India’s security industry is undergoing a structural shift as businesses increasingly move towards organised, technology-enabled and compliant security solutions.
For SIS, this transition is opening up a fresh growth opportunity across sectors such as healthcare, BFSI, manufacturing, logistics, e-commerce and critical infrastructure.
The company reported a strong start to FY27, with revenue rising nearly 30% year-on-year and EBITDA growing over 36%, while margins expanded to 4.5%.
Management believes the implementation of the new Labour Codes could further level the playing field for organised players by reducing the cost advantage historically enjoyed by the unorganised sector.
In this edition of ETMarkets Management Talk, Rituraj Sinha, Group Managing Director, SIS, discusses the company’s growth strategy, the sectors likely to drive its next leg of expansion and the potential for further margin improvement.
He also explains the outlook for its Australia business, the role of technology and automation, the company’s capital allocation strategy and why SIS remains focused on profitable growth rather than growth at any cost. Edited Excerpts
Q) SIS reported nearly 30% YoY revenue growth in Q1 FY27, while PAT grew at a relatively modest pace of 9.4%. What were the key factors impacting profitability, and how do you see margins evolving over the coming quarters?
A) We had a strong start to FY27. Revenue grew 29.7% to Rs. 4,604 crore and EBITDA 36.2% to Rs. 207 crore, with margin at 4.5% against 4.3%.
The gap between EBITDA and PAT growth sits below the operating line. Depreciation rose to Rs. 62.5 crore and finance costs to Rs. 58.1 crore. Acquisition related items account for Rs. 15.6 crore of that, against Rs. 1.7 crore a year ago. Adjusted for them, earnings before tax grew about 25%. Before the effect of Ind AS 116, PAT was Rs. 110.5 crore against Rs. 96.0 crore, a growth of 15%.
The rest is capex at customer sites and a new long term office lease abroad.
Margins should improve gradually as Labour Code implementation levels the playing field, as acquisition integration matures over four to eight quarters, and as efficiencies continue.
Q) EBITDA grew over 36% year-on-year, significantly outpacing revenue growth. What operational efficiencies or cost optimisation measures contributed to this performance?
A) EBITDA grew 36.2% against revenue growth of 29.7%, and margin expanded 20 basis points to 4.5%.
Facility Management margin up 70 basis points to 5.5% and international security up 50 basis points to 3.5%. Administrative and SG&A costs were tightened. And technology is now doing real work: automated compliance, digitised invoicing, optimised workforce management, and every security invoice carrying an auto generated Labour Code compliance docket.
Facility Management shows it most clearly. Revenue grew 8.0%, EBITDA 23.7% to Rs. 35.2 crore, the highest in the segment's history.
Q) The company has announced its fifth buyback. What message does this send about capital allocation priorities, and should investors expect a similar shareholder return strategy going forward?
A) The fifth buyback commits up to Rs. 106 crore at a maximum price of Rs. 478.50 per share, through the open market route.
Four completed buybacks of about Rs. 420 crore and four dividends of about Rs. 180 crore take capital returned since listing past Rs. 700 crore with this buyback. Around 86 lakh shares have been extinguished, 5.81% of the FY21 share count.
Two features are worth noting. This is our first buyback through the open market route, and we are among the first companies to use it after SEBI reopened that window. Promoters are not participating, so the benefit accrues entirely to minority shareholders.
We have kept investing alongside this. The philosophy will not change.
Q) Security Solutions India delivered over 37% revenue growth, led by sectors such as education, healthcare, BFSI and e-commerce. Which customer segments are likely to remain the biggest growth drivers over the next few years?
A) India security crossed Rs. 2,000 crore of quarterly revenue for the first time, up 37.3%. New wins added around Rs. 51 crore of monthly revenue, led by education, healthcare, e-commerce and BFSI.
We expect healthcare, BFSI, manufacturing, logistics, e-commerce, education and critical infrastructure to remain the main drivers.
The more significant shift is regulatory. Under the new Labour Codes the principal employer is responsible for compliance for every worker on their premises, even when outsourced.
That removes the cost arbitrage the unorganised sector has relied on. In Australia, where the framework already exists, the industry is highly compliant.
Customers increasingly want physical security bundled with technology, analytics and compliance. That is a narrower field, and where we are strongest.
Q) International operations also delivered strong growth despite currency headwinds. How do you see opportunities evolving in Australia and other overseas markets?
