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SIS Ltd

| Investor and Analyst Conference Call (November 25, 2025)

BULLISH SENTIMENT

Report Source

⬤25th Nov 25

Summary : SIS Limited anticipates significant positive impact from India's new Labor Codes, expecting market formalization, industry consolidation, and revenue growth due to its compliant business model.

Management Perspective positive : We genuinely believe that this is the GST moment for labor in India. ...increased compliances are actually not a headache. They are, I would say, a growth tailwind. We are India's largest fully compliant security facility management platform. ...we are structurally designed to be one of the biggest beneficiaries of this whole shift. ...I think our business model, our contracts and our experience give me reasonable confidence that higher minimum wages should be both a revenue and a margin kicker for SIS. ...Overall, I see this as an inflection point for our industry. Thank you very much.

Concall Report Analysis & Insights

Business Overview

  1. SIS Limited is a market leader in security, cash logistics, and facility management.
  2. The company operates as India's largest fully compliant security and facility management platform.
  3. SIS emphasizes its robust compliance framework, auditable books, and transparent accounting.
  4. They are not a temporary staffing company, focusing on mission-critical operations 24x7.

Future Growth Prospects

  1. New Labor Codes are expected to formalize India's labor market, shifting business to organized players.
  2. SIS is structurally designed to be a major beneficiary of this shift, seeing it as a growth tailwind.
  3. The codes will trigger organic industry consolidation, favoring large, compliant operators like SIS.
  4. Universalization of minimum wages and social security will increase SIS's revenue and margins.
  5. Increased social security coverage is a key government objective, expanding the formal workforce.

Management Insights

  1. The new Labor Codes are a 'GST moment for labor,' formalizing the workforce and accelerating the shift to organized players.
  2. SIS's contracts include full statutory pass-through clauses, ensuring cost increases are borne by clients.
  3. The company has been preparing for these labor reforms for years, investing in digitized systems and pan-India platforms.
  4. Management believes higher minimum wages will be both a revenue and margin kicker for SIS.
  5. The new codes will encourage customers to pay earlier, potentially reducing SIS's working capital requirements.

Signs of Skepticism

  1. Management's strong dismissal of client renegotiation risk, despite acknowledging clients always seek cost reduction.
  2. The timeline for full implementation of the codes and associated IT systems remains unknown.
  3. The exact impact on working capital reduction is theoretical and yet to be seen in practice.

Risk Factors

  1. Clients may attempt to renegotiate contracts due to increased costs from new social security clauses.
  2. Full implementation of the new Labor Codes, including IT systems and online filing, will take time.
  3. There will likely be 'teething troubles' and setbacks during the reform's rollout.
  4. Uncertainty exists regarding the exact timing and quantum of the national floor minimum wage notification.

Good To Know

  1. New Labor Codes were notified last Friday, November 22, 2025, and became effective in November 2025.
  2. Gratuity is now applicable to fixed-term employees after one year of service, down from five years.
  3. Minimum wage is now universalized, based on skill level, job location, and working conditions.
  4. A national floor minimum wage will be notified, preventing states from setting arbitrarily low wages.
  5. SIS already covers all employees under ESIC, with new provisions for preventive annual health checkups for those over 40.

Key Drivers

  1. Labor market formalization drives growth.
  2. Industry consolidation favors large players.
  3. Minimum wage hikes boost revenue.
  4. Reduced working capital improves cash.

Key Analyst Discussions

Competitive Environment

  1. Labor reforms will trigger organic consolidation, shifting market share from unorganized to organized players.
  2. SIS's current market share is 5-10% in India, with significant headroom to grow in the compliant segment.
  3. Organized players like SIS have a cost advantage due to full compliance and scale, unlike unorganized players.
  4. Clients prefer reliable, compliant partners over cheaper, non-compliant vendors under the new regime.

Market Trends & Consumer Behavior

  1. Clients increasingly seek specialist partners to manage large, distributed workforces under new compliance regimes.
  2. The universalization of minimum wages is a 'mega trend' transforming the labor market.
  3. Increased social security benefits and predictable wages may lead to higher employee retention across the sector.

Financial Highlights

  1. Gratuity changes will have negligible impact on SIS as costs are passed through to clients.
  2. Minimum wage increases are expected to boost both revenue and margins for SIS.
  3. Working capital cycle is not expected to increase; principal employer liability may encourage earlier client payments.
  4. SIS rebased PF calculations to 50% of gross pay pre-Corona, incurring no extra cost from new rules.

Product Composition

  1. SIS's operating, pricing, payment terms, and contracting models are identical for both security and facility management services.
  2. Facility management services are also priced as a percentage of overall cost, similar to security services.

Strategic Considerations

  1. SIS already caps overtime for employees at 40 hours per week using proprietary technology.
  2. Social security benefits are portable across employers, ensuring continuity for workers who change jobs.