SIS Limited (SIS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of SIS Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devesh Desai, Group CFO. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Welcome to our Q3 FY '22 Earnings Conference Call. Along with me, I have our Group Managing Director, Mr. Rituraj Sinha. I hope everyone has had an opportunity to look at our results. The presentation has been uploaded on the stock exchange and on the company website, www.sisindia.com. We are extremely happy to report one of the strongest ever quarter of growth for SIS, with consolidated revenues touching a historic high of INR 2,601 crores during the quarter. This effectively translates to an annualized revenue run rate in excess of INR 10,000 crores. Our consolidated revenue was up 10.3% year-on-year and 7% over the last quarter. All businesses across the group reported strong revenue growth and almost all of them crossed the pre-COVID levels during the quarter. At INR 130 crores, reported EBITDA was at 5%, whereas pro forma EBITDA was 5.4% after removing the impact of additional expenses during the quarter and which includes a certain amount of expenses. Details have been provided in the earnings note, which was released as part of the stock exchange upload. Operating PAT for the quarter was INR 76.7 crores (sic) [ INR 76.4 crores ], again, which is the highest level. On a YTD basis, OCF to EBITDA was 31.6%, which was driven mainly by the revenue growth during the year-to-date. A strong order book and new wins during the quarter for all businesses have set us up strongly for both the next quarter and the year across the group. The cash logistics segment continued its steady revenue growth with all service clients performing well and EBITDA and EBIT steadily moving up, coupled with strong cash accruals. In fact, this was the only business in the group that sustained its revenue and financial performance throughout the COVID period over the last 2 years. It also has a strong pipeline of orders and deployment. This is one business segment which was, till now, not ascribed its true value, and -- but it's now changed. We also released our first sustainability report well ahead of the mandatory requirement under the regulations, and we trust it will be useful to the readers of the report. And we would welcome comments and inputs from readers. With these remarks, I would now like to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Vidit Shah from IIFL.

So just a couple of questions regarding margins from me. So the FM business has now surpassed pre-COVID levels, but the margins still remained fairly low. So is that -- I mean, if you could just share like the margin profile of the businesses within facilities management. And like is this due to a change in mix? Or are there other reasons impacting the business?

Devesh?

Yes, I'll talk about that.

No, I can -- yes, please go.

So if you look at the facilities management business, the margins have improved both on a quarter-to-quarter basis and on a year-to-year basis. So I'm just wondering what specific concerns that you have, Vidit.

No, sir. What I was asking is, let's say, before COVID hit, we were doing around 6.7% margin with around INR 330 crores of quarterly revenue. We're back to around INR 360 crores of quarterly revenue, but margins are around 4.8%. So just trying to understand what is the, like, the reason for the decline versus those pre-COVID levels.

Vidit, what we've always guided is that pre-COVID level normal for SIS Group is between 5.5% and 6%, and for individual businesses like FM, it's closer to 6%, right? We are currently tracking at a 1% lower than that. A large part of that actually will come from the fact that we've done significant increments in October to December quarter. There's also been onetime catch-up pay correction payments that have happened, which are not recurring in nature. Plus, there is a continuing expenditure on account of basic COVID PPE and other things. Having said that, I believe that there is no reason why the business will not settle at same 6% ballpark simply because there is no fundamental change in mix. In fact, the revenue mix of FM just got better with lesser exposure on IT and greater traction coming from e-commerce and manufacturing. So I am confident that as the third wave and other things settle down, we will get back to that trajectory.

Okay. So just this trajectory towards 6%, like would it be a thing for 1 or 2 quarters to cover? Or would it be like over the next couple of years, do you see yourself getting to 6%? I mean, how do we model these things, sir?

No. I would say that we still wait and watch because we don't know third wave is still going to hang heavy on Q4. So I would myself find it very hard to forecast exactly how things will play out. But the all important thing is that the gross margin line is holding steady. So there is no reduction in gross margin. So these are volume adjustments and one-off expenses, and I'm sure it will settle down as soon as things become closer to normal.

