SIS Limited (NSE: SIS) Q3 2025 Earnings Call dated Jan. 29, 2025
Corporate Participants:
Vineet Toshniwal — President, M&A and Investor Relations
Brajesh Kumar — Chief Financial Officer
Rituraj Kishore Sinha — Group Managing Director
R S Murali Krishna — President
Analysts:
Yash Darak — Analyst
Narendra — Analyst
Chirag — Analyst
Aditya — Analyst
Kaustav Bubna — Analyst
Shivam Saxena — Analyst
Amit Mehendale — Analyst
Amit Sisodiya — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to SIS Limited Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr Vineet Toshniwal, President, M&A and Investor Relations from SIS Limited. Thank you, and over to you, sir.
Vineet Toshniwal — President, M&A and Investor Relations
Thank you very much. A good afternoon to everyone and I welcome you to the Q3 FY ’25 earnings call, that’s why. I hope you’ve had a look at the results which were uploaded yesterday and the earnings note on the stock exchange and the company website as well.
Now let me start with some highlights. We’ve had a fantastic quarter. As you can see from the results, we’ve witnessed growth across all three segments of our business. On a consolidated basis, we have recorded a revenue of INR3,363 crores, which is 9.4% on a year-on-year basis, highest-ever quarterly revenue. India Security has reported revenue of INR1,420 crores, which is again a 7.7% growth on a year-on-year basis. FM business has recorded a very robust growth, a quarterly revenue of INR576 crores, which is 9.7% growth on a year-on-year basis. International security has also recorded its highest-ever quarterly revenue of INR1,383 crores, it’s a growth of 11.1% on a year-on-year basis. So overall, all-round growth in all the three segments.
Now let’s come to the earnings. It’s been our constant endeavor to improve the margin profile across all three business segments as we’ve been pointing out over the last few quarters. Our focus is on margin improvement and it’s showing results on a gradual basis. We focused on margin both in terms of customer contracts as well as rationalizing the SG&A costs. So on a consolidated basis, the EBITDA grew by 3.6% on a year-on-year basis. Now it’s INR157 crores and that results in EBITDA margin of 4.7%, which is up from 4.4% from the previous quarter. India Security has shown stable EBITDA margin of 5.5%, which has been the case for last couple of quarters. Facility management, we’ve been continuously guiding that our margins will be gradually improving and it is showing results. We have an EBITDA of 4.6% now, which is 30 basis-points higher on a year-on-year basis, gradually improving. Additionally, the segment has reported highest-ever quarterly EBITDA of INR26.5 crores, which is a 17.9 — almost 18% growth on a year-on-year basis.
Now coming to international security business, where the last few quarters were of concern, I’m happy to report that the EBITDA margin for Q3 FY ’25 was 3.8%. It has also improved what was 3.3% in Q2 FY ’25, which is driven by lot of new wins and high seasonal businesses, which has been traditionally the case in the last quarter. EBITDA now is on a path to recovery. From Q3 FY ’25, it is now at INR53 crores, 19.5% growth on a quarter-on-quarter basis. Now coming to operational efficiency, which is the net-debt and the DSO, we’re very happy to report that we have significantly reduced our net-debt.
It’s down to INR225 crores, down by INR225 crores to INR632 crores net-debt, what was INR857 crores in the previous quarter. This brings the net-debt to EBITDA ratio down to 1.07 from 1.47, which was in the last quarter. This is the lowest level in the last three years. I would like to emphasize. Our OCF to EBITDA conversion remains robust. It’s at 163%. Now we’ve been working on efficient working capital management, bringing down DSOs. DSOs have improved by four days down to 69 days from last December, highlighting our efficient working capital management and this has released INR150 crore of working capital.
Now let’s talk about our bank outsourcing business. We’re again very happy to report that the business has achieved highest-ever quarterly revenue of INR182 crores, which translates to a growth of 12% on a year-on-year basis. Cash business expanded EBITDA by 15.5%, recording 17.1% as the EBITDA margin, PAT of INR13 crores, it’s a slight dip due to loss of benefits associated with carryforward losses available in Q3 FY ’24. Q3 FY ’25 PAT was also impacted by a lower ATJ benefits. So overall cash business momentum is on-track and we’ve been emphasizing — we are trying to derisk our business from ATMs and the non-ATM business now contributes 84% of our top-line, which was 80% in the previous quarter, thereby reducing our dependence further on ATMs. Our efforts to unlock shareholders’ value in cash are underway, as we reported in the last quarters also.
Now with this, I would like to take this opportunity to wish you all a great year and let me now hand over the call to other participants also with me. There is Raj, Group Managing Director; Mr Brajesh, who is our Chief Financial Officer; and Mr RS Modli Krishna, he is President SIS International and we are open for Q&A now. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wished to ask a question may press star and one on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handsets only while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. I repeat, you may press star and want to ask a question. We have our first question from the line of Yash from RSPN Ventures. Please go-ahead.
Yash Darak
Am I audible?
Operator
Yes, sir. Please go-ahead with the questions.
Yash Darak
We have the first question with regards to other income. The other income is inflated or not. If you could please provide a clear breakup of the other income by item wise.
Brajesh Kumar
Hello,, this is Prajesh, sir. The breakup of other income is basically there are two major components. One is interest from fixed deposit and another is this quarter we have received a significant amount of IT refund and we have received a on IT refund of INR12.5 crore.
Yash Darak
And there was a line-item in regards to rupee denominated bond which were sort of given to Australian company, Australian subsidiary. If you could give some — provide some color on that.
Brajesh Kumar
Actually, that RDB loan is sitting in the books of Indian company — its parent company SIS. This RDB loan has been taken, I think in 2018. So whenever there is a fluctuation in exchange rate, we account for that in the PAT. So that is also resulting in some change in the PAT moment and the amount is across INR6 crore.
Yash Darak
Okay, thanks. And my next question will be with regards to this. So in an analyst meet, Virit sir had mentioned that we were going to probably sell some international businesses. So are we still looking to sell these international businesses or how is it going?
