SIS Limited (SIS) Earnings Call Transcript & Summary

Good afternoon, everybody. Ladies and gentlemen, welcome to the SIS Confluence 2023 event series. This session is being recorded and will be uploaded on our website as well. I'm Shweta Jain,and I'm the EVP for Investor Relations and M&A. Today is the third session in our series. We'll be focusing on our Security Solutions International business. Hope you've been able to participate in the earlier 2 sessions. The first session was on FM. And the second session was on our India Security Solutions business, which was held last week. The presentation and recordings for both the sessions are now available on our website. Please feel free to view the same. The aim of these sessions is to share with you our strategy across our key business segments and provide you an opportunity to interact with our leadership team. I would like to say that some elements of our presentation may be forward-looking in nature and therefore, must be viewed in relation to the risks pertaining to the business. The safe harbor disclaimer applies to this webcast as well. I'd now like to introduce our speaker for today, Mr. Murali Krishna, President for the International business. He joined SIS in 2017. But his engagement with SIS began way back since 2006 when he was involved with a consultant in the initial CE fundraisers, the acquisition of Chubb Security business in Australia. Those were interesting times when a smallish Indian company was driving a large player in an unknown highly regulated market like Australia. Before SIS, Murali was with EY for 10 years and specializes in the services sector. He led transactions and advisory mandates in security and SM, both in India and abroad and developed a working understanding of the sector in APAC markets. At SIS, Murali has expanded the footprint of the international business. He has been responsible for the acquisitions of SXP, P4G, Henderson and more recently, SCS as well. He has also raised AUD 200 million syndicated line as a [indiscernible] for future growth. Murali is a chartered accountant and an MBA from ISB, Hyderabad. Over to you, Murali.

Thank you, Shweta. A very good morning to everyone, and a very warm welcome to this presentation. I hope I am audible, Shweta.

Yes, please go ahead.

