SIS - SIS LIMITED Share Price

In the Q1 FY26 earnings call dated July 31, 2025, SIS Limited's management provided an optimistic outlook highlighting robust growth across all segments. The company achieved its highest-ever quarterly revenue at INR 3,549 crore, a 13.4% increase year-on-year. Notable growth was reported in the India Security segment (INR 1,460 crore, 9.2% growth), Facility Management (INR 594 crore, 12.1% growth), and International operations (INR 1,513 crore, 18.5% growth), with the international segment now being valued at AUD 1 billion.

Management emphasized their commitment to margin improvement, reporting an EBITDA of INR 152 crore (up 10.7% YoY) with a margin of 4.3%. India Security maintained an EBITDA margin of 5.4%, while Facility Management improved to 4.8%. Despite a decline in the EBITDA margin for the International segment to 3% (from 3.4% YoY), the overall trend was positive as they recognized operational efficiencies through better customer portfolio management.

Profit After Tax (PAT) surged to INR 93 crore, showing a 44.7% YoY increase. Management also reported a reduction in net debt, now at INR 540 crore, down from INR 1,023 crore a year prior, leading to a debt-to-EBITDA ratio of 0.87. Days Sales Outstanding (DSO) improved to 68 days.

Key forward-looking points include anticipations of continued growth, especially in the Indian market, and management expressed aspirations to achieve an EBITDA margin of 6% over time, while also indicating a one-year window to execute an IPO for their Cash JV. They are proactively investing in startups, indicative of a strategy to enhance value for their blue-collar employee base. Overall, SIS Limited appears well-positioned for sustained growth amidst ongoing operational improvements.

Here are the major questions asked during the earnings call and their corresponding answers:

1. Question: "What kind of growth are we expecting this FY '26 and if possible FY '27? Can we maintain our growth rate which we achieved in quarter 1?" Answer: "We typically do not provide specific guidance on growth or margins. However, since our listing, we've maintained a 14.8% CAGR on revenue and a 13.4% CAGR on EBITDA. This historical performance can give you an indication of our potential moving forward."

2. Question: "What are the financial numbers for the cash logistics business for this quarter and last quarter?" Answer: "Due to regulatory restrictions, we cannot share specifics post-DRHP filing. However, I assure you we are maintaining a positive trajectory in our performance."

3. Question: "Is the international business growing due to any new business wins?" Answer: "Yes, we reported significant contracts in Sydney Trains and Canberra Airport that have driven our recent revenue increases. These wins are long-term contracts, indicating ongoing growth."

4. Question: "What are the major drivers of growth in your business?" Answer: "Growth is primarily driven by minimum wage changes, economic activity, and gaining market share. For instance, when minimum wages rise, we adjust pricing accordingly. Additionally, construction and industrial activity necessitate our services, regardless of economic fluctuations."

5. Question: "What are your aspirations for operating margins?" Answer: "Historically, we've achieved EBITDA margins of 6%. We aim to return to this level through scale benefits and operational efficiencies."

6. Question: "What about SXP restructuring costs and future expectations?" Answer: "SXP is a substantial mobile patrols business in Australia facing temporary turbulence due to management changes and contract exits. We anticipate costs will stabilize and profitability will improve within 2-3 quarters."

7. Question: "What is your effective tax rate expectation?" Answer: "For our India operations, we currently benefit from the 80JJAA scheme, keeping our tax rate nearly zero. However, our international business incurs around a 30% tax rate."

8. Question: "How will the new employment linked incentive scheme benefit SIS?" Answer: "We're not able to comment definitively until we receive formal notifications. However, if it rewards job creation, as one of the largest employers, SIS stands to gain significantly."

9. Question: "What's the rationale behind your investment in Adhikosh Financial Advisory?" Answer: "Adhikosh is a fintech platform providing loans for blue-collar workers. This investment aims to enhance employee experience for our 300,000 staff while fostering synergistic growth."

10. Question: "What would happen if the government discontinues the 80JJAA scheme?" Answer: "While I can't predict government actions, it would be surprising if they moved away from job creation incentives. Job creation is critical to their agenda, so I believe this program will continue."

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