Vineet Toshniwal
Sorry, is that repeat again, what was the question? Selling the…
Yash Darak
Selling or demerging the international business in an analyst meet, I think we are discussing with regards to this that the international businesses were not probably doing so well. So are you going to keep these international businesses or are you planning to sell them?
Vineet Toshniwal
No, I don’t think we have — we have any made any specific, you know guidance with regard to this.
Yash Darak
Okay, okay.
Rituraj Kishore Sinha
Hi, this is I just clarify the international businesses are an integral part of SIS’s future plans. And as you see, the results have also been good. But there is no plan to sell any part of the international business.
Yash Darak
Okay. Okay, sir. Thank you.
Operator
Thank you. A reminder to all participants, if you wish to ask a question, you may press star and one on your touchstone telephone. We have our next question from the line of Narendra from RoboCapital. Please go-ahead.
Narendra
Sir, am I audible? Hello.
Operator
Yes.
Narendra
Yeah. Thanks for the opportunity. Sir, my first question is regarding growth, right? So do we expect the same kind of growth say 10% on a consolidated level going ahead or do we see any improvement in the coming quarters or years, next couple of years? Yeah.
Rituraj Kishore Sinha
So SIS believes that there is opportunity to grow at least 2x GDP this type of business. And if you see our historical results, we have also since listing our CAGR for revenue is more than 15%. So okay. Is 10% good enough as per our estimates? The answer is no. We believe that we can grow faster. And how much has SIS been growing in the past? Last eight years or seven years since listing the reported results will give you good direction. It’s also there in the earnings note. Our Q-on-Q revenue growth is roughly 15% and Q-on-Q profit EBITDA growth is roughly 16% since listing. So that’s where we want to bring the business back at.
If you look at this quarter also, compared to Q2, both international business and FM business have reported a 4% growth, which is in that ballpark range in the 15% plus ballpark range. Security in India has reported 2.5% growth compared to previous quarter. That is largely because some major contracts that were due to start in December got deferred in January. So having said that, you must also bear in mind that in our line of work-in India, growth is a function of two variables: volume growth and price growth. So volume growth we are reasonably satisfied with. Price growth is directly linked to minimum wage increase that the government determines. That is not in our hand.
For the last few years, minimum wage growth in India has during COVID and post-COVID has been rather subdued. We believe that with the upcoming labor code implementation, which the government is talking about, there may be change in that approach. Any change in labor code or minimum wage hike will have a direct corresponding impact on the business overall. Sorry for the long answer, but I tried to give you perspective overall.
Narendra
No, no, that was very helpful, sir. So to attain that 15% is the wage hike necessary for attaining that 15% or once the wage hike comes, the growth would be more than a 15% CAGR over the long-term?
Rituraj Kishore Sinha
Well, historically pre-COVID, India on average, we were seeing us minimum wage increase of roughly 8% to 9%. You know, I’m talking about 2010 to 2020. Yeah. Post COVID, let’s talk about the most recent year, the nine months of this financial year. So the minimum wage increase is closer to 3%, the remainder comes from volume growth.
Narendra
Okay. Okay.
Rituraj Kishore Sinha
So you can do the math yourself. If this goes back anywhere near the pre-COVID levels of wage increase, then obviously the growth projections will change because every single contract of SIS that is minimum wage linked and any increase in minimum wage is pro-rata pass-through without negotiation. So it’s just a matter of changing the invoice and attaching the latest copy of the notification.
Narendra
Okay. Okay. Okay. Understood, sir. And my second question is, do we expect any further write-offs in our receivables or goodwill going ahead and when can we — when should we expect such kind of write-offs, if any?
Rituraj Kishore Sinha
Thank you. I think quarter-to-quarter the audit committee with the auditors reviews the status of all the aspects and takes a view. As of right now, there is no clear view or direction on that matter. So should this discussion come up, should the auditors feel that there is a requirement or the audit committee agrees, obviously, we will notify. But as of now, there is nothing.
Narendra
Okay. Okay. Understood, sir. And the margins, we are at the 4.5%, 5%, 5% mark that we wanted to reach, if I’m not wrong. So is — are we happy with these kind of margins or are we expecting further improvement coming up?
Rituraj Kishore Sinha
No, I think I have stated this repeatedly over calls and with — in interactions with investors and analysts. And SIS believes that as a market-leader, we have the pricing power to get to pre-COVID level of profitability. Pre-COVID SIS security businesses in India were at and above 6% EBITDA mark. The FM business also was at and above 6% mark. So the international business was 4.5%. So we believe that there is still some headroom before we can say that we are back at that level and that is what we are striving for.
Narendra
Okay, sir. So what would be the lever for that kind of growth and EBITDA margins, if you could explain?
Rituraj Kishore Sinha
Well, it’s — you know, these businesses are like a bucket of contracts, right? So your direct cost — your direct contribution, what we call gross margin is a function of the quality of contracts we carry in that bucket. So in the middle, we had taken on certain contracts, which were actually diluting the overall margin profile of the business. Some of those contracts have exited in security, so you see it at 5.5%. So the same thing happened in FM, it took a little bit longer because there were government contracts and we could not exit contracts with railways, et-cetera at the risk of getting blacklisted by government.
So we have taken time to come out of these contracts, large now these contracts are out. We are also more judicious about taking on new contracts, which add incrementally definitely not valued the margin profile of the overall market. So that’s one lever that’s working. Second, as the revenue grows, obviously, the SG&A will show-up operating leverage. And that is rather evident as growth becomes more rapid, you will see that the SG&A cost as a percentage obviously will decline. So that’s happening. And the third and more important thing that we are doing is that as we prepare for our Vision 30, we have reset the scale of branches.