Understood. Fine. I had another question regarding the tax rate and the cash taxes paid. So even in this quarter and if I see the 9 months as a whole, our tax expense on the P&L has been roughly INR 36 crores. However, we paid around INR 110 crores, INR 120 crores of cash taxes as per your net debt bridge that you have said across the 3 quarters. And even in this quarter, the tax expense was INR 4 crores in the P&L but INR 70-odd crores as cash taxes paid. So just trying to understand what causes this difference? And how should we think about it? Like is this a one-off cash tax paid? Or like is the cash tax generally high?

I'll take that. So I think if you look at it in 2 buckets, one is the international bucket and one is the India bucket. In the international bucket, it's a standard 30% tax, which we have paid out. You don't have those things like 80JJAA, et cetera, over there. So that gets paid as you go. It's called a pay-as-you-go tax, like an advance tax regime we have in India. It's the same way you have in other countries also. So that's one aspect. So that's where your tax payment comes. In India, your tax payment comes because of a mandatory TDS on all invoices raised to customers by all our businesses. So while at the end of the year, when we file our return and we take the benefits of 80JJAA and other deductions, that is not reflected in the TDS rate. So the TDS rate, the mandatory payment would go out to the government every year, and then you go out and claim a refund when you file your return. That is why we will find a difference between the cash payout and the tax expense in the P&L.

Sure. So this TDS, is that 1%, 2% that the customers did?

The standard rate is 2%, but you are able to make an application to the government to register it. That takes time during the year. And by the time that approval comes in, after you have won, and then you go out and engage with every customer and go and tell them, okay, you can now go and please fix this new rate to our invoice, please fix this new rate to invoice, and that's another 3 months goes. So we try and get some benefit out of that, but we are not able to get the full benefit because of timing issues.

Understood. So you said 2%?

2% is the standard rate.

The next question is from the line of Mukul Garg from Motilal Oswal.

So first question for Rituraj. The overall demand environment, I think it looks like things are recovering quite well. And so I just wanted to kind of get your sense on the reasons behind the hike and onetime payment which you did this quarter. I understand like there is a very commendable effort from the team during last 1.5 years. But is there any supply side issue, which is also kind of pressurizing the availability of associates, which was behind the thought of doing this onetime catch-up from your side? Is that also a factor which is playing out?

Well, let me first clarify that we are not a staffing business, and there is no associates concept here. So what I was talking about is the increments that were due to our staff. We have done increments for our non-billing staff, people who are back-office, not frontline, but back-office staff. Those increments happened in October. And the onetime implication there is that there was a bunch of people who did not receive increases in the previous year. In 2020, the higher-salaried back-office staff, while they didn't have any pay cuts, SIS did not do any pay cuts or any job cuts, we also were not able to give increments to the higher-cost back-office staff. Now those people who are compensated via a onetime 1-month equivalent pay, which was paid out in Q3, so that's the onetime effect that is coming into play. As regards to supply side challenges, I don't see any. I would once again draw your attention to the fact that SIS, amongst its peer set, is the only company that reported a 7% revenue growth in FY '21. And in FY '22, 9 months, we are tracking close to 10% year-on-year revenue growth. So we have grown in both years, which are impacted by COVID, and this could not be possible if we had a supply side constraint of any kind.

Sure. The other question was, again, like rate normalization as business comes back. I think one thing which has clearly happened, as you just mentioned, that like you guys have grown during this whole crisis also. Do you think there is an element of market share gain and that can help to kind of take some bit of price hike with your clients? Or do you still see very -- the competitive intensity remaining as stronger than what it was pre-pandemic?

