SIS LIMITED (SIS) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the SIS Limited Q4 FY26 Earnings Conference Call hosted by SIS Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vineet Soshniwal, President, M&A, and Investor Relations from SIS Limited. Thank you, and over to you, sir.

Thank you very much. Good afternoon to everyone, and I welcome all of you to the Q4 FY26 earnings call. I hope you all got a chance to have a look at the results which were already declared before the long weekend started. So as you've seen, I think by far Q4 and FY26, we're very happy to report that it's been a milestone quarter and one of the best growth years for SIS in possibly the last five, six years post-COVID, right? It's marked by strong execution across all businesses and there is a sustained momentum as you can see in growth and profitability with the highest ever revenue and highest ever EBITDA margins and as well as PACT, right? So that shows that we are firing on all three fronts. We reported a quarterly revenue of 4,489 crores. That's a huge jump of 31% year-on-year growth and a 7.3% quarter-on-quarter growth. By far our best quarter. EBITDA for the quarter is crossed the psychological 200 crore mark for the first time and it's at a record 207 crore. Which is 25.6% up year-on-year basis. This shows the strong resilience and scalability of our operating model. Now, last time, last quarter, we, as you would have seen, we reported a one-time exceptional charge of 290 crores, which is basically the charge we had taken while implementing the new labor code guidelines on gratuity and leave liabilities. This quarter, we did a reassessment of our liability with our auditors. And as a result, after reassessment, we reversed 38.8 crore of this liability during Q4, which is flowing through other comprehensive income, as you can see. So it's a reassessment of the liability, nothing materially has changed otherwise. So the liability stands reduced by 38.8 crores. Now, on a revenue basis, we are happy to report that on a consolidated basis, monthly revenue run rate is now 1,574 crores, which shows promising momentum across all categories. On a consolidated basis, as I said, 4,489 crores, 31% year-round year term. India Security has reported its highest ever revenue of 1925 crores in this quarter, which is a 34.2% growth year-on-year basis. Of course, this has come with consolidation of our acquisition of APS. For FM, we have reported a quarter of 635 crores, which is an 8.1% growth on a year-on-year basis. International Security reported its highest ever quarterly revenue of 1,950 crores, which is a growth of 36.9% on a year-on-year basis. Now, coming to EBITDA, we have been working, as you know, for a long time in terms of improving our margin profile across all segment, and that's a constant endeavor, right? So, On a consolidated level, EBITDA grew by 25.6% year-on-year to 207 crores, with an EBITDA margin of 4.6% on a consoled basis. India Security, out of that, has reported an EBITDA margin of 5.1%, which is 98.4 crore, almost touching 100 crore a quarter just for India Security alone in terms of EBITDA. Facility management reported an EBITDA margin of 5.5%. And for the international business, the EBITDA margin for Q4 was stable, 3.8%. But it was up by 28.7% on a year-on-year basis. Coming to PAT, the operating PAT was 105.5 crores for the quarter, resulting in a margin of 2.4%. We have been constantly on an endeavor to improve our return on capital, return on equity profile. So now our ROC stands at 16.5% up from 14.3% a year ago. And we have always been guiding that we are going to operate 15% plus less ROC. So I think we've crossed that mark now. DSO improvement, operational efficiency, it's a constant endeavor on our side. So this quarter, we are reporting one of the best DSO days, which is 63 days, down by four days from the previous quarter. And if you look, if you want to look at it from March, last few March quarters also, because typically the March quarter is the best in terms of DSO. This is one of the best quarters even since 2023 also. So that's 63 days of DSO. So now with this, I close the opening comments. On the call, we have Rituraj Sinha, Group Managing Director, Mr. Brajesh Kumar, our Chief Financial Officer, Mr. Vikram Kanot, CFO of the International Business, and I would open the floor for Q&A. Thank you very much.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question.

Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question is from the line of N. Modi, an individual investor.

Please go ahead.

Yes, sir. Thank you very much for this excellent result. Sir, my question is regarding this exceptional item, this 290 crore which you have provided in December quarter, and then some amount you have reversed in the current quarter. So, sir, that amount should not have been let off from here instead of passing it through that comprehensive income, something like that.

