BLS E-services Ltd IPO
Published by Sharekhan Education | January 30, 2024
Amit Pathak| Sharekhan Education
About the IPO
BLS E-services Ltd IPO has an Issue size of ₹ 310.9 Cr, Price Band in the range of ₹ 129-135. The issue opens on Tuesday, 30th Jan’2024 and closes on Thursday, 1st Feb’2024.
BLS E-services Company Overview
BLS E-services is a leading technology-enabled digital service provider. They offer digital and physical products and services in Business to Business (B2B), Business Consumer (B2C), and Banking Services for Governments (G2C) segments in semi-urban, rural, and remote areas, where penetration of the internet is low, and citizens need assistance in availing basic technology-enabled services. They provide essential public utility services, healthcare, financial, agricultural, educational, and banking services through partner retailers and stores called BLS Touchpoints.
Why is BLS E-services coming up with an IPO?
BLS E-services Ltd IPO is a fresh issue of equity shares aggregating to Rs 310.9 crores. The proceeds from the fresh issue will be used for strengthening its technology infrastructure to consolidate its existing platforms and pursue inorganic growth opportunities through acquisition. The minimum application is to be made for 108 shares and in multiples thereafter. Post allotment, shares will be listed on BSE and NSE. Listing of the equity shares will result in the enhancement of the brand name.
What are the competitive strengths of BLS E-services
The company has an asset-light business model with diverse sources of revenue and negligible customer acquisition and retention costs. It provides easy access to technology at the very grassroots level so that its services drive financial inclusion. They are operational across various categories such as B2B, B2C, and G2C. As a result, it has plenty of cross-selling and up-selling opportunities. It has a successful track record of acquiring businesses that complement its existing capabilities, revenue streams, and marketing presence.
Business Strategy of BLS E-services
The company plans to integrate its technology infrastructure by creating a common services portal and mobile application to increase operational efficiency, facilitate scalability, and increase profitability. They aim to grow the existing network of BLS touchpoints for various cross-selling opportunities and generate extra revenue for the company and for merchants in the same setup. They plan to pursue strategic investments and acquisitions to enhance their product portfolio and service capabilities to enter into complementary businesses and enter new geographies.
Key Concerns regarding the BLS E-Services IPO
The company operations involve handling significant amounts of cash. Thus, making it susceptible to operational risks, like fraud, petty theft, negligence, and ,embezzlement by its employees or its merchants. 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 changes in the RBI policies can adversely affect its overall profitability.
Financial Strength:
The company has delivered revenue growth of 94.1% CAGR over FY21-23. EBITDA has grown at 157.5% CAGR over the same time-period. EBITDA margins have expanded from 7.3% to 13.6%. Net Profit has CAGR of 154.1%. At the upper end of the price band (₹129-135), the issue seems richly valued at a P/E of 60.2x on post-issue FY23 earnings.
Source: IPO Red Herring Prospectus
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