SIS LIMITED — Q4 FY25 earnings call

Call held 7 May 2025

Management summary

SIS Limited reported a strong Q4 FY25 with consolidated revenue growing 9.3% YoY to ₹3,428 crores and EBITDA increasing 10.1% YoY to ₹165 crores, marking its highest-ever performance. Operating PAT surged by 52.9% YoY, though reported PAT was negative due to a significant non-cash goodwill impairment. The company demonstrated improved financial health with net debt significantly reduced and return ratios improving, positioning it for continued organic growth.

Highlights

  • Consolidated Revenue: ₹3,428 crores, up 9.3% YoY.

  • Consolidated EBITDA: ₹165 crores, up 10.1% YoY, with a margin of 4.8%.

  • Operating PAT: ₹83 crores, up 52.9% YoY, with a margin of 2.4%.

  • Reported PAT: minus ₹223 crores due to a non-cash goodwill impairment of ₹306 crores.

  • Net Debt: Reduced to ₹429 crores from ₹889 crores (March '24), bringing net debt-to-EBITDA to 0.7x.

  • ROCE: Improved to 14.3% from 12% last quarter.

  • International Security business secured AUD 150 million in permanent revenue wins in FY25.

  • DSOs improved by 5 days to 65 days.

Key financials

  1. Revenue ₹3,428 Cr +9.3%YoY
  2. EBITDA ₹165 Cr +10.1%YoY
  3. EBITDA Margin 4.8%
  4. Operating PAT ₹83 Cr +52.9%YoY
  5. Operating PAT Margin 2.4%
  6. Reported PAT ₹-223 Cr
  7. Net Debt ₹429 Cr
  8. Net Debt-to-EBITDA Ratio 0.7
  9. ROCE 14.3%
  10. OCF to EBITDA 175%
  11. DSOs 65 days

What they filed

Q1 FY27: revenue up 29.8%, net profit up 9.7% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,269 3,362 3,428 3,548 3,759 +15%4,185 +24%4,489 +31%4,604 +30%
EBITDA145 157 165 152 168 +16%189 +20%207 +25%207 +36%
Net profit69 102 -223 93 81 +17%-138 −235%102 +146%102 +10%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue
₹3,446 Cr Total
  • India Security ₹1,435 Cr 41.6%
  • International Security ₹1,424 Cr 41.3%
  • FM ₹587 Cr 17.0%

Guidance & targets

Profitability

  • International Security EBITDA Margin Profitability · going forward · Medium confidence 4-4.5%
    As far as international is concerned, on the international side, the pre-COVID EBITDA margin level was roughly 4.5%. International is back at close to 4% already, and you can expect it to operate at that 4%, 4.5% band going forward as well.

    — Rituraj Sinha, Group Managing Director

  • India Security EBITDA Margin Profitability · gradually · Medium confidence 6%
    I think in Security business in India, I think the contract churning exercise is pretty much done. Therefore, we are reporting 5.5%, 5.6%. And I think gradually, as we gain more operating leverage that will go back to 6% levels, which is the pre-COVID normal level.

    — Rituraj Sinha, Group Managing Director

  • FM EBITDA Margin Profitability · Q1 FY26 · Medium confidence 5%
    In FM, it has taken more time than before, but even FM now is inching towards 5% EBITDA margin. And I think hopefully, in the coming first quarter, you will see that even the FM business is out of the woods as far as the margin is concerned.

    — Rituraj Sinha, Group Managing Director

  • EBITDA CAGR Profitability · quarterly (historical, implied for future) · Medium confidence close to 15%, 16%
    ...and our quarterly CAGR for EBITDA also is close to 15%, 16%. So I think you'll have to take reliance on that.

    — Rituraj Sinha, Group Managing Director

Revenue

  • Revenue CAGR Revenue · quarterly (historical, implied for future) · Medium confidence close to 15%
    I don't think we give any guidance, but your last 7 years of listed performance will tell you that our quarterly CAGR for revenue is close to 15%...

    — Rituraj Sinha, Group Managing Director

Return Ratios

  • Return Ratios Return Ratios · coming year (implied) · Medium confidence moving upwards from 15%
    And as far as return ratios is concerned, Vineet already explained that our return ratios are back to 15%. And I think with a little bit faster growth and margin improvement, we'd like to see this moving upwards from 15%.

    — Rituraj Sinha, Group Managing Director

Risks & concerns

  • Timing of new labor law implementation and potential impact on wages.

    medium

    India enacted 4 labor codes, but state adoption is pending. Management expects implementation soon but notes national focus on other matters, and believes businesses like SIS might gain from higher wages.

    Management acknowledged

  • Labor availability in Australia impacting labor costs.

    medium

    Pressure on labor cost in Australia is due to non-availability of labor, not minimum wage increases. Management is seeing early signs of easing, which would reduce cost pressure.

    Management acknowledged

  • Sustainability of high order wins in International Security.

    low

    While significant wins were achieved in FY25 (AUD 150 million), management indicated these 'kinds of events don't happen every year' in the mature Australian market.