Mr. Modi, this is Rajesh responding to your question. So, as per accounting norms, whenever there is any difference in the liability already we have done, we have to pass it through OCI. We cannot simply reduce the liability or we cannot prove it through PN. So, as per accounting norms, we are under obligation to pass it through OCI and we have just followed what is the accounting standard. Okay, I got you, sir.

Sir, the thing, this amount is also passed through, we are going to get this money from our clients. This we are providing at the moment in Lamsayam, but ultimately we are going to get this money from our clients.

So, there are two aspects. One is the liability created for the past period and the additional amount which we will intern future. So, that's why future additional expenses concerns, this is getting captured in the rates to break up of all the existing customers. So, this will be totally passed through. Regarding the liability of past periods, we are under decision of our customers. Most of them have said that whenever actually this amount will be paid to consult employees who will retire that time, at the time they will reimburse. So, we are not creating any good income against that. Whenever that will get realized, that will pass through the TN. So, that is the status as on date.

So, that means we are going to get it ultimately. This will come to the credit of our TN.

Yeah, because that will have cash flow impact. Currently, we have just done the accounting adjustment. So, whenever the cash flow impact will occur, at that time, it will be passed.

Right, sir. Thank you.

Thank you. Our next question comes from the line of Abhinav from Acutas Investment. Please go ahead.

Yeah, hi. Firstly, congratulations for the result this quarter.

My first question is regarding our FM business. I see there are additional orders which we have won, and the monthly rent rate has increased to 31 CR, which was 21 TRS year-on-year quarter comparison. Thank you. Is this sustainable and with the current margins which we have?

Hi, this is Dhritaraj. The FM results are very much sustainable, and if you have been tracking the FM segment, you will see that they have gone from, you know, 4.5% or lower margin profile to almost 5.5% margin profile, plus the business has reported reasonable growth. I think it would be safe to say that both are sustainable.

Hi, this is Rhea. So in our international business, we've seen a lot of orders this quarter also coming from government and takeoff. What are the likely tenure of these orders and how should we look at it? Because if we just look at the employee count, they have not increased as much as the revenue has. So could you help me with that?

So, typically, these victims are not? Yeah. So, typical contacts will be signed in Australia and New Zealand are in the range of three to five years. That is your first question. In terms of not increasing headcount, so typically the quarter four is where we have events, business, pickup revenue. The Australian Open in Australia and the Grand Prix in Australia both bring in about, in Australian dollar terms, about $20 million of revenue, which adds to the revenue without increasing headcount correspondingly.

So is it fair to say that this will not come, this is a quarterly phenomenon? Why, why, basically?

Yeah, on a year-on-year basis, this is every quarter four, if you go back and look, will have this upswing in revenue, because these are long-term contract signs, but it's tied to the events happening in the quarter. So it will go back down to normalized levels in Q1, but it will again pick up in Q4 of 27.

So what will be the quantum of TV orders?

20 million Australian dollars is roughly about 120 crores.

And my second question is in terms of India business for the newer acquisition which we have done for APS. So, what is the plan there? How is the, what have we thought about it? What kind of company do we want to make it? And when will the margin converge to our India business of NIS? Good morning, everyone.

AP Securitas is a strategic transaction. It is basically the number one security company in India, which is SIS acquiring number six or number seven company. So it's a classic strategic acquisition. We've got it at a reasonable valuation. As far as the margins are concerned, in Q4, if you see... SIS Security has, excluding APS, delivered 5.5% margin. APS has delivered 5% margin. On a blended basis, these two businesses have delivered roughly 5.2% margin. I think it is going to be, I mean, it'd be fair to say that. The 50 BIPs margin gap is a synergy opportunity. Our plan is that over the next 18 months or as we consolidate branches, share back office services, integrate procurement, and cross sell on technology and other things, I think this should be close to converting.

Thank you very much. Thank you.

Just one question from the previous response. The APS before the EBITDA percentage is 4.2%.

It's 4.2%. So, we have a rule to go from 4.2 to 5.5. Is it right? Say that.

Yes.

Got it. And how much time or duration do you think this gap would be bridged?

I think budget, you know, at least a year, a year and a half. Oh, got it.

Thanks, Vithra. Thanks, Kareem.

Thank you. Our next question comes from the line of Umang Shah from Banyan Tree Advisors PMS. Please go ahead.

