Synopsis:
On Day 2 of the BLS E-Services IPO, the subscription figures surged significantly, reaching an overall subscription rate of 27.7x. Notably, retail investors showed strong interest, with the retail subscription rate soaring to 90x.
BLS-E Services provides digital solutions, including business correspondence services for leading Indian banks, as well as assisted E-Services and grassroots-level E-Governance services in India.
The BLS E-Services IPO continued to draw robust investor interest on the second day, especially from retail and non-institutional investors. The issue, which commenced bidding on January 30, was oversubscribed by 16 times on day one.
Based in New Delhi, BLS E-Services is offering its shares at a price range of Rs 129-135 per share, with a lot size of 108 shares and multiples thereafter. The IPO comprises a fresh sale of up to 23,030,000 equity shares, aiming to raise Rs 310.93 crore.
As of 12:50 pm on January 31, investors submitted bids for 37,981,7532 equity shares, or 27.72 times the 1,370,2904 equity shares available for subscription. The three-day bidding process concludes on February 1, Thursday.
The retail investor allocation was oversubscribed by 89.55 times, and non-institutional investors subscribed 54.25 times. Qualified institutional bidders (QIBs) showed interest at 2.06 times, while the reserved portion for BLS International shareholders was oversubscribed 5.08 times at the same point.
Established in April 2016, BLS-E Services is a digital service provider offering business correspondence services to major Indian banks, along with assisted E-Services and grassroots-level E-Governance services. These are the three primary service categories provided by the company.
Brokerage firms express optimism about the IPO, highlighting BLS-E Services' strong financial performance, asset-light model, extensive pan-India market network, and service sector nature. However, concerns about high valuations and increasing competition are noted as major drawbacks for the IPO.
BLS E-Services stands to benefit significantly from the increasing adoption of banking and digitization in both urban and rural India. This trend is expected to accelerate in the next 3-5 years, allowing the company to achieve robust growth rates, similar to the 50% it has achieved in the past, according to SMIFS.
With an already established presence and strategic acquisitions, coupled with the deployment of issue proceeds over the next two years, SMIFS believes that BLS E-Services has high growth potential over the next 5-6 years, accompanied by strong return ratios. They recommend subscribing to the IPO for long-term investment.
Before the IPO, BLS E-Services secured Rs 126 crore from ten anchor investors by allotting 93.27 lakh shares at Rs 135 per share. The IPO allocates 75% of the net offer to qualified institutional bidders (QIBs), 15% to non-institutional investors, and the remaining 10% to retail investors.
BLS E-Services holds a P/E valuation of 57.1x FY23 earnings. Although the company lacks direct comparable peers, a comparison with listed counterparts in similar businesses suggests an aggressive valuation, according to IndSec Research. The company is actively engaged in significant government projects, providing citizen services for Punjab, Uttar Pradesh, and West Bengal, along with offering Business Correspondent (BC) services to SBI.
With a robust margin profile, BLS E-Services plans to enhance it further through strategic capex investments in technology and the establishment of more profitable BLS Stores. Additionally, the company envisions future growth by setting up citizen service centers for overseas governments, positioning itself well for long-term expansion. IndSec Research recommends subscribing to the IPO.
Unistone Capital serves as the exclusive book running lead manager for the BLS E-Services IPO, and Kfin Technologies acts as the registrar for the issue. The company's shares are scheduled to be listed on both BSE and NSE, with a tentative listing date of February 6, 2024, Tuesday.