Thank you. The objective of this presentation is for me to provide a deeper understanding of the SIS International business to all of you. And I'll be trying to do that -- I'll be trying to do that by discussing the evolution of the SIS International business and operating model, which is fairly different from what it is in India, our clients, the leaders that are leading this business and certain nuances of the international market, along with the strategies that we have for growth of this international business. I'll keep this presentation as focused as possible and try and cover it under 30 minutes. I request you to reserve your questions until the end of the presentation when I guess, Shweta will open the floor for a Q&A session. SIS International has a very clear defined positioning segment. We want to be leaders, and we want to have a leadership position in the markets that we are presenting. And we will actively look to grow the business to accomplish the leadership position wherever we are not. We would like to stick to our core competencies, which is safety and the security services, and we would like to be pure play in these 2 services only which essentially means that we do not want to diversify like our India operations into facility management or anything around that, maybe even cash services. Geographically, we have defined our coverage as only in the APAC region. And even within that, we would like to participate only in markets that are highly regulated and compliant markets. That leaves us out of a lot of emerging markets in Asia PAC and certainly leaves us out of any of the European or the North American mature markets as well. Our aim is constant, consistent and profitable growth for the group. We would like to give solid cash generations from all of our operations and effectively be a counterbalance to the Indian operations as part of the international operations [indiscernible]. The SIS International as it stands today,we are present in 3 countries: Australia, New Zealand and in Singapore. And we operate with about 6 brands in these 3 geographies. In Australia, we have 3 brands: MSS, SDS and Southern Cross Protection, as I would refer it as SXP going forward. MSS is the largest out of these brands and is the man guarding business for us, and it also has capabilities in the strategic medical and the rescue service side. Southern Cross Protection is a business that specializes in the patrols and the loss prevention space. SDS was a recent acquisition. We did this acquisition in 2022, late 2022, and they focus largely on critical risk management, clinical governance, emergency medical services. I'll get to each of these services in the next few slides. In Australia, out of the total serviceable market as defined by our positioning statement, we believe -- or we estimate that we are at around 22% of the overall market. We have a share of 22% of the overall market in Australia. We entered the New Zealand market through an acquisition of a company called P4G called Platform 4 Group back in 2019. Back then, P4G was largely an event-focused business. But then subsequently, we added a lot of other capabilities. And currently, P4G is a national player, and its services include man guarding, patrols, monitoring, loss prevention on the events with which we started off. Our monitoring business in New Zealand is carried out through the other brand that you see out there, which is right and monitoring. And in New Zealand, we are -- we started off with just about NZD 4 million in revenues, local currency. And currently, we are at about NZD 40 million also and get on the top 3 in New Zealand market exactly. We gained an entry into Singapore again, back in 2019 along the same time as P4G through the acquisition of the company called Henderson, and the brand also is Henderson. This is a leading brand and currently is booking the top 5 in the Singaporean market. And we have capabilities of man guarding, patrols and monitoring in the Henderson business in Singapore. Overall, at SIS International, we had at about AUD 900 million in revenues. We support over 5,300 customers and deliver across 1,400 sites. We have 8,300 employees in all 3 geographies put together. And slightly over 6% of our revenues comes from solutions. I will discuss a little bit detail on the solutions aspect in the ensuing slides. But this is a key growth strategy for us for SIS International. And currently, we do about -- from absolutely nothing in 2017, we do something close to about 6%, and that's a fairly sizable increase in the last few years. We have an extensive range of services on the pure-play security and safety sides. Apart from the regular man guarding business, which is the bulk of our business, we also specialize in areas such as aviation security, event security, patrols, monitoring and emergency medical and rescue solutions as well. In the aviation business, we do people screening, we do the screening of baggage, freight and catering as well. We also do asset inspections in the aviation security business. We operate out of designated airports. We operate out of Tier 1 airports, regional airports. And some of our airports are also in far-flung interior places that cater to our money clients as well. On the patrol side, through the acquisition of SXP and subsequent growth thereafter, we are a fairly dominant force on the patrols and emergency response, both in Australia as well as in New Zealand. On the monitoring side, we have the capability to do conventional alarm monitoring and also the CCTV monitoring backed up by advanced automation in terms of responses and also in terms of analytics. Both these patrols and monitoring, you will hear more often in the subsequent slides. These are key to our business and are increasingly supporting our guarding business, particularly where it becomes uneconomical or sometimes even impossible to work in a site during nonworking hours or far-flung places and sites that are uneconomical to operate or difficult to operate in this section. So these are critical pieces. While in patrols, we do have a dominant share of the market. We are currently looking to ramp up our monitoring piece in both in Australia as well as is in New Zealand. Coming to the emergency response side and critical risk management side. We provide emergency medical response. We provide rescue and critical management services through 2 brands. One is our strategic medical and rescue business, which is housed within the MSS business and the other is the recently acquired SCS business. We train and supply paramedics, nurses, safety offices, testers, permit offices and many, many more. And we supply them to some of the critical infrastructure sites. And while I mean critical infrastructure, if these people are not there on the sites, the sites themselves cannot operate, so such as the criticality of our work out there. And these critical infrastructure sites include mining, shipbuilding and oil and gas sectors. We have 3 specialized training centers across Australia, where we train our people, and these also have certification capabilities as well. Our event security business, as it's a slightly different business than our man guarding business. It's a it's different because of its sheer size of the requirement and the shorter deployment cycle. So just for the event, we have to deploy a large amount of manpower on a casual basis and then we will have to move them from out of the site. So it's a very different business as compared to our regular guarding business. We do a lot of events, both in Australia as well as in New Zealand. We do a lot of prestigious events in sporting and in the entertainment industries: Australian open, the Grand Prix in Australia, a lot of cricket stadiums in New Zealand and Australia and even the upcoming women's with FIFA world cup is something that we will be guarding as well. Next slide, please. Let me dwell a little detail in terms of how the SIS International business came into existence and how we have kind of gone about in the last 15 years. SIS came into the international markets through the acquisition of Chubb. Back then Chubb was under UTC, and Chubb was the largest security player in Australia. SIS acquired this business and renamed it to SIS. From 2008 and all the way until 2017, the business was fairly focused on organic expansion of the business and bringing about stability in the business. In 2015, SIS, [ forward it ] to the safety side of business by acquiring SMR. Just for its capability, the business was nothing meaningful in size, but we just acquired the capability and started growing from that foundation. Starting 2017, the approach to the international business was changed, and we had a different strategy for growth after that. And you will notice that since 2017, when we are at about $478 million in revenues. And in 2022, where we are at about $883 million, we nearly doubled the size of the international business. And if you look at the same period between 2017 and 2022, most of the developed markets and particularly the Australian market. If you look at it, the GDP grew only by slightly over 3%, that has the same period the international business of SIS nearly grew almost double in size partly because of acquisitions, but also through organic groups. The acquisitions must have contributed to about 1/3 of the growth between 2017 and 2022, but the other 2/3 of the growth came in from organic groups. The strategy that we pursue between this period, 2017 and 2022 was to acquire a foothold in any new geography or in any new capability, use that as a foundation and then grow the business organically from thereof. So in 2017, we acquired SXP. SXP was being the largest player in patrols business in Australia. So we acquired SXP for its patrols and the loss prevention capabilities. We impaired with the majority stake in 2017. In 2019, we identified New Zealand and Singapore as 2 other geographies, which fit within our positioning statements. So therefore, we went on for an acquisition in these 2 geographies. P4G was the entity that we acquired in New Zealand, and Henderson was the entity that we acquired in Singapore. Subsequently, to add on to each of these equities and also to our organic business, we did a lot of refill contract over asset purchases, very small tiny ones, but largely to fill in our gaps in terms of capability, operational efficiencies or where there is a geographical coverage that was missing as part of our overall strategy. And through the COVID period between 2020 and 2022, we completed the acquisition of 100% shareholding of all these entities, SXP, P4G and Henderson. So we became 100% owner of all these businesses. In 2022, we acquired SDS. We acquired a majority stake, significant major taken stake in SDS. SDS happens to be a highly complementary acquisition for us. Complementary to our current capabilities in SMR business. It's complementary with respect to the geography that it serves. It's complementary with respect to the client industry spend it serves and also in some parts in terms of the capability. So it was a great acquisition for us. That fitted a greatly with our vision for the SMR business, which I'll get into later spaces. If you look at these acquisitions between 2017 and 2022, these have been largely successful. So we went in with a business case, and the business case had to be fulfilled post the acquisition. So the acquisition is the easier part, delivering all the acquisitions for the difficult part. So if you look at it, MSS, which was done way back in 2008 was a big success. There was no toes about it. However, in the acquisition that we did in 2017, SXP, we doubled the size in the 5 years since acquisition. P4G, which was just about $4 million to $5 million back in 2019, we grew by about 8x in 3 years. We also made it a national player and all services player were in the New Zealand market. SDS acquisition, again, we'll grow our SMR business much more closer to our vision of getting the SMR business to $100 million kind of market. Probably the only exception to this is the Henderson business. Again, [indiscernible] in Singapore market was to enter the market with a strong player and grow the business from thereon to more like $120 million, $130 million business. Unfortunately, with the timing, the impact of COVID on the entire industry in Singapore and more particularly for Henderson was fairly performed. The Singapore government took certain decisions to raise the minimum wage levels of the people that work in the security industry, which coupled with and which was also aggravated by the border restrictions in Singapore, where we had a shortage of manpower. The borders with Malaysia that close and a sizable portion of our -- of not just us, but for most of the other industry participants as well. The manpower was coming in from Malaysia on a daily basis. And this was cut off overnight. So we had to take some hard decisions. We had to trim our size to cut the losses, which is exactly what we did. And we are recovering from this. We have a very clear plan of action albeit it being a little slow. But we have a very clear kind of action to get the business back on track and to make good on our thesis of entering into the Singaporean market. Overall, the period between 2020 and 2022 was a little extraordinary because of COVID. COVID impacted our international business substantially since March 2020. Probably close to until late in 2020 -- mid-2022, the borders remain closed for all geographies, Australia, New Zealand and Singapore. There were frequent lockdowns in some of the geographies, and they had travel embargo as well in most of these debates. So many people coming over and come out. And these geographies, particularly Australia and New Zealand are largely dependent on migrant and immigration populations as well. And this kind of completely got cut off. And this kind of choke the labor markets. So currently, both in Australia and New Zealand, we see one of the lowest of -- in possibly last few decades, we have the lowest unemployment rates in these markets. So that's the level of the [indiscernible] markets at this point in time. And during this period, 2020 and 2022, the clients also respond for the declining business by reducing their service requirements. So it was a very difficult period for us between 2020 and 2022. But kudos to the team and the leadership as well. I think some very tough quick and smart decisions were made in -- at a time when the Indian business was going through a fairly volatile patch. The international business came to support and even, in fact, in some words probably even rescued the Indian business [indiscernible]. The international business has executed some large one-off contracts, particularly around COVID for quality hotels and the COVID clinics. These were good margin business, but with good margin comes high risks as well. Thankfully, the team [indiscernible] we ended up doing sizable business and good margin during the COVID period as well. As the COVID impact receipts in 2022 and now in 2023, the business is kind of getting back to track to the older levels of pre-COVID. However, we continue to face supply side challenges from the [indiscernible] of COVID. For 3 years, the markets have been shut without immigration. So therefore, the labor market continues to be a little tight. As I said, unemployment rates are at its lowest indicates. And because of the high inflation and consequentially higher-than-expected wage increases, it's kind of offsetting the market a little bit. Having said that, we have a very, very clear plan and work is in progress and actioning out of this plan to get this business back on its track to it;s Pre-COVID levels of profitability. So if you look back before 2019, that's the more sustainable levels. And what you see in 2020, '21 and '22 are more subject to COVID-related variations and so on and so forth. So we are kind of getting back to pre-COVID levels of profitability, and yes, we are working close to what [indiscernible]. A quick look at our clients like our Indian counterparts as well. I think we have so much mutual client in that it's really, really hard to put it into one particular slide, but I still tried and covered this year and kind of segmented between the industries that we serve. This slide is, in my opinion, a good testimony of our capability and on our leadership position in these markets. We have a very significant presence in the government institution space, the defense space, educational institutions in Australia, particularly retail through our loss prevention programs and the energy and resources phase through our SMR business. You will find a lot of the logos of blue chip companies in the BFSI sector, IT sector, health care, commercial and industrial business as well. You will see that the client portfolio is largely diversified, we are not specifically exposed to any particular sector as it is, but we are very, very well diversified. And we also try and see, to the extent possible, we try and follow our customers across the countries. So if there's a customer in, for instance one good example is JB HiFi where we were first present in Australia. And then we picked up the business in New Zealand. And we also drive cost seller services. So where we have a security mandate -- man guarding mandate, we try and do patrols and monitoring and so on and so forth. So we try and kind of work very closely with our customers. Our retention rates are fairly high in all these geographies and we try and follow our customers as well. In terms of business model or revenue model more to speak, we have the models by which we work with our clients. The most sizable or the largest chunk is the deployment based model. So where we bill our customers based on the roster or the admins and the on cost for it. So this is the largest base our customers are working on this model. However, the next model, which is the outcome-based model is fast catching up, particularly in specific client industries and geographies. For instance, in Singapore, the government actively encourages tech-enabled outcome-based contracts and is actively moving the industry around these lines. In my opinion, it's a win-win situation for both the customers as well as us because under this model, we are able to kind of stitch in the technology solutions. We are able to reduce our reliance on manpower. We are able to stay focused on the outcomes of the security, not in terms of the deployment itself. We are able to deliver savings to the extent possible to the customers and also participate in some portion of the savings by getting better margins for us into time. So we are also actively pursuant to get into this outcome-based model, which I'll touch upon as we move forward. The fixed fee model is largely prevalent in our monitoring and our patrols business. It's a fixed monthly fee, smaller ticket sizes. But there's a very, very high level of customer stickiness in these markets. So once a customer is local, since it being a smaller ticket size and it's a continuous process, we kind of stick on with the customers for ages and ages together. It involves high upfront costs as compared to guarding. But again, the margins are fairly very, very good with respect to the fixed price models. I can give you a quick snapshot in terms of how does industry and services play out. On the X-axis, you see the level of manpower industry between -- sorry, manpower intensity between our services. So static guarding is highly intensive with respect to manpower. Patrols and response requires manpower, but it's still not as much. Monitoring, you have manpower really in the control center and electronic security is largely manpower free. So it goes in terms of descending order in terms of the manpower intensity. On the Y-axis, you find the margin profile from being low to medium to high to a very highly margin effect. The bulk of our business right now is in the man guarding business. So it is -- on the Y-axis, while I say low margin, it is a relative skill. So the man guarding business is probably the lowest in terms of relatively, the lowest in terms of all of our services. So the idea is to move into or stitch more services along with man guarding, like patrols and monitoring along with the man guarding services. And better yet is that we can force them to tech-enabled solutions for guarding like virtual guarding; patrols, virtual patrols; and instead of a conventional alarm monitoring, move it more in terms of the CCTV monitoring backed up by video analytics on the matter. Man guarding will continue to remain the core of the business because that's exactly where the demand is created out of. But the strategy is to bundle these services and products as a solution into the mix so that there is a bit of movement from the man guarding to high profitable services. Currently, we have a tailwind, which is good for us on account of the difficult labor market and also the escalating wage cost and in turn the service costs. So currently, it is hurting the customers to go into man-guarding business. So customers are eager to kind of hear from us as to what alternative solutions we can give them, which can really use the impact on their wallets. So there is a bit of tailwind. And in the next couple of slides, I'll probably discuss about how we are approaching this, particularly with respect to the tech capability for us because most of these, as I said, patrol is something that we are already dominant in, monitoring is an area where we would like to grow. But again, it's not something that we need to really, really invest into. But on the other 3 areas, which are maroon in color, on this slide, I'll probably discuss about how we are beefing up our technology capability and how we are approaching our customers. So through COVID from 2020 and all the way until now, we have put a lot of impetus on building the technological capabilities of our security and safety businesses. Personally, I'm very, very thrilled with the results, and I'll probably discuss a few of them out here. So the first one is a drone and a counter-drone solution. So we have the capability right now to kind of deploy drones in our sites, particularly critical installations such as transport hubs and so on and so forth. We are able to do this not out of a static location from where the drone will take off and on. But we also have the capability to do it from one of the box on the bag in itself. These are longer-range capabilities. And MSS, which is the leading mandating business for us, is now a certified remotely piloted aircraft operator with a chief pilot and [indiscernible]. So we have that technical capability gap that is completely addressed. I spoke about virtual guarding. So the one on the bottom left hand of the screen that you see here is a picture of the virtual guarding partnership that we have, the equipment that we have. So it's a fully pleasant plan equipment, which comes along with a trailer. It's self-powered through solar and other modes. It has a rapid deployment capability and the feeds from out of these cameras actually come and back into a control drone. So our customer requires a rapid deployment on the remote side, which is go plug and play and then from [indiscernible] from there on, we are able to do virtual guarding from [indiscernible]. Some of radars and CCTV systems. So these do body heat sensing, velocity sensing and 3D video metrics capabilities. Through this partnership, we are able to detect any potential intruders right at the perimeter itself and prevent any offense even before it happens. This is a major hit in some of the most critical infrastructure sites. And we are pursuing this as a demo in many sites of our client [indiscernible], critical client. As I said earlier, patrols is a business where it's a route-base business where people go to physical sites and do the patrols on a daily basis. Sometimes we are able to deliver a better service to the client and at a lower price by using the virtual patrols for [indiscernible] as well. So where cameras are installed, the patrol is done out of the control rooms and regular reports like how well somebody does in a regular patrol business does is also sent out to the customer. So that is another capability that we have added in the last few years. So those are the front-end systems, but we also stitched it along with some analytical artificial intelligence-based analytical capability on the back end. So the customer -- so the cameras that feed in all of these -- from