So the revenue the number of contracts or the number of employees we managed through a single branch, we are trying to increase that capacity by 1.3x. So same branch, let’s say, ballpark used to handle 800 odd people, 900 people who will be able to manage 12, 1,300 people, a branch would be — which was managing 40, 50 accounts will be doing 100 plus accounts. The revenue-wise average size of branch, which was sub INR2 crores, we are hoping that we can push it towards INR3 crore-plus per branch. So these things are happening through complete overall of our IT systems.
So SIS implemented and complete self-developed homegrown proprietary attendance system, digital attendance system called MySIS, which is now rolled-out to major part of the business that cuts a lot of back-office time that increases efficiency hugely. We are already in stage of again implementing a second IT software called SIS Core, which is a contract management platform, again built for purpose, which will help scaling. So we are in the process of rolling out the next version of SalesMax, again a proprietary platform, which is now synced to the upcoming labor reforms so there’s a lot of things that are happening at the back-end over the last almost four quarters or more, which are approaching fruition, so that will also add to the operating leverage.
Narendra
Okay. Great, sir. Thanks for that answer, sir. So the capex for all this IT — IT infra that you are spending on, is it over or are we looking at significantly.
Rituraj Kishore Sinha
Mix? We don’t capitalize these IT expenses. These are all developmental expenses and they are all revenue expensed.
Narendra
Okay. Okay, great, sir. Thank you so much and all the best. I’ll fall-back in queue if I have any questions. Yeah.
Operator
Thank you. We have our next question from the line of Chirag from Capital. Please go-ahead.
Chirag
Yes, thank you for the opportunity. First, I would like to take some questions which were taken from the earlier participants. One was when you have said that the bifurcation of other income was related to in interest on fixed deposit interest on refunds from IT and some interest on IT refunds. Could you bifurcate what was the — what was the chunk from IT refund and interest from IT refund?
Brajesh Kumar
So in India in last quarter we have received the IT refund of approx INR90 crore. In international, we received the IT report of INR25 crores. And altogether, the interest amount on these IT refund there for last quarter was INR12.5 crores, which has been accounted for in last quarter, which has improved our PAT.
Chirag
Fair. And second thing, as you have mentioned that generally our industry grow at 2x times of GDP. However, based on my understanding and correct me if I’m wrong, based on few previous quarters, it was said that the growth of the industry has declined and it is not 2x as of GDP as a current trend. So just wanted to get a clarification. Is that — is two-way.
Rituraj Kishore Sinha
Help your understanding. I said SIS, is satisfied with 2x GDP growth. Okay. And I pointed out that for the last many quarters since listing, we have maintained an average revenue growth or a compounded annual revenue growth of close to 15%. So that is for SIS, that is what we want to achieve. Unless we grow a flip faster than industry, we don’t pick-up market-share.
Chirag
Fair point, fair point. And sir, as you said that it is a mix of volume and value growth where value growth is exactly as you said Pro data pass-on. I wanted some understanding or color on the volume growth. I’m able to see in last eight quarters, average addition on employees and security in India has been roughly around INR8,000 per quarter addition. It can be going low-to 4,000 and it can come back to 7,000 again, which was in the recent quarter. Any color on this that how are you panning out to increase this 8,000 addition increasing to 10 15 based on the demand? Second was related to facility management only. In last eight quarters, employees in facility management is around INR82,300 crore INR400 crores only. There was a depth rising back again. So could you give some color on the volume side where because we are employee-driven business, if this grows, I would definitely see growth in my top-line. So could you give some color on this?
Rituraj Kishore Sinha
I think my friend, you’re using the wrong yardstick to compute for forecast growth for SIS. Please note that SI is not a staffing company. If you’re trying to establish correlation between headcount and revenue, your numbers might not add-up. That is because 30% of revenues in FM, for example, are outcome-based contracts per square foot-based pricing. They are not really headcount linked. In security as well, take, for example, we protect revenue growth. We protect now, you know, is a I’d say ballpark 100 crore INR120 crore business but it generates close to 15% to 20% EBITDA. So now for that 15% 20% EBITDA of INR100 crore, let’s say, ballpark INR20 crores that flows through into a PL every year, INR5 crores every quarter, there is no headcount addition, zero headcount addition because protect does not deal with manpower it has alarms monitoring and response services. So my advice to you would be that the right metric to follow SIS growth is basically revenue per branch that we record and it is not a staffing-like situation.
Chirag
Thank you so much. Thank you so much for this clarification. I’ll definitely incorporate that in my understanding. Just wanted, as you have spoken about VPROTEC, what was the quarterly installations for VPROTECT in this quarter?
Rituraj Kishore Sinha
Quarterly installations for VPROTEC this quarter would be, I’d say, 1,000 odd connections.
Chirag
And it has been — it has been the same run-rate since last few quarters, right, if I’m not wrong?
Rituraj Kishore Sinha
No, no, no. It varies a lot. In the beginning of the year, it was almost 3,000 connections a quarter, then it went down. When they book a new order, they will — they — in a single month, they have capacity to install more than 2,000 connections. So that’s just protect, but that — I’m not talking about only. There’s a lot of other contracts that SIS does which have a component, like there is a caterpillar right now or there is a JCB, these contracts have a very large component of Vedanta and udairport where we are providing drones, we are providing access control equipment, we are providing vehicles, we are providing a lot of other things which are not manpower, which also gets booked in revenue.
So there is — there is a difference, my friend between staffing business, service business, solutioning business and route-based solution — solution business. Just like in a cash logistics company, you would use headcount to compute number of revenue growth or whatever in a cash logistics environment. So it varies. So a staffing company headcount is the right metric. In a service company, it’s headcount plus in a solution company it becomes headcount plus solutions sold, equipment sold per square-foot outcome-based contracts, etc. And then a route-based solution company like Cash Logistics or, the metrics are stops per route.
Chirag
Thank you. Thank you for this clarification. It was very helpful for me to understand it a little better. My next question is related to in your initial commentary you have mentioned that international business has some seasonal — better business in Q3. I would like to understand what is the seasonal effect in Q3 and the current margin levels of 3.8 percentage. Is it — I believe if that is seasonal benefit, it would be back to 3.5 percentage. Is it the — is it the understanding correct?
