Summary
SIS Limited - Q3 FY 2026 Earnings Call Summary Friday, January 30, 2026, 12:30 PM
Event Participants
Executives 4 Brajesh Kumar, R S Murali Krishna, Rituraj Sinha, Vineet Toshniwal
Analysts 6 Amit, Anant Mundra, Rahil, Rama Krishna, Shrinjana Mittal, Umang Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹4,185 crores | +24.5% YoY; All-time high quarterly revenue driven by strong execution and acquisition consolidation. |
| Operating EBITDA | ₹196 crores | +25.2% YoY; Reflects scalability of the operating model and focus on SG&A rationalization. |
| Operating EBITDA Margin | 4.5% | Stable YoY; India Security organic margins remained at 5.5% while International saw sequential improvement. |
| Operating PAT | ₹100.8 crores | Flat YoY; Significant improvement over previous quarter; note that Q3 FY25 was high due to tax refunds. |
| Earnings Per Share (EPS) | ₹7.2 | Annualized run rate of ~₹30; significant jump from previous fiscal year. |
| ROCE | 15.2% | +320 bps YoY; Continued improvement following last year’s balance sheet clean-up and goodwill charges. |
| DSO | 67 days | -2 days QoQ; Management maintaining tight control over collections and billing cycles. |
| Net Debt / EBITDA | 1.1x - 1.2x | Management noted debt remains within historical comfort levels after excluding lease charges. |
Geographic & Segment Commentary
- Security Solutions (India): Reported highest-ever revenue of ₹1,898 crores (+33.7% YoY). Organic growth stood at 11.2% while the AP Securitas (APS) acquisition contributed to the scale; organic margins held steady at 5.5%.
- International Security: Recorded revenue of ₹1,670 crores (+20.8% YoY) with margins improving to 3.8%. Growth was robust despite labor market tightness in certain geographies requiring higher overtime payouts for specialized clearances.
- Facility Management (FM): Achieved revenue of ₹636 crores (+10.3% YoY) with significant margin expansion of 80 bps to 5.4%. Segment EBITDA grew 29.1% YoY to ₹34.3 crores, marking a record performance.
Company-Specific & Strategic Commentary
- Labor Code Provision: The company took a conservative one-time exceptional charge of ₹290 crores for prior-period gratuity and leave liabilities based on new wage definitions. Management intends to recover these costs from clients once model codes are notified, treatining future recoveries as P&L upsides.
- AP Securitas (APS) Integration: APS currently operates at a 4% EBITDA margin; SIS has a clear roadmap to uplift this to SIS-benchmark levels (~5.5%) through SG&A and sales rationalization.
- Shareholder Returns: Announced a dividend of ₹7 per share, shifting from a pure buyback strategy based on market feedback. Management indicated potential for a buyback in the second half of the fiscal year.
- Technology Initiatives: “VProtect” (alarm monitoring) and “One SIS” have both reached monthly revenue run rates of ~₹10 crores, with VProtect yielding approximately 15% EBITDA margins.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth (Consol) | ~12% Sustainable CAGR | India Security expected at 1.5x GDP (~11-12%); FM at 12.5-15%; International at ~7.5%. |
| Margin Profile | Return to Pre-COVID Levels | Aspiration to return to 6% in India Security/FM and 4.5% in International segments. |
| Return Ratios | Upward Trajectory | Management expects ROCE to continue moving upward from the current 15.2% threshold. |
| ELI Benefit | Significant PAT flow-through | Expected to be a top-tier beneficiary of Employment-Linked Incentives (ELI) starting FY26. |
Risks & Constraints
| Risk | Context |
|---|---|
| Labor Code Volatility | Management anticipates short-term margin volatility during the period when contracts are renegotiated and fresh invoices are processed under new codes. |
| International Labor Tightness | High unemployment rates or clearance requirements in certain international sites (Government/Defense) lead to increased overtime costs, temporarily depressing margins. |
| Regulatory Recovery | While the ₹290 crore provision is taken, the exact percentage of recovery from principal employers remains a variable until model rules are fully operational. |
Q&A Highlights
Labor Code Provisioning
- Question: What is the rationale for the ₹290 crore charge and expected recovery? (Amit)
- Answer: It is a conservative one-off for prior periods due to changed wage definitions. SIS chose to charge the full liability now rather than wait for client recoveries. Most clients are expected to comply as these are statutory pass-throughs (Rituraj Sinha).
Margin Roadmap
- Question: How will margins evolve given acquisition dilution and labor tightness? (Vishal Chandiramani)
- Answer: India organic margins are stable at 5.5%. The group goal is to return to pre-COVID levels (6% for India segments). Structural margins are improving as higher-margin India business outpaces International growth (Rituraj Sinha).
International Segment Performance
- Question: Why is the International margin lower despite high government/defense exposure? (Umang Shah)
- Answer: Wage increases are fully passed through, but sites requiring high security clearances currently face labor tightness, leading to higher overtime costs which impact margins (Murali Krishna).
Employment-Linked Incentives (ELI)
- Question: What is the expected impact of the new ELI scheme? (Anant Mundra)
- Answer: SIS is likely to be a top-tier beneficiary due to large-scale blue-collar hiring. Benefits will flow directly to PAT as there are no associated costs, though exact math awaits the first government payout (Rituraj Sinha).
Key Takeaway
SIS Limited characterized Q3 FY26 as a milestone “rebound” quarter, crossing the ₹4,000 crore quarterly revenue mark for the first time with 24.5% YoY growth. Despite a massive ₹290 crore one-time conservative provision for new Labor Codes, the underlying business remains robust with India Security and Facility Management both seeing record revenues and stable-to-improving margins. Strategically, the company is successfully integrating the AP Securitas acquisition, which contributes ₹12.5 crore in quarterly EBITDA, while its technology-led ventures (VProtect/One SIS) have achieved break-even scale. Management is steering the business back toward pre-COVID margin levels of 6% in India, supported by a structural shift toward the higher-margin domestic market. With ROCE now exceeding 15% and a healthy net debt/EBITDA ratio of 1.1x, SIS is well-positioned to leverage labor reforms as a long-term consolidation tailwind while maintaining a balanced shareholder return policy through dividends and buybacks.
Want more insights like this?
Subscribe to get deep dives delivered to your inbox.
More Earnings Summaries
Explore more Q3 FY26 earnings call analyses: