Rating Rationale
December 19, 2019 | Mumbai
BLS International Services Limited
Rating Reaffirmed
 
Rating Action
Total Bank Loan Facilities Rated Rs.22.5 Crore
Short Term Rating CRISIL A2 (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
Detailed Rationale

CRISIL has reaffirmed its 'CRISIL A2' rating on the short-term bank facility of BLS International Services Limited (BIS; part of the BIS group).
 
The ratings reflect the BIS group's established market position in the visa outsourcing services sector, strong ties with Indian diplomatic missions, and comfortable financial risk profile. These strengths are partially offset by tender-based business, susceptibility to changes in regulations and pricing by the ministry of external affairs (MEA), and large working capital requirement resulting from the master service agreement with the Government of Punjab.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of BIS, BLS International FZE (100% subsidiary of BIS), and their step-down subsidiaries. This is because all these entities, collectively referred to as the BIS group, are under a common management and have strong financial linkages in the form of equity share capital, revenue sharing, and loans and advances.

Please refer Annexure - List of entities consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description
Strengths
* Established market position
Set up in 2005, the BIS group is present in over 62 countries and provides services through 2,325 offices worldwide. Within a decade, it has attained a comfortable position in the visa services outsourcing market. Though it has grown considerably in a short span, sustainability of market position in the long term is a key rating sensitivity factor. The group recorded an operating income of Rs 803.82 crore in fiscal 2019, and Rs 430.54 crore in the first six months of fiscal 2020.
 
* Strong ties with Indian diplomatic missions
The group serves around 20 Indian diplomatic missions in various geographies, which contribute a major part to the revenue. Not only has it been able to acquire new tender-based contracts from Indian diplomatic missions at new locations, but has also successfully renewed arrangements with them.
 
* Comfortable financial risk profile
Gearing was healthy at 0.11 time as on March 31, 2019, and was estimated to have improved further to 0.01 time as on September 30, 2019. Total outside liabilities to tangible networth ratio was also strong at 0.30 time. Debt protection metrics remained robust, with interest coverage and net cash accrual to total debt ratios of 9.15 times and 3.17 times, respectively, in fiscal 2019.
 
Weaknesses
* Tender-based business and susceptibility to changes in regulations and pricing by the MEA
The contracts with diplomatic missions are generally tender-based with a three-year tenure, and have certain pre-requisites such as experience in visa outsourcing, robust credit history, adequate information technology, operational expertise, and strong background check function. This makes revenue susceptible to the risk of non-renewal of contract at the end of the term or inability to bag new contracts. Also, the diplomatic missions regulate the management and pricing of visa application and commission of the outsourcing company. This limits the group's bargaining power. Thus, increased regulation or more stringent pricing by the diplomatic missions could reduce the group's topline. Any change in regulation will remain a rating sensitivity factor over the medium term.
 
* Large working capital requirement due to high debtors outstanding from Government of Punjab
The working capital-intensive operations are reflected in high gross current assets of 168 days due to large receivables of around 80 days as on March 31, 2019 because of delayed payments from the Punjab government under the master service agreement. However, BIS group has entered into new agreement with the Punjab government and the previous agreement is terminated. Working capital is getting normalize post change in the model of the project with advance payments coming to the group under the revised agreement. The total receivables outstanding at Rs 176 crore as on March 31, 2019 have reduced to Rs 119 crore as on Sept 30, 2019, with total outstanding from Punjab government reducing gradually from a peak of Rs 212 crore to Rs 67 crore by the end of Sept 30, 2019. Timely collection of pending receivables from Punjab Government will remain a key rating sensitivity factors.
Liquidity Adequate

Liquidity is adequate with sufficient net cash accruals of Rs119 crore for fiscal 2019 against repayment obligation of Rs. 14.87 crore for the same year. Cash accruals are expected to be over Rs 90 crore annually for fiscal 2020 and 2021 against the repayment obligation of Rs 8-10 crore annually. Current ratio was comfortable at 3.89 times as on March 31, 2019. Company had sufficient free cash and bank balance of Rs 67.32 crore as on March 31, 2019. Part from this, it also had free cash parked under liquid investment to the tune of Rs 112 crore as on March 31, 2019, giving comfort on the liquidity profile of the company.

Rating sensitivity factors
Upward factors
* Improvement in revenue by 15% and operating income of over 19%.
* Strategic investment of surplus cash benefitting the overall business risk profile.

Downward factors
* Decline in revenue by 20% or profitability by 200 basis point.
* Diversion of surplus cash into unrelated investments
* Any large debt based capex plans weakens capital structure.

About the Group

Established in early 2005 by Mr Diwakar Aggarwal, BIS is a specialist provider for outsourcing visa, passport, and attestation services to Indian missions across the world. It serves the diplomatic missions by managing all administrative and non-judgmental tasks related to the entire life cycle of a visa application process. The company was listed on the Bombay Stock Exchange and National Stock Exchange in 2016.
 