all of these sites can plug back into an AI-enabled partners product. And from there, we capture a lot of anomalies and abnormal events. Those could include unauthorized taxes, perimeter security, fire and smoke detection accidents and then many, many more, right? You name it and we can do that. And even beyond the safety and the security aspects that we are talking about, we can do many, many more value-added solutions for our customers through this product, wherein we can identify customers, their behavioral patterns, their purchase patterns and so on and so forth, but those are largely in trial mode. I'm not going to discuss about that at this point in time. But we have a full suite of product, which starts from the front end and goes all the way to the anti capability, which is completely automated to be able to deliver to our customers. In our monitoring business, we use a lot of our cars, and these are wood-based businesses as well. So efficiency comes out of reducing the accidents, making sure our employees are safe. The fleets are accepted to the max extent possible. and the routes are optimized to the max extent so that they deliver better margins. So we deploy things like driver monitoring system, route optimization and telematics for our that business. So on the driver monitoring systems, we install driver-facing cameras either on the rearview mirror or on the dashboard to detect any events such as an eye closure or an eye that is not phasing forward of the patrol officers. So once this is detected, the driver is instantaneously alerted with a vibration of the seat or through sounds and the control room is also notified about a fatigue event. So this way, we are able to ensure safe driving conditions for our employees and also make sure that there is no -- there are no accidents and consequently have much more impact for us in business. On the telematics side, we have installed systems, wherein we check for accelerations, harsh braking or driving above speed limit and seen conditions and so on. So the drivers are scored on a regular basis, and they are trained to do what to do and what not to do. This enables us to reduce the risk of accidents and also enhance the life of the asset itself, the cars itself. On the route optimization, again, like in the cash business, these are cluster-based businesses. And what happens is typically, there are businesses that -- there are sites that exit the business or a route, and there are sites that get added on our business. So let's say, for instance, a city like Sydney, where there's a constant churn and constant addition, one has to optimize this route on a fairly report basis. So we do that through this product of route optimization, which recluses and reroutes the patrol runs frequently to make sure that our runs are very optimal and economically mature. There have been very good and heavy investments on the back-end system spend, right? Some of them still kind of plug to the benefit of the customer, some of them for our own operations. Here are a few that we kind of invested in over the last few years. ISO, you would have heard it from the Indian businesses earlier. This is a product that is homegrown and tailor-made for our international businesses. This provides quality assurance and proof of service for our customers. ISOPro and [indiscernible] that you see on the bottom end of the screen, or insulin management products where we log in incidents and manage the incidents from start to finish. Workforce on the top right-hand side is a gross string software. As I said earlier, man guarding is the bulk of our business. And we pay people based on their rosters and based on the deployment. And it is completely dislinked with respect to the revenues that we generate. And I say given, regardless of our employees deployed or not, we will have to pay that employee. We'll have to roster them efficiently. So it's a -- this is a software that allows us to optimally roster efficiently roster the workforce, look for gaps where there are over time, where there are mis-shifts, and so on and so forth. And this is a product that's extremely key for us with respect to cost control and being on top of the business, top of the workforce deployment in free time. EV CRM is a product that is specifically catered for our aviation business, and this is a compliance tool. And it also monitors the screeners at the airport, their performance at the airport. And it is a secure installation site, airports and many other sites. So the screen of performance is very, very key for us to make sure there are no damages back for us. And EV CRM as a product plugs that gap big type. So if we find a screener who is not performing to the standard, they are able to pull that screen. We're able to first of or identify the screener, pull that screener out, maybe it's because of fatigue or whatever, but we are able to pull them out so that we avoid any sort of bad quality or of this incident in [indiscernible] business. Well, most of these are delivered through partnerships because we do not want to kind of go with just 1 product or invest in just 1 product. So most of these are 2 partnerships. So we can kind of change those at will. But in doing so, we have also kind of looked at many, many products and partners that are available, and we have chosen these few. I'm particularly excited about all these partnerships. These 3 slides that you saw in the last 3 slides, I think, gives us a significant advantage in the market over competition. Many people -- the other competing partner -- players also do have this, but I don't think they have the capability that has a completely stitched together product like the way we could offer to the customers. Looking forward in terms of growth, our strategy for growth rests on 3 pillars. I'll start from the very bottom and go all the way to the top. First is our strategy is to expand on specific segments, focus on specific segments and expand those. Monitoring, as I said earlier, and patrols, as I said earlier, are better margin businesses. So we would like to increase focus and increase the business on these specific segments. The strategic medical industry business has quite a bit of unmet demand at this point in time. And we believe this business can get to -- by its own [indiscernible] can get all the way up to $100 million business. So we would like to focus on the SMR business and grow it to $100 million ones. So that's the specific focus in terms of the sectors we need to grow. On acquisitions, we have always been doing infill contract purchases. I won't say acquisitions, into contract purchases or asset processes. We will continue to do that. We still continue to have some gaps in terms of our footprint, our operational efficiencies or capabilities for that matter. So wherever we find that there are smaller gaps you would like to continue to do contract purchases or asset purchases or the case [indiscernible]. Acquisitions, we will only pursue it if they are attractive enough commercially and business mix. So I could pretty much say that for FY '20, '24, we don't have a focus on acquisitions. But even if an opportunity kind of lands with us, we'll still pursue it only if they are attractive enough, both commercially and business was. The third is the main stay business of us, which is the man guarding business and growing that business will require a different approach. As I said earlier, we would like to bundle the physical guarding business through more products and solutions. And we would like to tailor make our solutions along with standardized products of us. The international markets, Australia, New Zealand and Singapore, all 3-line are largely tender. So customers take out a tender. And the vendors will have to respond to that and particularly confirm that they are in conformance with the tender in et cetera, or they run the risk of being dropped over the process, same process itself. So most of these tenders come in as a manpower requirement kind of a trend. So how do you kind of change the behavioral pattern. So we do that in 2 ways. First is in specific pursuits that we do, where it is worthy enough of our time. What we'd also do is we -- along with confirming tender, we also give tender response that is non-confirming as well. And that nonconforming response has all these tech-enabled solutions, products. So we'll try and kind of take 1 guard and put a patrols in or we'll take 1 site out and put a monitoring it and so on and so forth. So all that we do and thereby, reduce the overall -- the strain of the [indiscernible] of the customer and also increase our margins as well. And it's very difficult to do closer to the tender in itself. So in specific pursuits, what we also do is we engage with the client from very, very early on, probably about a year or 2 before the tender itself. We [indiscernible] the client and contribute them towards a solution mindset, move away from a deployment mindset move -- then go to an outcome-based mindset and system a solution where it works both for them as well as us. So that is another strategy that we would adopt in the years to come. And I believe we now have the technology and the capability to be able to sell these products and come in these customers as well. Our FX international leadership structure is slightly unique as compared to the rest of our businesses. For all the 4 companies, MSS, Southern Cross, P4G and Henderson, we have well experienced managing directors leading the charge of each of these businesses. There is a governing board that sits on top which is which we call as an SIS international governing board. And you will find people like [ Mike Makinen ] and [indiscernible] who have been the past leaders of these businesses. So Mike was leading the MSS business until Jeff took over from him. And Pat was leading the SXP business until Dave took over from him. So we get the experience, we get the guidance on the experience and the advantage resolved for a seasoned veteran of these businesses. And you will also see leadership from the SIS back home, yes. So together, this kind of a structure [Audio Gap] of these people, such as Rituraj or Mike Makinen or [indiscernible] work for that matter. I'll look into the financials of the past. As I said earlier, we have grown nearly doubled since FY '17 in terms of revenues. We have consistently grown these years, regardless of COVID or no COVID. The fundamentals of the business remain very, very strong, continue to remain very strong. We see strong cash flows. We see stable business -- we see customers continuing with us, both at tender or be it outside of tender. We have a solid ROCE on these businesses enter on capital employed. International business is probably the lowest in terms of DSO days in our entire group. So some of the strong fundamentals that we have continue to exist even today. However, on the right, you see that the EBITDA margin has come under pressure in some times. So I would like you to kind of not consider FY '21 or '22 because these are cold affected yes. But if you look backwards into FY '19 and '18, these are the kind of margins that we technically have to get back to. And -- but this has come on distressed right now and largely because of the after effects of COVID in the economies. As I said, labor market is tight. We are finding it difficult to source manpower. Unemployment rates are at lowest, higher-than-expected wage increases. But there is a plan in place to be able to get back to those pre-COVID levels of profitability and work is in progress to be able to get back to that levels. In summary, I think this is a business that was created for strong cash flows and operating as a hedge. The business continues to be a fundamentally a solid, stable business with strong cash flows. COVID was a great illustration where SIS International worked as a counterbalance and a great hedge in the Indian operations. In the last few years, we have grown our tech capabilities sizeably. [Audio Gap] in the next few years. Overall, as SIS International, our aim is to get it to $1 billion international platform independently by itself and get it back to a pre-COVID levels of profitability at the earliest possibility. That that's it for me, and I'll hand this back to Shweta again.