Hi, sir. Good afternoon. Thank you for the opportunity. Good set of numbers. Also wanted to congratulate on capital allocation with both buyback and a dividend this year with taking the total payout to 70%. I had three queries. One was, what was the reason for declining employees in the facility management segment? Employees have come down from 85,000 to 82,000 employees now. Second was, any forays planned in any other international markets in FY27? That was the second question. And third question was, you had called out that there were multiple one-times in international business this year. Then next year onwards, it will normalize to 7%. If that is the context, then how do we plan to have double-digit revenue growth going forward? These were the three questions.

Okay, so let me try and address one by one. So the first thing I think, let's, you didn't ask this question, but you know, just so that I can underline this information. SIS has returned a total of 250 crores to shareholders this financial year. And I think since IPO over eight years, if my memory serves me right, we would have returned close to, Shweta, can you help me with the number? Including this 150 crores, how much have we returned in total? Okay, let's gather that number. Till then, I'll answer your questions. Employee headcount in FM is not really reduced. They close certain contracts, surge work towards the end of Q4. So, I don't think you should read too much on FM revenue is not contracting. We haven't lost anything significant. There isn't some bad news that is not reported. So, FM is steady-state, it's growing, margins are improving, business is on track. As far as new markets is concerned, I think SIS is very focused on India at the moment. Our priority is consolidating market share and accelerating the solutioning aspect. So... Currently, there is no new international market that we are looking at. As regards to one-time, you know, on the international side, I don't think these are one-time, just as Vikram explained it. We have signed a 10-year contract with Australian Grand Prix. You know, a multiple-year contract with Australian Open. Whenever these events will happen, we will step in to do the security duties. It so happens that both these events take place in Jan to March period. So each year during Jan to March, you will see a bump up. So these are multi-year contracts. If you compare last year's Q4 also, you will see the same pattern and the year before. So again, on international, there is no one-time contract, no one-time revenue, nothing unsustainable. It is steady state numbers. Shweta, do you have?

Yeah, it's 600 crores since the IPO. 81 crores through dividends, 270 crores through buyback from FI 22 to FI 24, and then 250 crores this year. So about 600 crores total.

Thank you. Great, sir. Thank you so much. This answers all my questions. All the best.

Thank you. Our next question comes from the line of Karan from Guardian Capital Partners. Please go ahead.

Yeah, hi. Thanks for the opportunity. I just wanted to ask what kind of opportunities are you seeing with the implementation of the new labor codes? And are you seeing any signs of improvement in your business dynamics already with the conversations that you have with your clients?

Well, Labour Codes, as I have cited several occasions before, is a reset for India, not just for this industry per se or for SIS.

Let me walk you through it. There are roughly 55 to 60 crore. Working population in India, what you call the labor force of the country. Out of this roughly 25 crore are working in farms where labor codes don't apply. Remaining 30 crore plus people

are directly impacted by labor codes, which includes you and it includes me, because this is no longer about blue collar or gray collar. This is basically every kind of worker from pune to CEO, a contracted worker or a direct employee, a mining worker or a semiconductor factory worker. So, this is a very big change. Coming to our industry, our industry obviously is manpower intensive. It is highly regulated. So, these labor codes have a significant impact. However, The one clear downside, or the, not downside, or the retrospective impact that we had to take, which I was clearly calling out as a minus, was the gratuity impact. And that also was basis, the fact that the government has now changed the definition of wage. So, there was no non-compliance. It is just that that clarification was issued and we did compliance and we took a 290 crore charge. As far as I am able to see, that is the only significant downside of labor codes that I could envisage, which is now fully absorbed as an exceptional item. Going forward...

We have several opportunities at hand, and I will cite them for you. Number one, with regard to existing contracts, we believe that our invoicing, compliance, collections, and payment cycle. We'll see substantial readjustments if the customers fully cooperate.

But this has to be seen. This could result in interesting benefits on the working capital side.

Number two, with regard to

competition, I think with a single... Linn number, a single license, single labor license and a single Linn number, like you have a GST number for a business, and a single Chalan online filing system like you have for GST. The non-compliance trend in this sector, which has kept this industry rather fragmented, which has... Allowed competitors to take advantage of the compliance arbitrage, I think that is also likely to be neutralized as

this law gets enforced. Good, I think as the cost of labor goes up in general, I see quite evidently that

people are more open to considering solutions, adding more technology,

and helping with better outcomes with lesser mind power. So when it comes to our existing

customers, when it comes to our competitors, and when it comes to solutioning, there could be material benefits.