BIS has operations in over 62 countries either through joint venture with a local player or through wholly owned subsidiaries (BLS International FZE and others).

Key Financial Indicators
Particulars Unit 2019 2018
Revenue Rs crore 807.83 793.1
Profit After Tax (PAT) Rs crore 105.17 96.5
PAT Margin % 13.0 12.1
Adjusted debt/adjusted networth Times 0.11 0.43
Interest coverage Times 9.15 12.5

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Name of instrument Date of allotment Coupon
rate (%)
Maturity date Issue
size
(Rs.Cr)
Rating assigned with outlook
NA Bank Guarantee NA NA NA 22.5 CRISIL A2
 
Annexure - List of entities consolidated
Names of Entities Consolidated Extent of Consolidation Rationale for Consolidation
BLS E-Services Pvt Ltd Full Indian subsidiary of holding company
BLS E-Solutions Pvt Ltd Full Indian subsidiary of holding company
BLS IT Services Pvt Ltd Full Indian subsidiary of holding company
BLS International FZE, UAE Full Foreign subsidiary of holding company
BLS International Services, UAE Full Foreign subsidiary of BLS International FZE
BLS International Services Norway AS Full Foreign subsidiary of BLS International FZE
BLS International Services Singapore PTE Ltd Full Foreign subsidiary of BLS International FZE
BLS International Services Canada INC Full Foreign subsidiary of BLS International FZE
BLS International Services Malaysia SDN BHD Full Foreign subsidiary of BLS International FZE
BLS International Services (UK) Ltd Full Foreign subsidiary of BLS International FZE
Consular Outsourcing BLS Services INC Full Foreign subsidiary of BLS International FZE
Starfin India Private Limited Full Indian subsidiary of BLS E Services Pvt Ltd
BLS KENDRAS PRIVATE LIMITED  Full Indian subsidiary of holding company
Reired BIS International Services Private Limited Full Indian subsidiary of holding company
BLS International Vize Hizmetleri Ltd. Sti., Turkey    Full Foreign subsidiary of BLS International FZE
Annexure - Rating History for last 3 Years
  Current 2019 (History) 2018  2017  2016  Start of 2016
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund-based Bank Facilities  LT/ST    --    --    --    --    --  -- 
Non Fund-based Bank Facilities  LT/ST  22.50 CRISIL A2  12-04-19  CRISIL A2  29-03-18  CRISIL A2      08-11-16  CRISIL A2  CRISIL A2 
                    04-11-16  CRISIL A2   
All amounts are in Rs.Cr.
Annexure - Details of various bank facilities
Current facilities Previous facilities
Facility Amount (Rs.Crore) Rating Facility Amount (Rs.Crore) Rating
Bank Guarantee 22.5 CRISIL A2 Bank Guarantee 22.5 CRISIL A2
Total 22.5 -- Total 22.5 --
Links to related criteria
CRISILs Approach to Financial Ratios
CRISILs Bank Loan Ratings - process, scale and default recognition
Rating criteria for manufaturing and service sector companies
Rating Criteria for Software Industry
CRISILs Criteria for Consolidation
CRISILs Criteria for rating short term debt

For further information contact:
Media Relations
Analytical Contacts
Customer Service Helpdesk
Saman Khan
Media Relations
CRISIL Limited
D: +91 22 3342 3895
B: +91 22 3342 3000
saman.khan@crisil.com

Naireen Ahmed
Media Relations
CRISIL Limited
D: +91 22 3342 1818
B: +91 22 3342 3000
naireen.ahmed@crisil.com

Nitin Kansal
Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2154
nitin.kansal@crisil.com


Himank Sharma
Associate Director - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2152
Himank.Sharma@crisil.com


Nishita Patni
Rating Analyst - CRISIL Ratings
CRISIL Limited
D:+91 124 672 2136
Nishita.Patni@crisil.com
Timings: 10.00 am to 7.00 pm
Toll free Number:1800 267 1301

For a copy of Rationales / Rating Reports:
CRISILratingdesk@crisil.com
 
For Analytical queries:
ratingsinvestordesk@crisil.com


 

Note for Media:
This rating rationale is transmitted to you for the sole purpose of dissemination through your newspaper / magazine / agency. The rating rationale may be used by you in full or in part without changing the meaning or context thereof but with due credit to CRISIL. However, CRISIL alone has the sole right of distribution (whether directly or indirectly) of its rationales for consideration or otherwise through any media including websites, portals etc.


About CRISIL Limited

CRISIL is a leading agile and innovative, global analytics company driven by its mission of making markets function better. We are India’s foremost provider of ratings, data, research, analytics and solutions. A strong track record of growth, culture of innovation and global footprint sets us apart. We have delivered independent opinions, actionable insights, and efficient solutions to over 1,00,000 customers.
 
We are majority owned by S&P Global Inc., a leading provider of transparent and independent ratings, benchmarks, analytics and data to the capital and commodity markets worldwide.
 
