services Limited by governmental agencies for providing G2C services to the citizens and to BLS Kendras, its subsidiary for providing E- Governance. Moreover, the company has limited operating history, as a result it may not be able to compete successfully, and it may be difficult to evaluate its business and future operating results on the basis of its past performance.
The company is coming out with an IPO of 2,30,30,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 129-135 per equity share. The aggregate size of the offer is around Rs 297.09 crore to Rs 310.91 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by 150.31% to Rs 24,629.27 lakh for the Fiscal 2023 from Rs 9,839.56 lakh for the Fiscal 2022, primarily due to an increase in revenue from operations aided by increase in other income as well. Moreover, the company’s profit for the period, increased by 277.94% to Rs 2,033.18 lakh for the Fiscal 2023 from Rs 537.96 lakh for the Fiscal 2022.
The company aims to continue growing each of its business segments and with a particular focus on its cross-selling strategies, which will further entrench its value proposition with its consumers and is consistent with mission to serve its consumers’ entire digital journey in a comprehensive manner by merging all its product and service functionalities into a single ecosystem. While the company already has strong market positions in each of its business segments and others, there is continued scope for expansion given the growing demand for the various products and services it offers and in particular, the growing demand for digital products and services in India alone. The company endeavours to continue to increase the engagement and retention of its consumers on its platform by offering them relevant, innovative and integrated products. With an aim to improve cross selling opportunities, its Subsidiary Starfin, has obtained registration from Insurance Regulatory and Development Authority of India as corporate agents.
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