I think there are 2 fundamental issues here. First one, I'm assuming that you're comparing to the peer set when you talk about growth. The first fundamental difference is that SIS is a pure-play essential services provider. Security is categorized as an essential service. So it does not get disrupted even if there's a lockdown or anything like that. Same for facility management. In fact, the demand for hygiene and sanitation services post COVID have gone up. Per square foot expenditure on these services has gone up because of greater consciousness. Similarly, cash logistics, despite second wave, third wave, the services ought to continue as normal because that's the currency supply system of the economy. So that's the mother of all differences, that this is essential services. Therefore, its demand resilience is extremely high, and we continue to grow in crisis periods just like we grow in growth years, albeit at a lower rate. The second difference is that post the COVID experience, several customers recognize the essential component and the fact that this is important for business continuity. When malls were shut or when factories were operating at reduced capacity or IT parks were operating at reduced capacity, the services that they've still required to go on there was security and facility management. So they recognize that the service provider has to be financially robust to be able to cater to that requirement and also reliable apart from being an expert at delivering the service. And therefore, we see a natural trigger for consolidation. We see more pressure on the smaller operators who ran into some cash crisis also and who had service continuity issues. SIS has done outstandingly well in that contrast. In fact, our January customer satisfaction survey index is 8.6, which is extremely good. And we believe that over a period of time, this will help us towards a market consolidation. As you know that today, 65% market share is with unorganized small operators. And I think this experience of COVID will be a trigger to change that setup. But it won't happen instantly. It's not a flip-over switch. It would happen over a period of time.

Sir, sorry, let me just rephrase the question. What I was referring to was the news which were there that the global peers in the security side in India, they have been scaling back or they have not been able to retain kind of the guards during this lockdown period in the last 1.5 years. So is that something which you are seeing on the ground and helps from a competitive point of view? Or do you still see the same kind of competition out there, which was there pre-pandemic?

We wouldn't say that our competitors have not been able to maintain business continuity barring the smaller ones. I think all our major competitors continue to deliver services like we do. So I don't see where your question is coming from, actually.

Okay. Understood. Just one clarification from Devesh. Devesh, for India security business, ex of the one-off impact this quarter, the base margin comparison for Q4 will be 4.8%?

We are talking about EBITDA margin?

The EBITDA margin.

I haven't computed separately for the standalone. Do you want me to get back to you separately on that?

Sure.

Thanks. Okay. I'll just note it down and get back to you.

The next question is from the line of Alok Deshpande from Edelweiss.

Yes. This is Alok here from Edelweiss. Congratulations on a very good set of numbers in trying conditions, and also congratulations to the SIS team on the first sustainable report. Two questions from my side. Firstly, can you give some color on the quarter ending run rates for all the 3 segments, so that it's slightly easier for us to see how this quarter and next quarter may pan out?

So Alok, thanks for that. In the -- just to give you a comparable set of numbers, in September, the security, facility management and cash in India were doing INR 465 crores, and in December, they are doing INR 486 crores. And if you add the international business today, international business was -- if you add all 4 businesses, including international business, in September, we were run rating INR 857 crores, and now we are run rating INR 903 crores. But this is just a top line addition of all 4 businesses. It does not factor equity accounting on the cash side.

Okay. Rituraj, you mentioned INR 483 crores, that's for India securities plus cash, is it?

Let me break it down further for you. India security, just security business in India is INR 327 crores. And just FM business in India is INR 127 crores. Both put together is INR 453 crores for India, which in September end this is -- I'm comparing December to September. And September ended was INR 435 crores, and now it's INR 453 crores. And if you add cash to that, we are doing INR 486 crores. And if you add all 4 segments, we are doing INR 903 crores.

Got it. Got it. Sure. So this is quite helpful. And also, I think I just needed a little bit more color on the international segment. Reason being this ad hoc contracts, which are COVID-related, are now tapering down as you had mentioned in the press release. Also, there is a mention of some events at year-end that had happened, which would have helped this quarter's revenue. Now going forward, how should we look at it? What part of this run rate can get shaved off because of the ad hoc contracts going out? And then what part of that can get offset by the structural growth that can come in?