For more information, visit www.crisil.com 


Connect with us: TWITTER | LINKEDIN | YOUTUBE | FACEBOOK

About CRISIL Ratings
CRISIL Ratings is part of CRISIL Limited (“CRISIL”). We pioneered the concept of credit rating in India in 1987. CRISIL is registered in India as a credit rating agency with the Securities and Exchange Board of India (“SEBI”). With a tradition of independence, analytical rigour and innovation, CRISIL sets the standards in the credit rating business. We rate the entire range of debt instruments, such as, bank loans, certificates of deposit, commercial paper, non-convertible / convertible / partially convertible bonds and debentures, perpetual bonds, bank hybrid capital instruments, asset-backed and mortgage-backed securities, partial guarantees and other structured debt instruments. We have rated over 24,500 large and mid-scale corporates and financial institutions. CRISIL has also instituted several innovations in India in the rating business, including rating municipal bonds, partially guaranteed instruments and microfinance institutions. We also pioneered a globally unique rating service for Micro, Small and Medium Enterprises (MSMEs) and significantly extended the accessibility to rating services to a wider market. Over 1,10,000 MSMEs have been rated by us.


CRISIL PRIVACY
 
CRISIL respects your privacy. We may use your contact information, such as your name, address, and email id to fulfil your request and service your account and to provide you with additional information from CRISIL.For further information on CRISIL’s privacy policy please visit www.crisil.com.


DISCLAIMER

This disclaimer forms part of and applies to each credit rating report and/or credit rating rationale that we provide (each a “Report”). For the avoidance of doubt, the term “Report” includes the information, ratings and other content forming part of the Report. The Report is intended for the jurisdiction of India only. This Report does not constitute an offer of services. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or intending to provide any services in jurisdictions where CRISIL does not have the necessary licenses and/or registration to carry out its business activities referred to above. Access or use of this Report does not create a client relationship between CRISIL and the user.

We are not aware that any user intends to rely on the Report or of the manner in which a user intends to use the Report. In preparing our Report we have not taken into consideration the objectives or particular needs of any particular user. It is made abundantly clear that the Report is not intended to and does not constitute an investment advice. The Report is not an offer to sell or an offer to purchase or subscribe for any investment in any securities, instruments, facilities or solicitation of any kind or otherwise enter into any deal or transaction with the entity to which the Report pertains. The Report should not be the sole or primary basis for any investment decision within the meaning of any law or regulation (including the laws and regulations applicable in the US).

Ratings from CRISIL Rating are statements of opinion as of the date they are expressed and not statements of fact or recommendations to purchase, hold, or sell any securities / instruments or to make any investment decisions. Any opinions expressed here are in good faith, are subject to change without notice, and are only current as of the stated date of their issue. CRISIL assumes no obligation to update its opinions following publication in any form or format although CRISIL may disseminate its opinions and analysis. CRISIL rating contained in the Report is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment or other business decisions. The recipients of the Report should rely on their own judgment and take their own professional advice before acting on the Report in any way.CRISIL or its associates may have other commercial transactions with the company/entity.

Neither CRISIL nor its affiliates, third party providers, as well as their directors, officers, shareholders, employees or agents (collectively, “CRISIL Parties”) guarantee the accuracy, completeness or adequacy of the Report, and no CRISIL Party shall have any liability for any errors, omissions, or interruptions therein, regardless of the cause, or for the results obtained from the use of any part of the Report. EACH CRISIL PARTY DISCLAIMS ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. In no event shall any CRISIL Party be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of any part of the Report even if advised of the possibility of such damages.

CRISIL Ratings may receive compensation for its ratings and certain credit-related analyses, normally from issuers or underwriters of the instruments, facilities, securities or from obligors. CRISIL’s public ratings and analysis as are required to be disclosed under the regulations of the Securities and Exchange Board of India (and other applicable regulations, if any) are made available on its web sites, www.crisil.com (free of charge). Reports with more detail and additional information may be available for subscription at a fee – more details about CRISIL ratings are available here: www.crisilratings.com.

CRISIL and its affiliates do not act as a fiduciary. While CRISIL has obtained information from sources it believes to be reliable, CRISIL does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives and / or relies in its Reports. CRISIL keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of the respective activity. As a result, certain business units of CRISIL may have information that is not available to other CRISIL business units. CRISIL has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process. CRISIL has in place a ratings code of conduct and policies for analytical firewalls and for managing conflict of interest. For details please refer to: https://www.crisil.com/en/home/our-businesses/ratings/regulatory-disclosures/highlighted-policies.html

CRISIL’s rating criteria are generally available without charge to the public on the CRISIL public web site, www.crisil.com. For latest rating information on any instrument of any company rated by CRISIL you may contact CRISIL RATING DESK at CRISILratingdesk@crisil.com, or at (0091) 1800 267 1301.

This Report should not be reproduced or redistributed to any other person or in any form without a prior written consent of CRISIL.

All rights reserved @ CRISIL