Rituraj Kishore Sinha
This is clearly, but I’d like to answer that.
R S Murali Krishna
Sure. Thank you this is Krishnan here. Thanks,. Thanks for the question. So in the Southern Hemisphere in Australia and New Zealand, there are quite a bit of events that do happen around the summer seasons and also around the holiday periods of December and Jan, right? So I have Christmas and New Year. What really happens is many of the businesses has some one-off things with seasonal things, not one-off, but which keep recurring every year. For instance, we have increased response on our monitoring site. We have increased response runs that we do. We do have security requirements for a lot of events like, let’s say, right now as we see Melbourne couples happening, we had the Australian Open that’s happening right now. And also in New Zealand, there are a lot of events that happen, including cricket matches and concerts and so on and so forth as well.
So these are usual businesses for us. We are pretty much into these businesses and our margins are incorporated with a few losses in few months and a few profits in a few months and so on and so forth. So we continue to carry these things. So the revenue increases substantially during this period of this quarter because of these events. But when it comes to margin, these are regular margin events, some of them are good paying, some of them are not as much. So they even out. So the margin-wise, it’s a stable margin. Revenue, we usually see an uptick in the quarter three, in any year.
Chirag
Sure. Fair point. Thank you for the clarification. My next question is related to cash logistics business. I was just looking at the P&L that you gave in your earnings report. I’m able to see over the quarters our EBITDA run-rate has shot up on an absolute basis from INR20 crore to INR24 crores to almost INR30 crores plus now. I just wanted to know, however, our PAT at this moment is still in that same range of INR1213 crores. So could you give some color on this
Rituraj Kishore Sinha
I think
Chirag
Hello, yes, am I audible?
Rituraj Kishore Sinha
Yeah, you are asking about the cash logistics business, right?
Chirag
Yes.
Rituraj Kishore Sinha
So there have been some adjustments in the cash logistics business, which are one-off, which is the reason why you see this discrepancy. We are actually in the process also of bringing on a limited audit from of one of the big five and they will be coming and taking over the audit for this company as it moves forward. So in that process, there have been some catch-up adjustments, et-cetera, which, which will start showing up this quarter and next quarter. But otherwise, on a growth basis, the outlook for the cash business remains very strong. The margin profile of this business continues to be in the range of, 17% 18% ballpark and we believe that 8% is the right PAT level that you should work with going-forward barring these quarterly type of movements. I think these are the three numbers and obviously the return profile of the business is upwards of 30%.
Brajesh Kumar
So, one more point I would like to add about the low movement impact is mainly because earlier we had a carry-forward loss. So there were zero. Now that has been set-off against the — with the profit which we have earned. So the tax leverage, that’s why the PAT remains the same. So benefit of carry-forward loss is not there in this quarter, that is why — and that has been mentioned in the earning note also, if you can refer the section which talk about the historical financial there also.
Chirag
Sure. Thank you. Thank you for this clarification. Just to stay on cash-flow — cash flows business. As you said that the DRHP filing is in-progress, is there any timeline for the same that we could keep in our mind that in a year or in a two-year timeframe that it can come?
Rituraj Kishore Sinha
Hopefully sooner, but we would not be able to comment on future events.
Chirag
Just last question from my side. You have mentioned in your earnings report the cash-flow conversion of your different — your — all the — all the segments. However, I’m able to see that the cash-flow conversion in security business, international and domestic has been as per expectation of 100% plus. However, in — how in facility management it was well below the expectation. So what is the working capital that is getting stuck? Is it related to receivables, which is leading to lower cash conversion at this moment, which will get converted with time? Is it the case?
Brajesh Kumar
Yeah. Compared to Security India and the Security International, the improvement in the working capital, not that per dividend in because the collection is not as good as in other two segments. But in Q4, we are expecting that the liquid improvement, whatever information we had. So in Q4, you might see that there is a similar kind of OCF to EBITDA percentage for also. One more thing is that there is no IT refund in FST in last quarter and in security and international activity in India, both places there was an IT refund. So that has also impacted this better to EBITDA.
Rituraj Kishore Sinha
So just to just to supplement that response, I think for everybody to know, I think what SIF’s management is shooting for is 2x GDP growth, which is down about 15%, a return profile of higher than 15% and OCF to EBITDA in the range of 60% to 65%. So what you see this quarter is an exceptional OCF to EBITDA in Security and International, where the OCF to EBITDA is higher than 100%. This is not likely every quarter. This is not normal. This is a one-off event. What we can deliver as a fast-growing company is 60% to 65%. If you see historically, over the last seven years, we have always delivered on average more than 50%. Now as our base gets bigger, our growth is more subdued. We believe that this can move-up to 60% plus. I hope that clarifies.
Chirag
Right. Just to squeeze in last one. You have said that the minimum wage increase for the year was around 3 percentage. And I missed the part where you said that pre-COVID, what was the average minimum wage increase?
Rituraj Kishore Sinha
8% to 9% between 2010 and 2020 pre-COVID.
Chirag
Thanks. Thank you for — thank you for your time. Thank you for the answers.
Operator
Thank you. The next question is from the line, Aditya from Share India Securities. Please go-ahead.
Aditya
Hi, thanks for the opportunity. A great set of numbers on across-the-board. I had a couple of questions. One was regard to the international business, so we’ve done exceptionally well this quarter in terms of revenue growth. So structurally, can you just guide me into how things will pan-out in the next two or 3/4 in terms of strategically, how do we take EBITDA margins from the current level to say a 100 to 150 basis-points higher, what our long-term target is?