So ballpark, I'll give you our assessment on the Australian business, which is a mother ship, the biggest chunk of the international piece. In Australia, we have close to $40 million worth of COVID-related contracts that are still continuing. And every month, they will continue to reduce. Australia is now, even as they have a COVID impact right now, they are also fully vaccinated, almost fully vaccinated in the country. So we see COVID quarantine work, COVID vaccination center-related work declining from $40 million to a lower number per annum, that is, right? And we see aviation sector, other retail sector and other subsectors, our regular clients which had reduced our service volumes, they are adding back volumes. The universities are adding back volumes. So we see a similar scale back up of roughly $40 million, $40-odd million from our existing customers. So on a net-net basis, we do not think that the revenue will contract majorly because COVID was going off. But it depends on the pace at which the COVID contracts come off and the speed at which the regular permanent contracts scale up back to normalcy operations. So there might be some aberrations in a quarter or 2. But if you look at the entire financial year FY '23, I don't see a major impact because of COVID work reducing. I think we'll make that up adequately with regular contracts. In fact, our international business has won close to $2 million, $2.5 million worth of work even in the last quarter.

Right. Right. So Rituraj, overall net-net of that top line, which is annualized about INR 5,000 crores for international business, I mean, going by this quarter's run rate. Of that, roughly INR 300 crores is what is at sort of which may taper down and a similar number can come back net-net, right?

You are also right. Absolutely. So Alok, this is what I have been underlining quite regularly in the last 7, 8 quarters. We had literally a natural hedge with international operations. When Indian operations were struggling in FY '21 with severe lockdown, et cetera, international business had a surge in revenue. They reported a 20% year-on-year growth. And that sort of covered ground for our growth story. This year, in the coming 12 months, we see international business reducing those onetime contracts, but then Indian growth is coming back strongly. So these are very, very complementary businesses, and that's what makes the SIS story much more predictable in that sense.

Sure. Sure. Absolutely. So just one more question from my side. This facility management run rate that you mentioned, see, we are above the pre-COVID levels now. So now, has the railways part of it come back to also the pre-COVID levels? Or there is an upside that can come from that bit?

No, railways is about operating at close to 60%, 65% of pre-COVID still.

Okay. So that -- there is still room for that to come back, right?

There's room for comeback in IT sector. There's room for comeback in the railway sector. There's room for comeback in several other subsectors. So that's what I've been saying that as this COVID thing normalizes, what we expect is that our existing customers, certain segments that have cut back like education, for example, schools have been shut for a long period of time. Educational establishments, IITs, IIMs, such educational establishments have also reduced quantities. This will come back strongly as and when they normalize. And similarly, there's been a heightened demand from sectors like health care, which may see some reduction as things go back to normal. Right now, health care, manufacturing, et cetera, are on exceptionally high volumes.

Sure, sure. Rituraj, I had one more question. I don't know if there is a long queue. In that case, I may go back. But I had one more question. Can I go ahead? Or...

Operator?

Mr. Alok, you may please go ahead, sir.

Rituraj, I had this question on, not directly, I mean, margin. Margin is an output of the costs that are going in, obviously. But with regards to the staff vaccination, in terms of the additional costs that are going in, in terms of hygiene, et cetera, this is something which during the pandemic has led to our margins contracting by about 100 bps or so roughly in facility management also, also in securities. What I wanted to ask was now, as we go forward in time and demand becomes much more normalized, the path to normalized margins, how will it work? Is it that these costs will not be there anymore? Or is it that we will be able to pass this cost much more effectively to the customers?

