SIS - SIS LIMITED Share Price

Question 1: "On the onetime charge that you have taken of INR 290 crores, I understand it's on the conservative side. But how much do you think we can recover out of it? Do you think we can easily recover maybe 50%? What's your view on that?"

Rituraj Sinha: This INR 290 crores gratuity charge is a one-off exceptional item from prior periods due to the redefinition of wage in new Labour Codes. We've opted for a conservative approach by fully provisioning this amount first. Once the model rules are released, we aim to claim this gratuity from clients. While I can't predict exact recovery rates, any amount we collect will positively impact our P&L. We fully recognize the charge, and any claims will show as recoveries in our results, giving no negative surprises.

Question 2: "Another question was on the dividend payout. The company has historically rewarded shareholders through buybacks. But this time, there's a dividend of INR 7 per share, higher than usual. Will this trend of dividend rewards continue going forward?"

Rituraj Sinha: SIS is cash-positive, generating substantial free cash. Historically, we focused on buybacks but shifted towards dividends due to market feedback. Our INR 7 dividend reflects this new strategy. Going forward, we aim to balance dividends and potential buybacks, benefiting shareholders based on their preferences. As we expect sufficient cash flow from growth and ELI, we might see further returns in the second half, potentially as buybacks, depending on market conditions.

Question 3: "If we were to adjust for the AP Securitas acquisition, what would our revenue growth be?"

Vineet Toshniwal: Excluding the APS acquisition, India Security's revenue growth is 11.2% year-on-year and 2.3% quarter-on-quarter. On a consolidated basis, growth would be about 15% without acquisitions included.

Question 4: "What is the aspiration for margins for us to grow in FY '26 or FY '27, considering the latest reported margins?"

Vineet Toshniwal: India Security's margins, excluding APS, remained stable at 5.5%. Our strategy includes improving margins through integrating APS efficiently while maintaining SIS's established margins. The hope is to uplift APS's margin to align with SIS standards gradually over time.

Question 5: "What are the main trade-offs you are managing in expanding coverage, meeting client SLAs, and protecting margins with current wage inflation and regulatory changes?"

R. S. Krishna: Our business model is largely cost-plus, allowing us to pass wage increases onto customers, minimizing risks. While increases might create temporary strains, contractual obligations ensure that we maintain margins. We have a robust monthly review system to monitor performance and make necessary adjustments as conditions change.

Question 6: "Can you elaborate on the impact of labor reforms on the addressable market opportunity for companies like SIS?"

Rituraj Sinha: Labor reforms simplify compliance, which is currently fragmented. The security services market is over INR 1 lakh crores, with SIS owning just 5-6% market share. As enforcement improves, we expect larger organizations like SIS to gain share from smaller, non-compliant players, raising our addressable market significantly in the coming 3-5 years.

Question 7: "What is the growth outlook guidance for Q4 FY '27?"

Rituraj Sinha: We don't provide specific guidance, but we project our security services will align with GDP growth rates at around 11-12%. Facility Management could grow 12.5-15%, while international growth could stabilize around 7.5%. Overall, for consolidated growth, we anticipate approximately 12% based on these trends.

Question 8: "What has been the contribution of APS to our operating PAT this quarter?"

Rituraj Sinha: APS has been contributing roughly INR 12.5 crores to EBITDA every quarter. However, our reported numbers reflect effects from prior year tax benefits that inflated last year's PAT. Thus, while APS contributes positively, the comparison might seem less favorable without context.

This summary includes key questions and detailed responses from the earnings call, adhering to your guidelines.