A) International revenue was Rs. 1,982 crore, up 31.0%, the highest quarterly run rate the segment has recorded. On a constant currency basis growth was 7.0%. EBITDA grew 52.4% to Rs. 69.6 crore, with margin at 3.5% against 3.0%. New wins came mainly from defence and aviation.
Australia remains structurally attractive: unemployment of 4.4% in May 2026, persistent labour shortages, and rising demand for compliant providers.
Fair Work Australia raised the minimum wage by 4.75% from July 2026. Our contracts carry rise and fall clauses with a short collection lag. It is a routine annual exercise.
Cash conversion was strong, at 183.5% of EBITDA, with DSO at 48 days.
Q) Facility Management reported its highest-ever quarterly EBITDA while maintaining stable margins. Is this margin profile sustainable as the business scales further?
A) Facility Management reported EBITDA of Rs. 35.2 crore, up 23.7%, on revenue of Rs. 642 crore. Margin was 5.5% against 4.8% a year ago, and stable versus the March quarter.
The improvement came from better contract selection, portfolio optimisation and disciplined SG&A rather than one-time factors. Those are structural, which is why we regard the level as sustainable.
Our aspiration is 6%, and the route there is productivity, technology adoption and pricing discipline. Demand is supportive, with large university campuses moving to end to end contracts. We would rather grow this business profitably than quickly.
Q) Net debt to EBITDA has edged up slightly. How do you plan to balance growth investments, acquisitions and shareholder returns while maintaining a healthy balance sheet?
A) Net debt was Rs. 807 crore at the end of June against Rs. 707 crore in March, taking net debt to EBITDA from 0.99 times to 1.05 times. Our six-year average is 1.2 times.
The increase is working capital, not structure. Receivables rose as customers work through rate revisions linked to Labour Code compliance. India security DSO was 74 days, better than a year ago though above the 67 days in March.
Operating cash flow was 42.3% of EBITDA. This should normalise as rate revisions conclude, and the Labour Codes ought to reduce working capital intensity over time.
At just over one time leverage we retain flexibility to invest, acquire and return capital.
Q) SIS has returned approximately Rs. 600 crore to shareholders since its listing through dividends and completed buybacks, with the proposed fifth buyback set to take the cumulative return to over Rs. 700 crore once executed. How do you decide between buybacks, acquisitions and reinvesting in the business?
A) These are not competing claims on a fixed pool.
The first call on capital is the business itself, through technology, capability and capacity at customer sites. The second is acquisitions that clear our return thresholds. AP Securitas contributed Rs. 332 crore of revenue and Rs. 12.2 crore of EBITDA this quarter.
The third is returning surplus capital, which makes sense when we hold surplus and have conviction in the business.
So far we have not had to choose. Rs. 420 crore of buybacks, Rs. 180 crore of dividends and Rs. 106 crore now committed take the total past Rs. 700 crore, while leverage stayed near one time EBITDA and ROCE improved 487 basis points.
Q) SIS appears to be moving towards a Rs. 500 crore annual PAT run rate. What are the key drivers that could help the company achieve this milestone, and what strategic priorities will sustain earnings momentum over the next 3-5 years?
A) We do not manage the business to a profit milestone. Profit follows from building something durable.
That said, the arithmetic is visible. Reported PAT was Rs. 101.7 crore for the quarter, and Rs. 110.5 crore before the effect of Ind AS 116. The drag from acquisition related items, Rs. 15.6 crore, is finite and reduces as integration completes.
Four things carry earnings from here: the Labour Codes shifting share to compliant operators, India security margin moving 5.5%, Facility Management towards 6%, and further margin improvement internationally.
Q) SIS has consistently improved its Return on Capital Employed (ROCE) while delivering sustainable business growth. What are the key factors that have enabled this balance between profitable growth and capital efficiency?
A) ROCE* was 16.7% in Q1 FY27 against 11.8% two years ago, an improvement of 487 basis points. Return on equity moved from 9.4% to 15.8% over the same period.
Three factors explain it. We invest only where returns clear our thresholds, and we have walked away from revenue that does not. Operating leverage has improved, with EBITDA growing faster than revenue for several quarters. And a diversified model across three businesses and four countries generates resilient cash flows.
We intend to sustain it through disciplined execution, continued investment in technology and automation, and capital efficient growth.
* Note: ROCE is computed after adjusting acquisition-related expenses and ROE after adjusting the impairment and gratuity charges.