Thank you, Murli. Thank you for a great presentation. I'm sure the participants also enjoyed and founded a very engaging and interesting conversation. We're now on the floor for any questions that you may have. [Operator Instructions]. I think the first question is from Kunal. Kunal, please go ahead, ask your question, introduce yourself and then ask your question.

Yes. This is Kunal Thanvi from Banyan Tree Advisors. We are a semi-registered PMS firm. And I had 2 questions again. Like the first one was on -- like you talked about margins in the international business, which went as high as 6% plus during COVID and they are now kind of running down because of the wage hike that we saw and there's a lag effect in the passing on that wage hike. I wanted to understand where first -- where we are in the cycle in terms of passing on the benefit of the increase in the wages? Secondly, you also talked about that we are seeing some supply side challenges. Does it mean that there has been some impact on the growth, like on a normalized basis, we understand that the COVID business has kind of run down. On a like-to-like non-COVID business, are we seeing volume growth or there's a challenge on the volume growth as well; so those are 2 questions. One, where we are in terms of passing on the increase in the wage hike? Second, what is the impact on the volumes because of that?

Sure, Kunal. During the COVID times, there was a bit of slowdown in terms of activity -- in terms of tender activity. We see the tender activity back to its original levels. So there is no issues of that we see with respect to volume growth itself. So year-on-year, we have been growing fairly strong. And the tender activity, market activity is also fairly good. So that's not an issue with us. With respect to margins, you did mention where are we in terms of the cycle of passing on the wage increases. Typically, most of our contracts do pass over the past across the wage increase with a bit of a lag. So the -- in the major market, which is Australia, the wage increase happens in the month of -- on 1st of July, right? And many of these contracts do the rate hikes has been on the 1st of July or sometimes during the anniversary of the contract renewal. So it could be October, November, December, Jan, all the way to the [indiscernible]. So the increase will invariably happen. You will always see a margin dip in the second quarter because of this -- because of a catch-up. But towards quarter 3 and quarter 4, you would have quarter for all the wage hikes in the past. So that's not an issue. The other thing that you should also note is the wage increases based on Fair Work Australia in Australia. But sometimes, most of the contracts are based on the favorable [indiscernible] bases -- but sometimes some contracts operate based on a different index in state. So that has also been a big bit of a challenge for us. But again, we have been able to work with our customers and get those price increases as well. So the cycle of wage increase is not as much a problem, right? Having said that, the supply side challenges are the more critical for us. So what happens is we still have to deploy the manpower as per the contract at the sites. And if we don't have adequate manpower, we do work people on an overtime basis and pay penalty rates on that. Now that affects our margin. While it does not give us revenues, it increases our costs, it [indiscernible] up our costs and that we have not originally factored for. And that is what is causing the margin recession significantly. So that's a big problem. So the supply or challenges are starting to ease as we speak. We are also going very heavy in terms of our recruitment. We are looking at all possible pipelines to get the recruitment back on track. We have seen some early signs of benefits out there. But again, the challenge continues to remain, and the market will have to be [indiscernible].