But then again, let me call out that labor code implementation is not flip of a switch. It will take time to percolate down to the last contract. This is not

a change that has happened, but it is definitely beginning of fundamental shift in the industry. If things go well, this could very well be inflection point

for businesses like ours. I hope that helps. Yes, thank you so much for that answer.

That was it from my side. Thank you.

Our next question comes from the line of Harshit Khadka from Robo Capital. Please go ahead.

Hello, sir. Thank you for the opportunity. Am I audible?

You are audible, sir. You may proceed.

Yes, sir. I just wanted to understand what is your ROE inspiration for the next two, three years.

Thank you. I don't think, I mean, we have an ROE aspiration as such. I'll tell you, SIS must be seen as a compounding story. At least, that's the way I see it.

And for us, the two

metrics that are super important are to be able to get growth. About 15% and maintain returns

over 15% on a multiple year basis.

As long as we can compound on that 15 is to 15 formula, I think we are very happy. And if you look backwards also, since listing, Since FY18, SIS has maintained a 15% growth taker. That chart is available in our earnings note. We put it out each time. So we pretty much want to continue doing what we are doing with a 15% return profile and with scale that keeps us significant. I think that's very important to call out. Obviously, this sector is seeing multiple companies being listed. I'm sure in the coming years, there will be many, many more. However, in our space, we want to be the clear platform that distinguishes itself. Today, with 16,000 crores-odd of revenues, we are double the size of all security, facility management, and cash companies. Put together. So amongst all listed companies, SIS is clear twice their size. But I think it's more important that we are also comparable to others in the market. And that's why our aspiration is to be amongst the top 100 listed companies in terms of profit after tax. We are certain that in today's market environment, as far as we see the numbers, if we get to a 500 crore pat mark, that would clearly put us at top 100 listed companies, including the BFSI majors. We want to be a significant company. We want to grow at 15%. We want to maintain 15% ROE. That's what we really want to pursue.

Okay, sir, I understand. Is the plan for IPO of the cash business on track? Like, what is the update over there?

So, let me walk you through the whole situation. Firstly, the cash IPO is not delayed by us.

It is deferred owing to circumstances, largely the geopolitical situation and the IPO markets over the last few months.

We believe that the cash IPO is designed to unlock value for shareholders. We will act with the objective of delivering best value from that unlocking. We are not pushed for time. When conditions align, we will move. Hopefully, within FY27.

And I think SEDI has facilitated that by extending the DRHP validity to September 30th. I cannot share too much detail, but the business has delivered very solid numbers. The cash business has delivered very solid numbers for FI 26 and a good outlook for FI 27. So net summary, we are well set. When the geopolitical environment is more predictable and the stock market is more welcoming. For new IPOs, particularly in our space, we will press the button. But for now, we wait and watch.

That was very helpful.

Thank you.

Thank you. The next question is from the line of Nishita from Crown Capital. Please go ahead.

Yes. Hello. Yeah, congratulations on a good set of numbers. So, I just wanted to understand, so you mentioned that we aspire to grow at around 15% on a multilever basis, and we've had very good growth in all three different segments. So, I just wanted to understand what is the growth trajectory we see segmental-wise for each segment, if you could give that growth, like for FY27 and going forward.

We don't do guidance by segment, even on a console basis. I have basically articulated what SIS has been doing in the past. If you take SIS numbers since listing, we listed as a 6,000 crore company eight years back with 100 crore of profit after tax small park. Today, we are a 16,000 crore company with roughly 390 crores of profit after tax for FY26 on a normalized basis. If you back calculate the numbers, even for the return profile, you will basically see that we have been hovering around 15% growth and 15% return profile. That's what I said that we intend to continue to do that on a multi-year.

Okay, understood. And on the margin front, do we expect the current margins in each segment to be continued or can we expect some like upswing in the margins as well?