R S Murali Krishna
This is here. I will answer that question. The last quarter and the quarter before that is the quarter that just ended and the quarter before we have had some phenomenal wins which we have reported in our reports as well. There was one win, a customer called Sydney Trains, which is upwards of 30 million, which is a sizable win for us. And we have also expanded our presence in defense segment, which will start kicking-in not immediately, but maybe a few quarters down the line. So revenue-wise, I think we are fairly well-positioned. We have done a lot of groundwork with respect to our business developments and reorganizing our approach to the customers and whatnot. So that is — which we have done in the last two to three years that is starting to pay results, pay dividends right now and we are seeing them coming every quarter on.
So we are positioned very, very well with respect to the revenues. As put up a little while ago, our international business, even pre-COVID levels, the margins were about 4.5%. And that’s the more realistic number that one should consider as a target that should be accomplished. Now we have — currently we are somewhere close to 4% and the change of — between here and there is largely due to the labor market conditions, very, very tight labor market conditions that we see in Australia and New Zealand as well and in Singapore, all three markets together. So the labor market started to tighten post COVID.
We’ve been reporting that every quarter. In that the unemployment rate continues to remain at record-low levels, a sub 3.5% and — and that’s what is affecting us at this point in time. So we have expanded our efforts, our focused efforts on recruitment and retention and so on. So while we are working towards getting there, again, there is that bit of market thing as well, which we need to look out for. As and when the market eases, we will surely kind of see the wave of moving back up that number.
Aditya
Yes. Right, right. And just on the international front, how, how are we doing in Singapore? How is the Henderson business going, if you could substantiate with some numbers?
R S Murali Krishna
Right. If you look at the history of Henderson since COVID, the COVID had severely affected the business. Our immediate attention was to kind of get of get it to a self-sustainable level, which is — which I think I’m very confident to say that we have achieved those levels at this point in time. So we are self-sustainable. And from here, there will be a new phase of taking the business to its rightful place, which was pre-COVID, the way it was pre-COVID. But again, in Singapore, there are structural shifts that are happening to the labor market. You could look for what is called as a progressive wage model, which where it is the concept of a minimum wage here in India, which is fairly similar, but slightly different. The Singapore government publishes those rates fairly in advance and that there are some structural shifts in those. So we have to maneuver those and you also have to look at how the competition maneuvers lows and so on and so forth. So there is a bit of work to do to be able to grow from here to its rightful position, but I can confidently say that we have come to a position where we are self-sustainable.
Aditya
All right, right. And lastly, I wanted to get some sense on the new tech business, the business and the likes of that. So there are two schools of thought. One is that eventually when and the likes of those high-tech business grow and they become a sizable scale. Obviously, is very small currently, but over a period of, say, three to five years, it grows higher. Could that be a cannibalization on your existing business or is it it more of a complement rather than a substitute? Because there are two schools of thought that if your V protect or the likes of that comes in, obviously, your — your manpower goes down. So how do we look at it from a strategic perspective, say, five years later, three to five years later?
R S Murali Krishna
Well, that’s a great question. And I think at SIS, we don’t see technology as a threat. We see technology as an accelerator. So we are doing two things. One, we convert our services into solutions using tech. So you know, greater use of cameras, greater use of apps, greater use of AI, video analytics, all of that you know is happening at one stage. The second area you know this is what you turn this complementary you know you know moving from service to solutions where you using technology in a complementary fashion. The second situation is where the manpower is being replaced by tech you called it cannibalising I see it as a part of industry evolution so there is a lot of services that we offer like we protect, where we are effectively cannibalizing the static guard base or the evolving the customer demand as we see it.
So for example, there was a time if I take you back 15, 20 years, every telecom tower used to have guards below it. Today they are none. You know it’s completely done by electronic gadgets every ATM in the country had guards. Today, a large number of ATMs don’t have guards. So this is market evolution. So I believe that security manpower will stay where security is critical to the business operation. In a sugar cane factory where you have to get buggies to line-up for three kilometers in the peak winter for crushing season, electronics cannot do that for you. You’ll need manpower in front of a cement in a large industry steel output mine definitely. But I am a firm believer that there is no reason why there should be a guard stand standing outside a restaurant to open the door and close the door. So that is not critical to the operation of a restaurant. And such use of manpower is and should get eliminated.
So if we can do that using tech, if we can — you know, instead of the guard sleeping outside the bank branch or the ATM at night, if you can remove the guard and use to solve that problem or when the restaurant closes down in the evening where nobody is supposed to enter or exit, if we can use that — do that with, why do you put in the first-place? So we don’t see that as cannibalizing. We see that as evolving with the market. And as a market-leader, it’s our job to help the customer achieve its goals in the lowest-cost fashion in the most effective fashion, right? So you may see it as cannibalizing, we see it as evolution. And if somebody is going to cannibalise the it better be the market-leader itself, which is SIS in this case.
Aditya
That was very helpful you.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to take questions from all participants in the conference, please restrict your questions to only two questions per participant. Should you have a follow-up questions, we request you to rejoin the queue. We have our next question from the line of Kosta Bugna from BMSPL Capital. Please go-ahead.
Kaustav Bubna
Yeah, hi. So I have two questions. The first question is, could you give me some data points to explain the market opportunity in the international markets that SIS is operating in for security solutions.
R S Murali Krishna
Good utili Krishna here. I’m sorry, could you repeat that question so that I it back.
Kaustav Bubna
Yeah, I wanted some data points to explain the market opportunity, the total addressable market and the upcoming market opportunity for the next few years in the international markets that SIS is operating in for security solutions?
R S Murali Krishna
Sure. Thank you, sir. Nikraj, would you like to take that?
Rituraj Kishore Sinha
Yeah. I think you need to get a macro view of the security industry globally, but I think it’s a very good question because people don’t want to understand the business at that level generally. So security globally is a 200 billion-plus industry out of this 200 billion-plus industries, 60% continues to be manpower-centric services. All electronics, all tech included, 60% is still manpower centric. If you look at this 60% the manpower-centric business, you will see that the 10 largest players in the world barring three, seven of them don’t have a significant presence in Asia-PAC region. That is so because roughly 65% of the global industry still in terms of revenue comes from Americas and Western Europe. So seven of the top-10 players focus on those markets.
