SIS

SIS reported its highest-ever quarterly consolidated revenue of INR 3,363 crores, marking a 9.4% YoY growth. Consolidated EBITDA grew 3.6% YoY to INR 157 crores, with the EBITDA margin improving to 4.7% from 4.4% in Q2 FY25. This growth was broad-based, with India Security revenue at INR 1,420 crores (7.7% YoY growth), Facility Management revenue at INR 576 crores (9.7% YoY growth), and International Security revenue at INR 1,383 crores (11.1% YoY growth).

The company's focus on margin improvement yielded results, with Facility Management EBITDA growing 17.9% YoY to INR 26.5 crores and its margin improving by 30 basis points YoY to 4.6%. International Security's EBITDA margin recovered to 3.8% from 3.3% in the previous quarter, driven by new wins and seasonal businesses. India Security maintained a stable EBITDA margin of 5.5%. Management aims to restore segment margins to pre-COVID levels of 6%+ for India Security and FM, and 4.5% for International.

SIS demonstrated strong operational efficiency, significantly reducing net debt by INR 225 crores to INR 632 crores, bringing the net debt-to-EBITDA ratio to a 3-year low of 1.07 from 1.47 in the prior quarter. Cash flow conversion (OCF to EBITDA) remained robust at 163%, and Days Sales Outstanding (DSOs) improved by 4 days to 69 days. The company also received INR 90 crores in IT refunds in India and INR 25 crores internationally, contributing to PAT.

Management outlined three key levers for growth and margin improvement: improving contract quality, leveraging operating leverage from SG&A as revenue grows, and enhancing branch capacity by 1.3x to manage 1,200-1,300 people and 100+ accounts per branch, aiming for INR 3 crores+ revenue per branch. SIS is also overhauling its IT systems with proprietary platforms like MySIS (digital attendance), SISCore (contract management), and SalesMAX to drive efficiency and scalability.

The international business, primarily in Australia, New Zealand, and Singapore, is considered an integral part of SIS's future plans, with no intention to sell. Australia is the second-largest market in Asia-Pacific, where SIS holds a 20-25% market share. The company aims to achieve pre-COVID margins of 4.5% in this segment, acknowledging current labor market tightness. SIS is among the top 10 global security players and the largest in APAC, with over AU$1 billion in revenue.

Rituraj Sinha directly addressed investor concerns regarding the stagnating stock price, high debt, subdued return ratios, and rising depreciation. He clarified that most debt is working capital debt, necessary to ensure timely employee payments, and committed to reducing debt exposure. He also stated the goal of bringing return ratios back to the 15-20% range and promised transparent depreciation breakdowns in future reports, aiming to resolve perception issues through actions.

The cash logistics business reported its highest-ever quarterly revenue of INR 182 crores, a 12% YoY growth, with an EBITDA margin of 17.1%. PAT was INR 13 crores, slightly impacted by lower 80JJAA benefits and carry-forward losses. Management aims for an 8% PAT level and a return profile upwards of 30% for this business. Plans for a DRHP filing to monetize the value of their minority stake in the joint venture are underway, with hopes for it to materialize sooner rather than later.