Sure. Got it. So basically, when we say -- so at this point of time, we are still facing the problem. There are some great news that things would improve from here on.

That is correct, Kunal. That is correct.

Sure. And from a longer-term perspective, if you can break down the expected growth in the international business between price and volume. Second, again, what is the -- what is the long-term margin that one should look at almost on a sustainable basis because at this point of time, there are supply chain issues and because if you look at FY '20 margins, right, where there was no impact of COVID as such like it was this last 10, 15 days. The margins were north of 5%. So just wanted to understand 2 things. One, long-term growth breakup between volume and value and existing customers giving us more business. And what is the sustainable long-term margin for international business?

Let me take the second question first. The sustainable margin, as I said earlier, is the pre-COVID levels of margin, which is FY '19, '18 and few years prior to that, right? So what we would like to get back to is as pre-COVID levels of profitability. And when it comes to growth in itself, our price growth is largely dependent on the wage increase in itself, right? So all our contracts are [indiscernible] based on the wage increases and we pass on the wage increase to the customers. Historically, it has been around 3% to 3.5%, 2.5% to 3.5%. But the inflation hitting across all the economies and including Australia and New Zealand and Singapore, we believe -- last year, I think we dropped somewhere about 5% or so. And going forward, for the next until inflation eases, we could probably see higher levels of price growth in itself. . On the volume growth, again, our strategies will have to pay. These are long lead term, these thing. But we expect to repeat some of our volume growth just prior to COVID. What is happening is we have many of these service reductions that happened during COVID levels are coming back on track right now. So some portion of the volume will kind of kick in from out of that and some from roots. So we want to get back to those pre-COVID levels of volume growth as well.

Sure. So on a consolidated basis, the revenue growth -- sustainable revenue growth would be 5%, 6%?

See, again, it depends on how the price growth comes in from. So the price growth in itself is, let's say, 6%, then along with the volume growth it can be higher. If the price growth comes in at 3%, then the volume got can be different. So it is anybody's guess honestly at this point in time.

Sure. Vivek Sethia. He has the next question. He's posted on the Q&A.

Am I audible?

Yes, Vivek. Go ahead.

Yes. So the first question is with regards to like what's the breakup of your revenue in the international business, like product-wise, solution wise, what's the breakup?

Yes, so in our international business, we currently, as I said, in the first few slides, our solutions, which is largely petrols, monitoring and so on and so forth, he contributes to about 7% of our overall international revenues.

Okay. And the security solutions?

See, the bulk of it will be the manned guarding. So we punch it into 2 parts. One is the manned guarding business and Solutions . Now what happens in some contracts, you pick up a lot of manned guarding have stitch it along with patrols and [indiscernible]. So that's a Solutions business. What we try and do is we try and take stock of manned garden separately and the other business separately and the other business is contributing around 7%.

Other business contributes about?

7%.

Okay. So the rest is manned guarding 93%?

Largely will be manned guarding, yes.

Okay. So I just ran through some numbers like if you do a simple division of the revenue by the number of employees. The average realization from the associates in Australia -- in the international business comes out to be around INR 460,000, which is around about [ AUD 100,000 ], if I'm not wrong. On an annual basis, I'm talking about. So whereas I went through some websites on Google, like Indeed, Seek and all those other job sites, it says that the average sale for a security guard is around [ INR 65,000 to INR 75,000 ]. So like I want to understand like what's the reason for this 30%, 33% higher realization? And are there any key -- I mean, is the reason the type of clients that you're serving? Or is it something else?

Vivek, it's a combination, being the leader and the kind of quality that we provide, certainly, we do command better rates as compared to many others. So a customer that is keen in terms of service. It's a customer that is keen in terms of the partner that they work with, certainly do compose before the realization itself is higher. The other thing that you should note is also the aversion as you put it out also includes our monitoring and the patrols business, where realizations will be larger vis-à-vis the number of people that are employed.

So how would you -- I mean, my first question with regards to breakup was precisely because of this to understand that what is the revenue and how many employees are there for manned guarding for us to calculate to be able to calculate the realization for the manned guarding business? Like how should we take it?

So I might not have a ready answer for you, Vivek. Why don't I kind of kind of come back to you off-line through Shweta.

Okay. And I just want to know if there are any key clients and how do they contribute to the revenue in terms of percentage?

As I said earlier, the defense business is fairly key for us. That's a large [indiscernible] for us. But other than that, there is -- it's a very, very well diversified portfolio. Customer will talk [indiscernible], so it's a fairly well-diversified portfolio for us.

And how about the cash flow generation, the receivable is -- what's it like in numbers for the international business?

Yes. In the international business, it's shared in the earnings note quarter-on-quarter, you could look into it. But again, off the of my memory. Our DSO base are anywhere between 45 and 60 or that, certainly not around 80, 90 [indiscernible]. So it's -- for instance, our SXP business, will be in the lower end of the range. And at business kind [indiscernible]. So again, the -- our payroll cycles are because you asked up on the cash flow, cash given touching upon the payroll cycles as well. So unlike in India, the payroll cycles are largely fortnightly in Australia and in New Zealand as well. Singapore operates on a monthly cycle. So our out goes over on a monthly basis. And our inflows -- sorry, our outgoes are on a fortnightly basis while our inflows are on a monthly basis through the on essentially. And so you will find in some of the months, historically as well, there will be 3 pay cycles that will come in a particular month, that will kind of show a kind of cash outflow on the operations, but that should be looked at from a point of view that it has had 3 payroll cycles. I think December was one such quarter. where we had 3 payroll cycles in the month of December. And that means on a cash flow basis, we got paid out in advance, and we are getting back on the customer -- just a calendar event that's it.

So just to confirm, inflows are on a monthly basis across Australia and New Zealand and Singapore, whereas outflow in Australia and New Zealand is fortnightly and Singapore is monthly, right?

Correct. So payroll cycles are fortnightly, again in Australia and New Zealand and in Singapore, it is a month basis.

And inflows are on a monthly basis?

Inflows keep coming through the month.

Vidit, I see your hand is raised. We will unmute you, and you can go ahead and ask your question.

I hope I'm audible. I just had one question on Henderson, you touched on what's happened out there since COVID, if you could just shed some more details on really what's happened because I see revenues sort of half since in 2019. So what really went wrong? And what is the plan to improve? I mean, can we go back to what we were doing 3 years back or it's a new story going forward?

