BLS E-Services IPO: 10 key risks investors should consider before investing in BLS IPO

BLS E-Services IPO has opened on Tuesday, January 30, and will close on Thursday, February 01. BLS E-Services IPO raised ₹125 crore from ten anchor investors, on Monday, January 29. Within minutes of taking off, the retail investor response to the BLS E-Services IPO was overwhelmingly positive. The retail portion of the BLS E-Services IPO was oversubscribed, and eventually the issue was fully booked in the first hour itself.

BLS-E Services is a digital service provider that provides Assisted E-Services, E-Governance Services at the grassroots level in India, and Business Correspondence services to major banks in the country. Business correspondent services, assisted e-services, and e-government services are the three areas of focus.

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Also Read: BLS E-Services IPO opens today: GMP rises, issue details, 10 key things to know

The company's listed peer is EMudhra Ltd with a P/E of 56.27.

Between March 31, 2022, and March 31, 2023, BLS E-Services Limited's profit after tax (PAT) climbed by 277.94% and its revenue increased by 150.31%.

Also Read: BLS E-Services garners ₹125 crore from anchor investors ahead of IPO

BLS E-Services IPO solely comprises of fresh issue of 2,30,30,000 crore equity shares by the subsidiary of the listed business BLS International Services. There is no offer-for-sale component to the BLS E-Services IPO.

The company intends to use the net proceeds to finance the establishment of BLS Stores as a means of promoting organic growth, the acquisition of businesses to achieve inorganic growth, general corporate purposes, and strengthening the technology infrastructure to develop new capabilities and consolidate the current platforms.

Also Read: BLS E-Services IPO: Issue oversubscribed on day 1, retail investors steal the show

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

• The company's primary sources of income are fees and commissions; therefore, the inability to earn revenue from these sources might have a negative impact on the company's financial performance.
• The BC business, which is run for the banking partners by the corporate subsidiaries ZMPL and Starfin, generates a sizable amount of funds. The Reserve Bank of India (RBI) regulates the banking partners of the firm, and modifications to the RBI's policies, rulings, and regulatory structure may have a negative impact on the business, cash flows, operational performance, and financial standing.
• The capacity the company has to pay dividends on its equity shares is dependent on its ability to receive cash dividends or other cash payments, and a decline in the performance of its subsidiaries may have a negative impact on its operating results.
• With one of the biggest PSU banks as a sole customer, the company depends on them for a sizable amount of its income. A major negative impact on the company, operational performance, and financial situation might come from cancelling the agreement with their largest client.
• The company exclusively offers e-governance services in the states of West Bengal, Punjab, and Uttar Pradesh; as a result, any unfavourable changes to the circumstances impacting these areas may have a negative impact on their operations, finances, and business.
• As permitted by their memorandum of association, the firm's Group Companies may compete with one another in the same industry as the company.
• The company has not yet established any firm agreements with any particular targets as of the date of this Red Herring Prospectus.
• The use of the net revenue from any particular item could not boost sales or earnings.
• For business correspondent and G2C services, the company depends on the technology, application programming interface, and servers of banks and government organisations.
• Failure to renew the agreements might have a significant negative impact on the company's operations, financial performance, growth, and business.

Also Read: BLS E-Services IPO opens today. GMP, subscription status, review, other details. Apply or not?

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.