SIS Q1 FY27 earnings call

SIS Limited commenced FY27 with a strong performance, reporting a robust revenue of ₹4,604 crores, marking a 29.7% year-on-year and 2.5% quarter-on-quarter growth. EBITDA for the quarter stood at ₹207 crores, a significant 36.2% increase year-on-year, maintaining a 4.5% margin. The company also achieved a PAT of ₹101.7 crores and improved its Return on Capital Employed (ROCE) to 16.7%, up from 14% a year ago. Despite a slight increase in Days Sales Outstanding (DSO) to 66 days, management attributed this to typical Q1 seasonality.

The management highlighted the new Labor Codes as a significant tailwind, with rules notified on May 8-9, 2026, and implementation underway. These codes are expected to ensure a level playing field for service providers and be accretive to both EBITDA and PAT over the next 3-4 quarters. Several states, including Haryana, Uttar Pradesh, Karnataka, Telangana, and Uttarakhand, have already implemented minimum wage hikes ranging from 20% to 47%, which are directly passed through to clients, boosting revenue and profitability. The new definition of 'employer' shifts compliance responsibility to the principal employer, fundamentally changing the organized vs. unorganized market share.

The Board approved the company's fifth share buyback, amounting to ₹106 crores, through an open market program with a maximum price of ₹478.50 per share. This buyback, scheduled to open next week, is designed for minority shareholders, with promoters not participating. This initiative will bring the cumulative capital returned to shareholders since the IPO to over ₹700 crores, reinforcing the company's consistent track record of capital allocation and commitment to shareholder returns.

India Security recorded its highest-ever quarterly revenue of ₹2,004 crores, growing 37.3% year-on-year, with an EBITDA of ₹103 crores and a stable margin of 5.1%. The Facility Management segment reported ₹642 crores in revenue, an 8% year-on-year growth, with its EBITDA margin normalizing to 5.5% and expected to trend upwards. International Security achieved its highest quarterly revenue run rate of ₹1,982 crores, growing 31% year-on-year (7% in constant currency), with EBITDA improving by 52% to ₹69.6 crores, despite Q1 typically being lower due to seasonal high-margin events in Q4.

Management clarified that contracts in both India and Australia include 'rise and fall' clauses, allowing direct pass-through of wage cost increases to clients. While this ensures that minimum wage hikes are EBITDA-accretive, a timing mismatch can occur between the effective date of the hike and the full realization of claims, particularly in Australia. For India, the objective is to move blended margins from the current 5.3-5.4% range to 5.5-6%, with FM margins aspiring to reach near 6%. The current lower overall margins are partly attributed to the drag from recent acquisitions, which is expected to normalize^📎 over the next 4-8 quarters.

SIS Limited aims to position itself among the top 100 Indian companies that consistently deliver over ₹500 crores in PAT, coupled with a 15% year-on-year growth in profits and a 15% or greater return profile. The company views FY27 as a potential 'inflection year' to achieve these ambitious targets, building on the strong rebound observed in FY26. Management emphasized disciplined execution to achieve these long-term financial objectives.