So, if you look at the margin profile of the business, let me take you back. You know, we were roughly 4.3%, if my memory serves me right, in Q1 of this year. We are closing this year at 4.6%, 4.7%. This is with the impact of APS consolidation for the full quarter. The standalone segmental numbers without APS, India's security is at 5.5% EBITDA margin. FM is also at 5.5% EBITDA margin. And both on... In the vicinity of the 6% that we used to do pre-COVID, I have said on multiple occasions before, and I repeat, that I see no difficulty in us getting to pre-COVID levels, and we have demonstrated that for the last one or two years, if you go back and trace our numbers. But that's what. We should, you should work with. This industry is not a 10% EBITDA margin industry. This is a growth and ROSI industry. Please understand that clearly. Your EBITDA margin will hover around 5, 6, maybe 6.5%. That won't change much. You look at the global peers, they are all in that ballpark. The key thing is... On a base of 16,000 crores, can you keep growing 15% year-on-year, and can you maintain over 15% return profile? That is what we are, you know, very focused on doing.

Understood, understood. So, like, can you reach the 6% mark in FI 28, or is that achievable in FI 27?

I wouldn't be able to comment with that.

Okay, okay. Thank you so much.

Thank you. Ladies and gentlemen, to ask a question, you may press star and one. Our next question is from the line of Chirag Filioki with MS Capital. Please go ahead.

Hi, thank you for the opportunity. Congratulations on a strong quarter. I had three questions. One is just a clarification. I believe, Ritraj, on an interview outside with press, I'm not sure if this is correct, but you guys mentioned that you're targeting around 20,000 crores in 27. Is that just misquoting you guys, or is it something that you internally think is possible? Overall revenue, this is first as a clarification.

Well, It is a misquote, but it is also possible. Understood. Understood. Interesting.

And just to clarify again on the SIS, India securities business, X of AP Securitas, that margin is 5.5. Is that right? Understood. And maybe connect offline. I'm getting a different number, but I'll just connect offline and make sure. Two smaller questions. One on the depreciation side, this quarter, quarter on quarter, our depreciation has increased by around 15 odd crores, which I guess the note says is relating to largely a new office lease in the international business. That analyzes to around a 60 crores kind of an office, please. Is that what it is? Or how large is that space?

Let me walk you through that because I think I'll save everybody the trouble. So, Q3, F526,

our depreciation number was 55 crores. Q4. It shows up as 70 crores.

So, there's a 15 crore change. Out of this 15 crore, 10 crore is attributable to the MSS lease that we have signed up in Australia. So, lease of a new office contributes 10 crores out of the 15 crores, and the rest for

Are basically fixed asset addition in India. Let me also give you perspective on a full year basis. FY25, our depreciation was roughly 163 crores.

This year is 215 crores. FY26 is 215 crores. So, net change is close to, let's say, 50 odd crores.

Of this 50 crores, 20 crore over is simply leases

and another 10 crores is basically owing to APS consolidation because of PPA accounting and APS group, whatever. So if you do apples to apples comparison, there isn't anything material in terms of the depreciation line. Moreover, we have already put out, and we do put out in earnings note every single quarter, depreciation chart, which is there on, I think if I, I don't know the page number, it may be on page 7, 8 or something. Sorry, one second. It's page 11. If you look at the earnings note, page 11, there's a depreciation chart. Since FY21, SIS is averaging 1.1, sorry, 1.2%. 1.2% average on depreciation. So there is nothing that you should be awfully worried about.

Understood. Now, very clear, just, so that's very helpful. So just to, again, double click on one part of it, that 10 crore per quarter is like a 40 crore annual lease for that office. Is that right? And that I'm getting is close to what the rent of that office built space is. Is that right? Yeah, understood. Okay. Small last question, the expected credit loss that you guys report on the cash flow, which is just an allowance, I understand, and it's almost meaningless from an overall perspective, has gone up dramatically, though, if I look at it from a year on year basis, anything to read in there? Or is it just, you know, too much of a double click there? It's gone up from around 20 odd crores to 50 odd crores.

Well, it's just a prudent provisioning. Understood. Once you also have to put these things in context to the revenue number, right? Put it in context to 16,000 crores. And then probably you will get more. sense on it.

Perfect. I understand. I just wanted to know, from last year, there is no major change either in policy or some expectation of a larger receivable loss. That's not the case.

No, it's simply our audit committee pressing for

being more prudent. Perfect. Thank you so much. Thank you for the patience.

Thank you. Our next question comes from the line of Vatral Shah from Glightstone, Capital Management LLP. Please go ahead.

Yeah, hi.