Asia-Pac, which is which was in 20 years back, the smallest part of the global security market is now the fastest-growing and will become the second-largest market for security business globally. So in — at SIS, we believe that India is going to be the — the big growth engine of that market because of the size of the economy itself. If India is to become a 5 trillion, 7 trillion, it trillion economy, you know the security industry in India also will become a very large and significant market. India also has an advantage in this region of historically business-wise export of manpower wise various ways. So we have therefore looked at building an international business that is focused on Asia-Pacific region.
First, we operate three markets, one of Australia, which is the second-largest market in Asia-Pac. New Zealand, which is an adjacent market, it’s like an extension of Australia and it made no sense to operate Australia and avoid New Zealand. Other than that, Singapore is a strategic market because we wanted even as it’s not very large in revenue size or quantum of opportunity, it is just the hub for regional contracts, regional tenders when Amazon does a regional security contract, it originates — the RFP originates from Singapore. Same for a lot of other manufacturing companies, a lot of other companies when they do the Asia-Pac contracts because the regional headquarters are in Singapore, Singapore becomes a very important market. So we enter this market.
So we believe that five years forward, by 2030, two things are extremely likely to happen. Number-one, Asia-PAC will be a clear number two in terms of size of market and it will also be the fastest-growing part of the global security industry. In geography terms. And the second thing that is going to happen is that this market is also advancing more rapidly towards solutioning because of the nature proximity to China and the nature of technology, the cost-effectiveness of technology. So it is not only growing very rapidly in-market growth terms, but it’s also growing very rapidly in knowledge terms. It’s leapfrogging. So I believe that this market becomes extremely important.
If you look at standalone, Australia is roughly a $1.2 billion from $1.8 billion to $2.5 billion security market and our businesses in Australia account for almost 20% 25% of that market. So we have a very strong market position in Australia. We are not just number-one, we are greater than 20% market-share. Similarly, in New Zealand, we are in the top-five in Singapore, we are in the top-five, but obviously the market opportunity is much smaller. So you might get a $50 million to $100 million business in New Zealand and a $50 million to $100 million business in Singapore. But I think there’s a lot that we are learning in these markets that gets implemented back home in India. Like for example, right now we are putting the new Noidai International Airport that is in news or in recent weeks, we have been working on pitching to the Noida Airport Authority about our aviation security experience in Australia and the best practices being imported to India should we get the opportunity in Noida International Airport.
So there’s a lot of transfer of knowledge and technology that happens both ways. The systems we develop in India, for example, our video analytics platform, the machine-learning that we have done for facial recognition and ANPR and a lot of those things, they are being commoditized and being sold international markets for dollar-to-dollar rates. So there’s a lot of back-and-forth, but I believe that is the future of the security industry globally. SIS is amongst the top-10 players in global security industry today, but it is also the largest player in the global security industry in APAC. So APAC is a market that we can clearly say that with roughly more than $1 billion of revenue Aussie dollar terms, we are very well-positioned for this key market.
Kaustav Bubna
Excellent. Thank you so much for the detailed answer. Just one last quick question. So just specific to the India market, what is — and for Security solutions, what is SIS’s exposure to the residential space because you have already in MMR region, just as an example, obviously, there are opportunities in each state and city, but you have these redevelopment projects coming up and which have already started in the MMR region. So logically, these poor quality housing societies before redevelopment can become a little more structured and organized, so they could opt for better security solutions. So does SIS participate in that market or that’s not an opportunity for a company like us?
Rituraj Kishore Sinha
Residential is not a focus for us.
Kaustav Bubna
Okay, great. Thank you so much.
R S Murali Krishna
We like to — our focus is to work with the corporates that there is a saying in, there’s two things that determine stickiness of your contract. One is how critical it is to the business operation and I already gave that example, whether it’s a guard opening a door at a restaurant or it’s somebody working at a Sugar cane factory. The second thing is who your customer is. So if you’re working in the RWA where there are 300 apartments and 300 customers, you know, there is lack of clarity as to who is the Chairman next year and what his preferences are and it’s a very chaotic situation, the purchasing correct. Decision is also not very well-organized, it’s complicated. There’s a lot of other factors that are beyond our control. So vis-a-vis, when you work with large corporates, multinationals, there is a proper procurement process. They are picking basis quality, they are picking basis the right factors. So I think we are better placed to work-in that space.
Kaustav Bubna
Okay, thanks. And if you could just let me squeeze in one quickly. What are you exactly doing to create value from your cash logistics business? Why is that — I mean, it may not — I personally feel like why is that in our portfolio of services anyways.
Operator
Please request you to rejoin the queue
R S Murali Krishna
And I can take that quick question. Yeah, and you can rejoin the queue if you have any.
Kaustav Bubna
Okay, thanks. No, that’s it. Thanks. That’s the last question if you could answer that.
R S Murali Krishna
The cash logistics business started-off by the banks asking us to provide cash banks. SIS used to be providing security guards to banks, then the bank said that, okay, we need some cameras. So we got into the cameras business and then the bank said that, okay, [Foreign Speech] then we got into that business and that’s how organically businesses evolve. You hold the customer’s finger, you follow the customer’s demand and you learn how to do things. But way early in 2009, 10, SIS recognized that cash logistics is not a security business, it is a logistics business, yeah. So we went and found a partner in. Kosugur is a global leader in this space.
We have a joint-venture running for 15 years and now because that joint-venture company, our ownership is minority, 49% because that asset does not get captured in our books, it’s not consolidated. So we had a belief that you know that value of that business is not being recognized simply because it’s not rolled into our books. In a standalone, that business has INR135 crores of EBITDA. Okay, but that doesn’t get rolled into our EBITDA calculation. Yeah. So we had an IPO or a listing put option with our joint-venture agreement and we are exploring whether we can use that to A, monetize our value of our shareholding that business; and number two, maybe even consider bringing back some of the proceeds towards further lowering our debt situation.