No, I don't see the cost being passed through to customers. That's not a position we've taken from the beginning. Just for you to have the numbers, SIS has taken -- undertaken probably the largest vaccination drive in any company of our scale and size of operation. We have inoculated -- we have organized more than 450,000 doses of COVID vaccine. And all transportation, everything, arrangements that go into that, they have been taken care of at company costs. Similarly, close to INR 9.5 crores has been paid out as COVID sort of welfare payments because people, when they get COVID, they can't work for 10 days, 15 days. They need medical attention. They need medicines. And as a company, we've taken a call to pay them ex-gratia amount. So that is another thing that is ongoing. Now these things are not something that are intended to be passed on to customers because this is not industry norm. Our competitors are not doing anything of this sort. They are not organizing a vaccination program or a welfare fund. So this is not something -- as and when the entire company gets fully vaccinated, and we are very close to that, we started a booster dose round now. But as soon as this is out of the way, which is maybe 1 or 2 quarters, and hopefully, COVID is not taking up so much time, attention and cost, we believe that these costs will go out of the books. So this is not a pass-through situation at all.

[Operator Instructions] The next question is from the line of Sidhant Mattha from B&K Securities.

So first of all, I wanted to talk about the days outstanding, DSO. So we have seen a slightly -- slight margin -- basically, DSOs have marginally moved up. So what's the trajectory there? Because wherever we see a strong growth is coming here, the DSO is rising. So how can you guide us on that?

Devesh here. Are you rightly asking about the DSO?

Yes, DSO, days outstanding. So we are seeing days outstanding rising. So do you see it falling back again to the 60, 65 or even rising more into 75. And in the fourth quarter last year, March, we did around -- the DSO was around 68. So how do you see that?

Yes, year-end target is always around that 65 to 70 range. That's the year-end target. And this was -- in this time period in the Q3, sometimes you have businesses having the issues of the year-end and business holidays. Sometimes we are able to get the collection. Sometimes we're not able to get the collection. In fact, in India security, there were some collections which were delayed. They all came out in the first week of January as soon as the office opened. So this was just like a temporary payment timing issue and nothing to do with any structural issues. So in the March quarter, typically, we tend to target that 65%, today, range. And we...

And for the facility management also? Because that was around 80, 85. Yes, that was around 80, 85, so do you -- we have seen a consistent fall over a period of time. So do you expect this to fall further?

Well, we are focusing on getting the cash out from the customers. So that focus continues. How much it will fall or whether it stays stable, difficult to say. But definitely, we will not allow to go out of hand out, out of [ control ].

And my last question is, earlier, you had talked about facilities management margins, which tend to -- which will go around 6% in a few times to come after all these expenses and everything, the one-off expenses go over. So in this India security, when do you expect the 6% margin mark to -- so that you can achieve that 6% margin? How much time will it take just [indiscernible]?

Like I said, we are eagerly waiting for all these exceptional costs related to COVID to go out and also our regular volumes from existing customers to come back. It's very hard to predict when that is going to happen. Like for example, we had no clue that we'll have to tackle a third wave and a booster dose. So it's very hard for us to forecast whether that's a 1 quarter issue or a more than 1 quarter issue. But I think I'll, again, draw your attention to the fact that the gross margin in security, like FM, remains unchanged. The gross margin line is intact. It's not as if customers are reducing prices or something. So we are, therefore, confident that we will be able to go back to the pre-COVID levels.

The next question is from the line of [ Rohan ], an individual investor.

Hello, sir. My name is [ Rohan ], and I just have 3 questions. First is regarding the margin. Second is regarding the market share and service technology. So I just want to know what is SIS doing uniquely compared to its peers in improving these 3 stuff?

What are the 3 things I said -- you said? Margin...

I said margins and in terms of technology because technology -- yes. So these 3 things, first of all.