I just had one question. What would be our year-on-year growth for security India if we excluded APS?

Okay, about 10.8%.

11.8%.

11%. Okay, got it. That's it so much.

Thank you. Thank you. For participants who wish to ask questions, may we please press star and one on the touchstone telephones. Sir, we have one participant who has just entered the queue. We have a question from the line of Madhul Rati from Counter Cyclical Investments. Please go ahead.

So, Mr. Shana, I'm trying to understand that is there any advantage that we have in terms of sourcing of labor, like since the, I mean, we are based out of Bihar and Bihar has the lowest cost labor. So, is there any advantage wherein we can source people from really interiors at low cost and then train them in-house and then maybe place them in tier 1, tier 2 cities? Is that the model?

No, that's absolutely not the model. So, in India, what you get paid is dependent on where you work. And, you know, I think it's important to understand that carefully. More than your skill, where you work determines how much you get paid. So, if somebody hailing from Bihar works in Bihar, For the job of a security guard, let's say he gets 10,000 rupees. That's the prevailing minimum wage. When the same individual goes to Mumbai, for example, for the same security guard duty, because of Maharashtra jurisdiction, he might be able to get 20,000 wage for exactly same duty, same hours, same everything. So we don't have an arbitrage. We can't take people from Bihar and pay them 10,000 rupees in Bombay. What they get paid is regulated by where they work. Having said that, you are correct to the extent that in this line of work, where you're dealing with

343,000 people on your payroll. The supply chain is your biggest differentiator. Your sourcing is your biggest differentiator.

And I think that is what has propelled SIS to current scale. We have 25 residential training facilities spread across 14 different states in the country. Some states like Bihar. I have more than one training facility, but, you know, several eastern seaboard states, East India states, and, you know, some central India states are supply centers for us. That's where the labor mobility happens from. We have the ability to recruit, to train, to certify, and then mobilize workers. I think that supply chain has, you know, helped us scale the way we have over the many decades. I think one fundamental thing that one needs to understand about this sector is that there is no barriers to entry in this sector. There is no more like barrier to entry. You know, anybody can set up a security company. You know, and hundreds of retired policemen and ex-army men set up security companies every month, every year. The barriers are not to entry. The barriers are to scale. You know, anybody can run a 50 crore security company. But then... There are only two security companies in India currently, which have revenues more than 2500 crores. One is Group 4. And the second is SIS, which is now doing roughly 6000 crores, twice the size of Group 4. So sorry for a longish answer, but I hope I explained it to you.

Yes, so that was very helpful.

So basically, what I understood is that, So, the payment that one receives, I mean, whether it is our security guard or our competition security guard, the payment will be the same. The customer will pay the same salary. It is not as though we can command any kind of premium versus the competition. Everybody is going to get the same salary, whichever agency it might be. So, then where does our advantage come from?

So, you do command pricing power, but it's not like a monopoly or a duopoly where, you know, you are the only provider. But you do command the pricing power. SIS price on average would be a few percentages higher than, you know, another competitor, a local company in Bombay or… Gujarat for that matter or any other place in India. And that's largely on account of the fact that SIS would be charging a higher service fee, SIS will be charging for the technology we provide, SIS will be charging, you know, a training fee, a kit fee, and a lot of other things that generally would not be paid by customers to another local company. So, people do pay a brand premium, but honestly speaking, it's not an earth-shattering brand premium. This is not a monopoly. SIS is the largest, but even today, we have barely 5% market share in security. This will fundamentally change when labor codes gets fully implemented. You know, in the US, the largest security company has more than 15% market share. In UK, the largest security company has more than 15% market share. In any mature market, the largest security company generally has double-digit market share. So we believe that, you know, this is just the beginning. We have a long runway and a huge scope as India grows to, you know, as India remains the fastest-growing security market. In the world, and the third largest security market in the world. And mind you, globally, security sector alone is a $300 billion industry as per Fedonia report. And India is the largest, sorry, India is the fastest growing and the third largest. And we are the market leader in that segment. And labor codes are happening.

So it's all up to execution.

Understood.