    Management acknowledged

Q&A highlights

3 direct
Goodwill write-off and future impairment risk Direct
I don't see any residual impairment requirement that we have not taken. So Henderson impairment is complete. SLV impairment is complete, almost. So basically, I don't think that there is any significant concern on this count. ... And other than these three entities for which we have taken the impairment, there is no indication, there's enough headroom available as per the impairment model. So, we have the confidence that we don't need to take any further impairment on account of any of these entities going forward as of now, as per the result till now.

This addresses a major negative item (reported PAT loss) and provides clarity on whether similar write-offs are expected in the future, which is crucial for investor confidence.

Asked by Gopinath from PNR Investments, Chirag Maroo from Keynote Capital

Sustainability of large order wins in Australia Direct
So, these kinds of events don't happen every year. It's a mature market, but we are happy that we have been able to gain market share in this business in such a significant manner. So while we are very happy about the wins, and we would like to continue to keep winning in the market, this is certainly a great year that might not repeat as much going forward.

Clarifies that the significant international order wins in FY25, while positive, are not necessarily indicative of a new, higher baseline for annual wins, managing expectations for future growth from this segment.

Asked by Gopinath from PNR Investments

Low margins in FM despite higher solution business share Direct
The price point for an FM manpower, for example. Per unit is lower for cleaning services or FM services than it is for security. That's the way the industry is structured. ... It does. The gross margin of my FM businesses are lower than the gross margin on my security business. And when a lower gross margin business grows slower, then the percentage SG&A compared to percentage of revenue SG&A goes up, you lose operating leverage and that shows up on your EBITDA.

Explains the structural reasons behind lower FM margins compared to security, even with a higher share of solutions, highlighting industry dynamics and the impact of operating leverage on profitability.

Asked by Amit Kumar from Determined Investments

3 min read 6 chapters

Detailed narrative

Strong Q4 FY25 Performance Driven by All Segments

SIS Limited reported its highest-ever consolidated revenue of ₹3,428 crores in Q4 FY25, marking a 9.3% year-on-year growth. This performance was broad-based, with India Security revenue at ₹1,435 crores (+9.6% YoY), FM revenue at ₹587 crores (+12.9% YoY), and International Security revenue at ₹1,424 crores (+7.7% YoY), all achieving their highest-ever quarterly figures. The company's consolidated EBITDA also reached a record high of ₹165 crores, growing 10.1% YoY, with an EBITDA margin of 4.8%.

Significant Goodwill Impairment Impacts Reported PAT

While operating PAT for Q4 FY25 stood at ₹83 crores, representing a 52.9% YoY growth and a 2.4% margin, the reported PAT was a negative ₹223 crores. This was primarily due to a non-cash goodwill impairment charge of ₹306 crores taken for investments made in Henderson, SLV, Uniq, and ADIS. Management clarified that this impairment was a result of acquired businesses not performing as initially projected, particularly those acquired before COVID-19, and assured that no significant residual impairment is expected for the remaining ₹700 crores goodwill related to MSS, DTSS, and RHPL.

Improved Financial Health and Capital Structure

SIS demonstrated significant improvement in its financial health, with net debt reducing substantially to ₹429 crores from ₹889 crores in March 2024. This brought the net debt-to-EBITDA ratio down to 0.7x, the lowest level since June 2021. The company's Return on Capital Employed (ROCE) also improved to 14.3% from 12% in the previous quarter, and DSOs improved by 5 days to 65 days, driven by better collections. Management stated that equity fundraising is not a priority, given sufficient headroom for debt and ongoing negotiations to reduce interest rates.

Margin Expansion Across Segments and Future Outlook

The company's focus on margin improvement initiatives is yielding results, with India Security's EBITDA margin at 5.6% (up from 5.5% in Q4 FY24) and FM's EBITDA margin at 4.7% (up 80 bps YoY). International Security's EBITDA margin also recovered to 4% from 3.8% in Q3 FY25. Management expects India Security margins to gradually return to pre-COVID levels of 6% and FM margins to reach 5% in Q1 FY26. International Security is anticipated to operate within a 4-4.5% EBITDA margin band going forward.

International Business Secures Substantial New Contracts

The International Security business, particularly MSS, secured AUD 150 million in permanent recurring revenue wins in FY25, a result of 2-3 years of business development efforts. While acknowledging that such large wins may not repeat annually in the mature Australian market, management expressed satisfaction with gaining market share. The segment's EBITDA of ₹57.6 crores in Q4 FY25 represented an 8.6% QoQ growth, providing tailwinds for future performance.

Strategic Focus on Organic Growth and Core Businesses

SIS reiterated its commitment to organic growth, emphasizing that its expansion is not dependent on M&A, despite having a strong track record of over 15 acquisitions. The company will continue to operate within its core niche of security, cash logistics, and facility management, aiming to strengthen market share and service content. Management outlined key priorities for the financial year, including faster revenue growth, further margin improvement, better free cash generation, and higher return ratios, targeting upward movement from the current 15% ROCE.

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