Okay. So I think we've adequately answered the margin question. Security, facility management, cash logistics type businesses globally, if you look at the peer group on the listed companies world over, in our segment, they are operating ballpark 5.5%, 6% EBITDA margin line. We were at 5.5%, 6% pre-COVID. We have slipped because of the reasons I have explained already, and we are very hopeful to go back to 5.5%, 6% margin. But this, I would like to underline that security, FM and cash logistics are, on a combined basis, are not double-digit EBITDA margin businesses. So you have to take that into account that this is a ballpark 6% type industry. What is exciting about this industry is that even at a 6% EBITDA margin, this industry has capacity to deliver more than 20% return on capital employed and more than 20% return on equity. Ultimately, that's the beauty of the industry. And if you see our ROCE line for the last 4, 5 years since we got listed, you will see that we have been oscillating around the 20% mark, give or take 2% here and there. Including the COVID period, our ROCE has been very, very strong. As regards to market share, our Vision 2025 revolves around 2 basic themes: one, building on market share ;and two, building on solutioning. So as far as market share is concerned, we are a believer that the Indian industry will see a fundamental change over the next 3, 4 years as labor reforms get implemented. As labor reforms get implemented, there will be a more level playing field. Customers will prefer to operate with larger, financially more stable and more compliance-oriented service providers. And that will change the industry mix. Today, organized players like ourselves have only 35% as addressable market. 65% is taken care of by regional players, local players and smaller, unorganized players. Over a period of 4, 5 years, I see this mix changing. More than half of the market will be addressed by large, organized players, and that will open up the addressable market size for us. So we are very bullish that we have the opportunity to double our market share in security, double our market share in FM and double our market share in cash logistics in the next 3 to 4 years. As regards to technology, SIS has been a pioneer in implementing technology, both at the back end for our own internal efficiency, whether it is implementing Oracle, or implementing facial recognition-based attendance software, or iOPs for operation management, mobile-based training platforms where people can self-learn. We've done a whole lot of work around technology at the back end. Similarly, we are doing a whole lot of technology-related work on the customer end. You'll be very pleased to know that our latest business we protect which is an alarm monitoring company, it does not provide security guards. It provides alarms and does monitoring of customer sites remotely using CCTV footage. That business has crossed 5,000 connections this quarter, which is a great signal. And we are working more and more to build new technology-based products in our FM business like energy management, like One SIS solutions and in our cash business with the [indiscernible] and other such services. So we are looking very aggressively to enhance our service offering and use more and more technology, my friend. I hope -- that's a longish answer, but I hope I have addressed some of your concerns.

Yes, you have addressed all the concerns. Because I also think that when we use technology, we can exponentially grow the business compared to -- because now we think SIS OR any company, we think that it's a capital-intensive business. And whenever we need to grow, there will be a physical growth, right? There are people involved in there. So that's why I think that when we use technology, I guess there will be a huge growth, and that may be an expansion growth. So that's why I asked it.

The next question is from the line of Ashwini Agarwal from Ashmore.

Rituraj and Devesh, great set of numbers at the September quarter. So I have one question. The last 2 years, you've been kind of talking about improvement in market share through inorganic maybe as an opportunity looking at the environment, where a lot of the small- and medium-sized players are struggling to get through the tough times, constrained cash flows and so on and so forth. But we didn't really do anything. So is it because now you feel more confident that organic growth is a better way, a better quality growth path? Or is the -- were the pricing expectations from potential candidates were completely haywire? I mean, I was just curious to understand what happened.

Well, thanks for that, Ashwini. I think SIS has always been an organic-led growth story. We have always believed that, that's the best way to create value and maintain our return profile that we want to maintain, 20% plus. We have acquired companies in the past. We continue to look at opportunities. But in the last 2 years, we've been preoccupied in settling the transactions that were half closed. Like last -- this quarter, for example, Ashwini, if you've seen, we have closed the P4G New Zealand transaction. We acquired the remainder shareholding there. And that's a beautiful story where we bought a very small $8 million business. And today, it's almost run rating close to $25 million, $30 million over a cycle of 3 years. So the return profile on that business is absolutely fantastic. It's a 20%-plus IRR for us. So we will look at doing acquisitions. Our acquisitions predominantly will be India focused. But we will also be looking at transactions which are very value accretive for us, and we will have to wait for the expectations to settle down. There have been several IPOs in our sector of late, Ashwini. And several other IPOs are being lined up. So obviously, at this point in time, people who can IPO are looking at completely different level of multiples, which we believe are unviable for us to even contemplate. And I'm sure that in near term, there will be a period of time where people who have attempted to IPO and they cannot IPO, they will definitely be on the block, and that's when we hope to make our move.