So, I also wanted to understand, Mr. Sinal, like you were alluding to the fact that we have our in-house training center, residential training centers in multiple states. So, firstly, is it, I mean, is there any minimum qualification for security guards? Like, do they have to be 10th pass or anything like that? Or they can be like even below that education qualification? And then secondly, how much time do they need to spend in our residential training facility? What is the duration? And post that, once we train them, is there any bond or anything with that particular person whom we have trained for months that for the next five years or at least some time he will have to spend on our payroll? Otherwise, we can just train people on our own cost, and then after one, two months, they can just, I mean, join some other agency.

So let me walk you through a very, very good question. And I think for anybody who wants to understand the sector, I'll put this on record. So the recruitment criteria, recruitment qualifications are mandated under the Private Security Agency's Regulation Act 2005. It specifies who can be a security guard. He must be an Indian national, he must be above certain age. He must have, you know, over 10th matriculation certificate, he should have, you know, there's a certain set of minimum basic criteria set by the Pasara Act. So the minimum criteria comes from there. He must have a clean police verification and background check, etc. How much the training is, what is the duration and what is the content of training? This again, the bare minimum is mandated under the same Pasara Act, which prescribes 180 hours of training and subsequent certification under the act itself.

SIS recruits above

the bare minimum criteria. 60-odd percent of the total number of people we recruited last year were graduates. So, obviously, we are recruiting better quality over the bare minimum prescribed by the active. That's the first step towards building a better product. Second. Government prescribes, the act prescribes 180 hours of duty. It does not prescribe whether it should be residential or non-residential. SIS conducts across 25 training facilities, residential training for a period of 28 days. So again, it's the second input that differentiates and helps us build better quality of manpower. Number three, the act prescribed certification. You can certify, train and certify yourself, but SIS goes for third-party certification. We do tie-ups for others to come and do the testing and calibrate and certify the malpractice. Number four, and most important, training in SIS is not free. Training in SIS is subsidized. For the 28 days training, people pay roughly 7500 rupees to undergo training. It is not free of cost. It's not a cost center. We do not run recruitment and training as a cost center. Once they complete training and they are certified, they get a job guarantee in SIS. But there is no bond because under the laws of this country, Signing up bonds with people for a minimum service is legally not permissible. Moreover, there is no reason for us to do that because A, we have already charged them for the training, and B, because we believe that you can't force or tie down somebody to do a job. You have to create circumstances that people choose you over other employees. So, that's our approach to retention. Industry-wide, a survey conducted said that roughly 42% attrition happens in this sector. Our attrition is a good 10% lower than that, despite the fact that we maintain the largest workforce in the country. So, that is the long story about recruitment training costs. The good news or the last point that I must also register is that now government, through its employment incentive scheme, is committing to pay people a sum of 15,000 rupees should they do training and then continue to work in the organized labor force for a 12-month period. On continuous basis, government is incentivizing them with a 15,000 rupee payment direct to the individual's bank account. It has nothing to do with the company. We believe this will further incentivize people to continue and serve at least 12 months.

Hope that helps. Yes, understood. Thank you very much and best of luck.

Thank you. Our next question is from the line of Umang Shah from Banyan Tree Advisors PMS. Please go ahead.

Hi, sir. Thank you for the opportunity again. We spoke of our margins reverting to pre-COVID numbers and also spoke of aspirations of growing more than 15%. What big change has happened after COVID is that minimum wages in many states have not been revised. So the numbers that we aspire for, will the increase in minimum wages be an important factor here, or irrespective of this increase, we will still grow or aspire to grow at these levels?

Well, wage growth is a positive for us, it's not a negative. That's the first thing that you need to understand. Revenue in our industry is a function of price, which is driven by wages, multiplied by volume. So if the wage goes up, the price per head per month goes up, the price of overall service goes up.

Even at the same volume, you get higher revenue. Got it, sir. And this has not been happening, right? Post-COVID. The government artificially compressed the wage increase.

So on an annualized basis, the wage increase in the country for the last five years has been 3 to 5% only per annum.

But obviously, that's not going very well with the workers.

And that's why we saw some incidents in Haryana and Greater Noida, etc. in the last month, which you might have picked up in the news. And subsequently, in the last 30 days, Haryana has hiked minimum wages by 50%. Uttar Pradesh by close to 28%. Punjab and Uttarakhand above 15%. So that's what's happened in the last UP again by 20 odd percent.

Very interesting, sir. Thank you so much.

Thank you. We have a next question from the line of Madhur Rathi from Counter-Cyclical Investments. Please go ahead.