Kaustav Bubna
Excellent. Thank you so much for answering all these questions. Really give some clarity. Thank you. Best of luck. Thank you. Thank you.
Operator
Thank you. We have our next question from the line of Shyam Saksena from ICICI Bank. Please go-ahead.
Shivam Saxena
Sir, just having one question. You said that wage hike helps.
Operator
And sorry to interrupt, sir. Maybe please request you to speak a little louder.
Shivam Saxena
Wage hike help. Am I clear now?
Operator
Yes, sir.
Shivam Saxena
Am I wage hikes up. So any experience in past we commission comes and the wage hikes are there. So does it — has it in your business or in our government is strong and then eventually the salary hikes will pass-on the private sector. So will it help your business?
Rituraj Kishore Sinha
Minimum wage hike always helps our sector so our pricing is based on minimum wages, statutory components, service charges, administrative charges, profit so when the base changes, everything is linked to the minimum wage, right? So let’s say minimum wage is INR100 rupees. So the PF is charged at the rate of 12.5% of INR100 rupees. ESI is charged as a percentage of that. Bonus is charged as a percentage of that. Our training charges, our supervision charges, admin charges are all a percentage of the minimum wage, which is INR100 rupees in this case. So if the government decides to increase minimum wage from 100 to 105, everything gets pro-rata computed on 105. So there is a direct benefit not in margin terms, but in absolute value terms to our EBITDA and our PAT. So obviously our revenue in the first case.
Shivam Saxena
So has it been — in the earlier past, seventh pay commission was implemented was there benefit?
Rituraj Kishore Sinha
The seventh pay commission is for government employees, sir. It is not for minimum wages
Shivam Saxena
Understand. I understand, but actually what happens generally the salaries in the private sector also get revised if 7th is that
Rituraj Kishore Sinha
Under the — under the Central Labor Ministry and under the state labor ministries there is a wage board which determines the minimum wages applicable in the state or in the central circle, that has not been done as yet. Whether the pay commission rise triggers that I’m not sure. I hope you are right but we have to wait for the gazette notification by central government ministry of Labor and the state government’s Ministry of Labor.
Shivam Saxena
Okay. Thanks and all the rest.
Operator
Thank you. We have our next question from the line of Amit from RoboCapital. Please go-ahead.
Amit Mehendale
Hi, thanks for the opportunity. I have couple of questions. The first question is on the broad M&A strategy. In the past, we have been pretty active and we have bought some assets on the M&A side. Now going-forward, a couple of things I just wanted to check whether we have any active pipeline for acquisition, number-one. And number two, what type of multiples are we looking to give any broad range? I understand that cannot be very specific, but is there a broad range that you can mention that this is the multiple that which will do acquisition deals. I’m asking this specifically because in SS you know is also you know the our own multiples have dropped a little bit. So in that context, if you can comment, it will be helpful hello.
R S Murali Krishna
So we let me let me take that. Okay. So we — so SI is — SIS growth is predominantly organic we don’t acquire for growth. So that’s the first thing you must understand. In the last five years, we haven’t acquired anything because we haven’t been confident of acquiring anything. The second point is, SIS has a track-record of successful M&A. We have acquired more than 15 companies in India and overseas and barring one Henderson, others have played out more or less to plan. Number three, SIS does not. We acquire for strategic reasons. Maybe a certain geography, like I was giving the example of Singapore maybe a — you know, in India, if you say Bangalore market is growing very rapidly.
So we wanted more footprint there. So we acquire something. Maybe a customer segment like healthcare perio acquired rare because of that. So we acquired for strategic reasons. We haven’t acquired in the last four or five years because we were waiting for the full-year audited numbers without any COVID impact. ’21 and ’22 were impacted by COVID ’23, most people said most sellers were of the view that they are still impacted by COVID. FY ’24 was the first year where people had a set of numbers where there was no COVID impact, positive or negative. So we have started looking at opportunities. We believe our balance sheet is in good shape now with our net-debt to EBITDA at barely 1x.
But rest assured, SIS is in no rush to acquire anything. We don’t see acquisitions as a way of bringing faster growth. If and when we acquired will be for strategic reasons, we do not acquire basis multiples. So we do not believe that 6x is cheap and 12x is too expensive. Our thesis is very simple. The IRR of that deal in a base-case scenario should be greater than 21% and the IRR of the transaction should be better than 15% in a downside case scenario. So if there is a transaction that meets that requirement and it’s strategically useful. So we definitely will consider buying. Multiples is not the basic or the metric that we are too hinged upon. So I hope that answers your question..
Amit Mehendale
Yeah, thanks for that. It’s pretty useful. So just of — just my second question is on the debtors, just a follow-up on the earlier point. Could you inform what is the size of the debtor scheme that is beyond six months and also if any of it is disputed or any anything at you know at-risk of collection, which is beyond six months?.
Brajesh Kumar
Sorry, can you repeat your question please?
Amit Mehendale
Yeah, I was just looking to understand what is the amount of debtors that are beyond six months. Debtors due beyond six months, 180 days, number-one. And out of that amount, what would be the amount that is currently disputed with the client or at the risk of collection, etc?
Brajesh Kumar
Right now, I don’t have aggregate figure for this. We’ll get back to you, we’ll provide you this information separately. Our team will provide you question.
Amit Mehendale
Thank you. That’s it from my side.
Brajesh Kumar
Hope it okay. Thank you.
Operator
Thank you. We have our last question for today from the line of Amit, an Individual investor. Please go-ahead.
Amit Sisodiya
Hello. Yes, hello.
Operator
Go-ahead with the question.
Amit Sisodiya
Am I audible? Hello, am I audible?
Operator
Yes, Mr Amit, you are audible. Please go-ahead
Amit Sisodiya
My question is for Ripura, sir. I am invested in SIS since IPO and I have a few things to share. So we are the number-one security and number-one facility management company in India and we have significant overseas operations also. And since our listing, we have almost tripled our revenues, but we have failed to generate any returns for our shareholders. And I guess we must introspect while the investment community has ignored us and our share price is still stagnating below IPO price. During my interactions with several investors, I found that there are few common reasons for the lack of confidence in SIS as an investment. So do we have the time to listen to those?