Okay. Great. The other thing is that one of the drivers for your top line, especially in the security businesses, how the minimum wage regulation moves in a different states. Could you provide some update as to what's happening there? Because there's a huge amount of, I would say, economic distress on the lower leg of this K-shaped recovery. And unfortunately, the urban bottom of the pyramid workers and rural India has seen a brunt of that. In that context, I was a little surprised that the government didn't provide for more support by way of consumption. But is wage an area -- I wonder, if the government is looking at it or state governments are thinking about it. I mean, what are you hearing?

Well, I'm glad you asked that question because we -- when we say 20%-plus growth, Ashwini, that 20% growth generally is broken down into 3 components, roughly 7%, 8%, around about, came from minimum wage inflation. And the remainder 12% came from existing customer new business and new customer acquisition. Now in the last 2 years, what we witnessed is that the minimum wage escalation has completely stalled. The minimum wage escalation that came through for the central minimum wage was very 1.5% as against 8% to 10%. So that is -- has been a problem. While we've acquired customers to make up as much as we could, we believe that the minimum wage inflation is a key element of our growth story, and it has been for the last many, many years. And that's not just unique to us. That's an industry-wide global phenomenon. But looking at it from a different perspective, Ashwini, I see also that there is a massive catch-up that is building. Government hasn't really done anything much for the minimum wage paid workers in the last 1.5 years, 2 years because of the state of the economy. But today, as the economy is looking at a 9% growth this year and 8.5% growth next year, sooner than later, I guess there will be significant pressure to do something major on the minimum wage hike. And I guess that is going to be a mega opportunity for SIS.

So sorry, pardon the ignorance on this. Is that kind of simply mandated? Or it's centrally advised and then each state passes its own law? How does it work?

Well, the way it works is that -- so far, the way it has worked is that the central government generally does central minimum wage-related hike, and the state governments do their own hikes. But they all sort of lean on each other's percentage of hike given, right? So if it's subdued, then it's going to be subdued across the country, central and state. So I guess there will be catch-up hopefully soon enough in that direction. And if the labor reforms wage code gets implemented sooner, I think the act is there since last 1.5 years. They are yet to announce the implementation schedule. But if and when that gets implemented, Ashwini, that is also talking about a national floor minimum wage. It basically provides a framework for connecting the central wage and the state wages, like a floor wage for the whole country. So as and when that floor wage comes, that could be another booster. But I see these 2 things are different. Even if the floor wage does not come or it comes at a lower level, the minimum wage catch-up has to come. So I'm banking more on the minimum wage catch-up that hasn't happened across India for the last 1.5 years, 2 years, and then the national floor wage could be sort of a booster on top of that.

And what's the reason? I mean, I'm sure you've been in touch with various government ministries that take these decisions. I mean, what's their kind of explanation? They just don't want to put burden on industry in a tough time? Or...

Absolutely. I think the governments are clearly trying to do more reducing taxes, incentivizing production. They don't want to do anything to upset the applecart in terms of additional costs. One of the things that labor reforms entails is higher cost to employer, right? And therefore, I think the government is a little wary of bringing that out unless the general sentiment in the economy is favorable and amenable to that idea. In fact, we completely believe, Ashwini, that it should only happen -- even if it happened 2 quarters late, it should only happen when the industry sentiment is favorable because we don't want to get into fistfight with our customers to pass it through, right? Industry uptake has to be high, so that the pass-through is automatic.

Yes. No, that's fair. That's fair. And finally, congratulations on the wonderful recognition from the family office and all the best.

Thank you very much. Thank you.

The next question is from the line of Shalabh Agarwal from Snowball Capital.