Thank you for the opportunity once again, sir. Does this flex-speed operator giving end-to-end service in... To the landlords, as well as the customers, affect our facility management division because a lot of these guys are coming up with, like, providing everything from Design Fit House to your facility management and security services as well.

Corporate offices or office spaces put together would not even constitute 10% of our customer base and facility management. That is the beauty about this sector. This is completely diversified. Because you are from counter-cyclical, let me tell you that if there is one sector which is non-seasonal, it is essential services like security and effort. It's definitely not cyclical. And it's almost recession resistant. If you go back and see the numbers of SIS during COVID, in the first year of COVID, when the economy shrunk by 7%, SIS grew by 7%. That is because even if one sector like, you know, people used to ask us the question during COVID, oh my God, people have gone to work from home, what will happen to FM business? The fact is that, you know, people have gone to work from home, offices are requiring lesser manpower, hospitals are needing more manpower, manufacturing establishments are needing more facility management staff. So, this is, this service is omnipresent. Just sound today morning, whenever, wherever, whichever part of the country you woke up in, whichever building, there would be cleaning staff and security staff and CCTV camera in that building. If you went to drop your kids to school or the bus that came to pick them up would be driven by facility management staff with a security guard up front most likely. If you went to drop them to school, there would be guards, cameras and cleaners in the school. Your office has guards, cameras, and cleaners. You go to a friend's office, or you go to a mall in the evening, or you go to the airport. You will see this everywhere, irrespective of city, irrespective of state. This is why this sector is so resilient, and I think nothing can test you more than COVID,

and you should see the results of SIS during COVID. Got it.

Sir, just one question, sir, does pay commission have an impact on wages for the overall market and that should help us or that is not a big, because during like previous pay commission between FY26 and FY29, our revenue had grown at a very nice level. So, is that a possibility or no?

My dear friend, pay commission is for government staff, not for private. We are driven by the minimum wage notifications, which are now under the wage code of the country. So, as and when minimum wages are increased by the central government or state governments, we have a direct benefit and we pass it on to customers.

Our contracts are built for automatic pass-through.

So, Mr. Sinha, taking from your earlier, you mentioned that 60% of our guards are basically graduates. So, but what's the rationale of hiring overqualified people, I mean, for a security guard, even a 10th pass, if that's the statutory requirement, then what can a 10th pass not do what a graduate can do? After all, a guard is not expected to do a lot, and the graduate will insist on higher wages. So then, what's the rationale for recruiting graduates?

Guards, graduates or post-graduates, they are all going to be paid as per the minimum wage declared for security guards by the state government. It doesn't matter whether it's a graduate or a 10-pass. So we pay the same wages, number one. Number two, for the same wages, if you get better qualified people, better educated people, today a lot of our guards and job posts are doing phone duty, they are running apps, they are doing their attendance on apps, they are maintaining visitor registers on apps. They are filing their reports, career reports, which is, you know, situation reports, all using digital platforms. So more educated is better. We have to pay what the government mandates us to pay for the job role.

Understood.

Now, also, Mr. Shah, since we have foreign operations, so is there a possibility wherein we can send Indian labor on work permit in Australia and so on, so that we can make higher margins?

No, sir. There is no provision to take security guards to international markets. Immigration laws mostly allow for immigration to only high-skilled manpower. And that too, where they are not locally available. Security guards so far do not fall under that category.

Understood. Thank you very much.

Thank you. As there are no further questions from participants, I now hand the conference over to Mr. Ritu Raj Sinha for closing comments.

Over to you, sir. Thank you very much to all of you for joining

this call and taking so much time and patience to ask your questions.

As I close this call for FY26 and for Q4 of FY26, I would like to say that there has been a recurring critique of SIS. People have often said, too many segments, too many moving parts, something or the other is always limping. That's also been true for several quarters in the past. Fi26 presents a counterpoint. It demonstrates what

happens when a multi-engine platform,

which is the market leader in security, market leader in FM, delivers.

So, FY26 is a good story, and like I said, FY26 has been a rebound year,

and with labor codes, I think we have strong tailwinds for the coming years to very well be the inflection point for SIS and this industry. I, once again,

wish all of you the very best, and thank you for continuing to take a deep interest in SIS. I hope to see you soon.

Thank you. On behalf of SIS Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.