Rituraj Kishore Sinha
Absolutely.
Amit Sisodiya
Sir. Sir, the first doubt the investors have is why are we having such a huge debt when RF is an asset-light and high cash-generating business? The investors say that if the business would have been generating so much of cash then we would not be carrying this much of that. This was the first doubt that I commonly encounter. The second is we are having almost INR1,000 crores of cash, out of which INR500 crores is in Indian — is in India and INR500 crores is outside India. And they want to know what — in which entity is this cash lying and why are not we using this cash to reduce our debt?
The third common doubt that investors have is we are an asset-light company and still we have charged about INR160 crores in depreciation in last 12 months and this figure has been continuously rising over the last few years. This depreciation charge confuses the investors. Can you please explain the calculation of this depreciation in the simplest terms so that even a layman can understand what we — exactly how we are charging this depreciation. And the last one is, sir, we would be generating around INR600 crores of EBITDA, but INR160 crores will go in interest payments, INR160 crores will go in depreciation and the resulting PAT would not be that significant and which will again make our return ratios look poor and fee will optically look high, again discouraging the new investors. So these are the broadly four doubts that I find among the investors. So I wanted to us comment on these pointers. Thank you.
Rituraj Kishore Sinha
So my dear sir. Firstly, I would like to thank you for being so patient with SIS. Since you’re an IPO investor. Second, my sincere apologies is that SIS has not been able to generate the return that you and I both had hoped for. Despite the fact that since IPO, our revenue has more than doubled, it’s more 2.5 times and our profit, our EBITDA, which was INR200 crores is now INR600 crores. But the share price remains below the listing price, right? So I can understand your pain and I completely empathize with that. Now coming to the points that you have raised, as far as the debt situation is concerned, I am aware that a lot of people have this concern, they are constantly comparing SIS to staffing companies and their view is that why does SIS have working capital in the business?
It’s an asset-light business. And our belief in this industry is that 300,000 people working for SIS are our employees. Whether or not customer pays should not affect their pay date, they should — they have to run families and homes. So working for SIS, SIS is accountable to pay their salaries. Staffing industry does not work like this, their approach is different, their approaches. When I collect from customer, then I will pay you, if the customer does not pay me for two months, I will not pay you for two months. So that is why there is capital employed in the business. All the debt that you see parring maybe INR500 crores is working capital debt. If you see the earnings document, the earnings note that we released, we are probably the only company that spends writing 15 pages to explain all this in detail.
So there is a table that gives you a breakdown of debt, and cash entity-wise. So if you need any further clarification, I’ll give you. But more importantly, I want to assure you that I also want to see what happens if we are able to pay-down the debt majorly. Does that resolve the perception in the market that we have too much debt? But what we cannot do and what I would not want to do is to change the way we operate business. We cannot collect and then pay. We have to pay first our employees and then collect money. So that’s on the debt piece. But I’m with you, we will try and reduce the debt exposure in the business, allow us some time, we are working on it.
The second thing is the return profile of the company. Now that is again because of the capital employed in the business, business because the working capital employed in the business is high, the return ratios look subdued. Once we address the debt component, hopefully the return ratios of this asset-light business could be and have been in the past in the range of 15% plus — 20% plus impact, we will try and bring the business back to that stage. Number three, the depreciation breakdown is what exactly is the depreciation charge for that breakdown, I will ask Rajesh to make. And now that you have pointed out, every quarter Vineet and Shweta, the Investor Relations team will put the — depreciation calculation in the earnings report for you to see transparency.
Yeah, that would be certain asset-light business, we are an asset-light business. The only assets that we buy are either making offices or buying equipment that customers want cleaning machine, vehicles for patrolling, drones, you know, alar monitoring equipment, things like that we buy, whatever depreciation we have, we will put a list for you to see where the depreciation charges coming from. But in summary,. I owe you another — I owe you an apology. I hope not to that you will I hope that you will bear with SIS a little bit longer.
Hopefully, we will — I’m not sure about stock price that’s not in my control, but the points you’ve raised are very valid. Perception issues around debt right around return ratio and around depreciation. I will answer all these three through actions and let’s see what the stock market thinks.
Amit Sisodiya
You’re right, right. So I’m invested and continue to invest regularly in SIS just because of your passion for the business and the way you answer and you have every single minute detail of the operations that is commendable and I really respect you for that. Thank you, sir.
Rituraj Kishore Sinha
Sir, I am also very — I’m sorry having this personal chat over a conference call, but you know, I did my first round of private-equity investment from in 2007 and we gave them seven times return. So my second item of private-equity was CX Partners in 2012. We gave them three times returns. But I’m very sorry that my IPO investors have not been able to generate returns and it disappoints me greatly as well. And you will see that this is not directly linked to the performance of the business. As far as I know the revenue and profit say a different story, but let’s see, we can only keep price. Sir, once this EBITDA translates into PAT, you will see magic happening with this top price. Hello,. Okay, sir. Thank you.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr Raj Sinha for over to you, sir.
Rituraj Kishore Sinha
Thank you everyone for joining this call. I think this has been an exhaustive conversation. I appreciate all the questions that came through. As you can see, Q3 has been a good quarter with all engines firing, security business in India, FM business in India, cash business in India and international business. All four segments that we have delivered. This demonstrates what can happen when all engines fire. I know that for the past few quarters, we have had one or the other engine pulling us down. But I think as we proceed forward, we will try and see that we keep seeing all businesses moving on-track. Q4 looks like a good quarter and I hope that we will also be addressed — able to address some of your major concerns in FY ’25 and ’26 about debt, return ratios and the depreciation aspect. Thank you very much. All the best.
Operator
Thank you. On behalf of SIS Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.