So first question is I wanted to check about this segment of residential apartment security. Is that a big business for us? Or are we really looking at it? And how do -- how are we making inroads into this business because this is a stronghold of players like JLLs of the world?

Well, Residential Welfare Association or residential security is not a primary focus market for SIS per se. And the reason for that is basically because it's more addressed by the lower-cost operator. However, we do certain high-end societies, which are generally managed directly where the impetus is not just on the lowest-cost provider but also on the quality of service. So in Gurgaon, you would have some Aralias and Magnolias and top-end residential accommodation like that. Or in Bangalore, you would have certain facilities. But barring that, we are not either very big or very super bullish on the RWA segment.

Okay. Okay. So in these high-end societies, is it like provided directly by us, or we get it -- we work with JLLs of the world to get the contract? Because the typical can be contract and they would outsource.

In certain instances, they may be direct contracts, but in most instances, it's basically the customer going through a JLL or CBRE or a Colliers, but mandating that their security provider will be SIS or their facility management must be done by DTSS.

Okay. Okay. So this is not a segment which One SIS is targeting?

One SIS is primarily, as of right now, targeting manufacturing, healthcare and commercial establishments, like an IT park or a mall or something like that.

Okay. Okay. And sir, just to touch upon One SIS, can you also let us know what -- where we are on our journey and how big does that complement in our overall scheme of things?

Well, One SIS is very recent as a development. It was an idea that we were cultivating as a part of our Vision 2025. It's still fairly small. We barely have a 5, 7-people team that started it. Now it's gaining momentum. We are winning more contracts. We are partnering with some of the large commercial real estate owners. They love the idea that unlike a large IPC property managers, they are not going to take the contract and then outsource everything. We are talking about cell delivery. We are also adding a technology component, energy management dashboards for customers to see service fulfillment. So I think there's a lot of exciting things on One SIS, and it's one of our big funds in our Vision 2025 plan. But for it to really, really take a material size, I guess, it's at least 1 year or 2 away.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you very much, everybody, for participating and also asking all your questions. I hope we've been able to address them satisfactorily. This third quarter has been a remarkable for SIS. It signals a strong growth coming back. Looking at the order pipeline, Q4, again, looks like an interesting quarter for all 4 segments: security in India and international, facility management and cash logistics. We are also very encouraged by the budget. We believe that India's commitment to spend INR 5 lakh crore last year and INR 7.5 lakh crore in the current year towards infrastructure creation is a massive opportunity creation for us because, whether it's building a metro or a health care establishment or educational establishment or a railway platform, everything, any kind of infrastructure, any kind of square footage that is added is going to need CCTV cameras, security staff and hygiene and sanitation staff. So effectively, we see this as addressable market expansion, and it's a really wonderful and encouraging news for us. I also believe that certain developments in the market are very well for SIS, particularly the listing of certain competitors in the cash logistics space. Even as SIS is the second-largest cash logistics company in the country, our cash logistics business has honestly not received true recognition or value because it happens to be the smallest amongst the 4 segments that we operate. But with other cash companies getting listed, we are very hopeful that the market will take note of our cash business that is not just continuing to grow, it is also run rating of INR 500 crore ballpark revenue and a plus 13% EBITDA margin. So on a stand-alone basis, just the cash business is worth significant value, which is currently not fully captured in the SIS story. So we are very encouraged by the macro environment and also the softer environment and the order pipeline, and we hope to close this financial year FY '22, despite the first quarter, April, May, June, getting literally wiped out because of second wave of COVID. And Q4, again, Jan, Feb seem to have significant COVID third-wave effect. Despite 4, 5 months of disruption in this FY '22, we are very hopeful to close near to 10%, near to double-digit revenue growth. And I think that is a testimony to the power of essential services and the platform that SIS has created as a unique platform, which is not just a market leader in security, but also a market leader in facility management and cash logistics segments. So thank you very much, once again, for your patience, and I look forward to speaking to you some time in the near future. Please take care. Thank you. Bye-bye.

Thank you. On behalf of SIS Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.