Vidit, I was expecting this. Thanks for asking this question. See, Henderson, we -- so Henderson, we entered -- as I said, we entered in with the PCs to kind of grow from our $6 million business. And as you rightly say, kind of we have the business, right? And it was a kind of a strategy where we had to do this because of certain conditions that were prevalent in Singapore during the COVID times. So the labor market started to kind of get really dead, the Malaysian workforce kind of contributes to roughly, let's say, about 20%, 25% of the overall workforce. And that died at one shot, with the border closures. The COVID itself, what happened is put a lot of workforce getting sick and not turning up for work. And what interim also happened is we had to pay for the cycles well and also in terms of the revenues, the revenues were not coming. And if you are not deploying, you have to pay damages and so on and so forth. So it's a lot to do with COVID. And what we took a strategic call was to say, hey, this is not the right time to expand or even stay in the same level of business. So I think we should quickly -- we have hit a patch of here, and then we need to quickly back and kind of get to a state where we are able to service our clients and stabilize the ship. And that's exactly what we have done. In the interim, what has also happened is, the Singapore government has put out a note to kind of move this industry to kind of become more solution-specific. And there are after effects because of that. One of the after effects is the minimum wage increase that has happened. So all put together, I think we have taken a strategic call to be at the size that we are right now. Our focus is to get back to the older level itself. And worth mentioning here is we did receive the grants from the Singapore government, which specifically caters for these kind of situations because they are trying to move the industry, steer the industry to a particular level. All the industry participants are going through what we are going through. And therefore, that tax is a cushion for us. But the strategy for us, once we have pretty much stabilized the ship, now the strategy for us is to grow from here on and continue with our thesis for hereon.

Sorry, I got muted by mistake. So is it -- am I corrected understanding that the problems that we had was a labor shortage problem and thus we could not service the customers are now moving to the solution-based industry, we are hoping to go back to old levels. So how do we fare in with regards to competition when we move towards some more solution-based systems? I mean given our experience in Australia and maybe even in India, do we have the know-how of the technology which is at par with the others? Or is it even superior to those?

See, any technology, in my opinion, kind of gives you a headway, right, a head start with respect to your competition. Competition will soon catch up. technologies are evolving. And you have to constantly be ahead of the game. Currently, I believe we are ahead of the game in terms of the technologies with -- as compared to our customers, many of our customers -- sorry, with respect to our competition. Many of our competition are not pure-play security and safety players, either they are integrated with FM or they're integrated with, let's say, a parking business and so on and so forth. So we are a pure play focused business, and we have invested heavily in the last couple of years to be able to create and do these partnerships, right? So it certainly gives us a head start. Stitching the products on the solutions is one, selling it to the customer and engaging the customer and changing their mindset is another. We have done that in the last couple of years, particularly in the last year, for which the outcomes will be seen in the next couple of years or so. But more specifically, now we are fairly confident with the stack of technologies that we have right now that we are engaging with all meaningful clients with respect to putting them into something of a technology or a solution-based platforms. Certainly, it is advantageous for us with respect to competition. But again, as I said earlier, it gives us a headway. We need to constantly be on the treadmill to continue to keep up on our technological gains.

Okay. Understood. Just one last one for me is any time lines you can share in terms of this plan to get to the $50 million, $60 million that we are doing in Singapore pre-COVID?

Tough question, Vidit, honestly. See, again, what is happening is we have done a lot of changes in the business in itself, fundamental changes in the business, and we have stabilized the ship. It is a path to recovery. I don't think I can share a time line at this point in time with you. But again, what is more important for us is a profitable growth, again. So growth is the second part of the overall statement. So profits come first, profitable growth, and that's exactly what we our focus is.

Chirag, we'll unmute your line and you can go next.

Sir, one question I had was the Solutions business or technology-driven business, if I can use that work. See, your entire presentation focuses on that, but it's near 7% and you indicated it is a long gestation period, right? So it doesn't tie down. what are the initial segments or feedback you are getting from the customers, which makes you think that this is a long gestation period?

See -- thanks, Chirag. Thanks for the question. Security is a very, very age-old business. And it's been there forever now. So many of these things have gotten into the mindset of people both within our organization as well as in the customer organization. So you have to tackle at both things. You have to tackle the mindset of our people. The industry is evolving. We have to stay relevant in the industry. We have to stay relevant in the tech front as well. And at the same time, we have to make sure that our guys understand how the technology works. We are technically -- we are originally not a technology kind of company, right? We don't have that nature. So first is to have these partnerships, change our mindset, change our sales strategy and then start cultivating our customers, changing their mindset and doing the sale. So the gestation period is not as much with respect to challenges per se, but I think it's a revolutionary thing that we need to move forward with respect on the technology. I think we have cracked the code on the partnerships. We have cracked the code on how they see it. We are now -- we are now kind of selling it to the customers more -- pursuing the customers more in a more meaningful way. The customers are now starting to see benefits from all of that because it's highly automated, not man far driven. We see cost savings from out of it. Overall, efficiency is much better for them. So the customers are also -- the turning around is a little difficult. But again, but the customers are also starting to see. Ultimately, we have to move it.

Yes. Sorry, I was on mute. My question was more pertaining to the fact that we have already had around 7% of revenue. Part of that would be Solutions and technology based, right? So to achieve that 7%, what were the resistances you got from the customers? It would not be an easy journey, right? It is always that initial 7%, 10% is a difficult one and then you are able to scale it up.

That is correct. So for instance, if I have to -- if I kind of tell the customer that, as I said earlier, it's a tender-based market. So the customer comes out with a tender saying, hey, I need X manpower at these, these hours and these, these sites and so on. So to go and tell them, preach to them that, hey, you don't need this particular resource at this hour. Why don't you change the way you look at things? And why don't we add a product or a different service like a patrol or monitor. And that's what I call a Solution, combine many aspects to get it to the customer. That changing of mindset is a little different. So we have been able to do that in many places. Globally, it's a manpower focused industry. And -- but now we are -- across the model is changing. And we also have to change with the times, and we are doing that. The customers are seeing it as of now.

The next line is Shalabh.

Hello. Am I audible?

You are, Shalabh, but your volume is very low, if you could just raise it up a little bit.

Is it better?

Shalabh, we can't hear you very well.

It is better?

Yes, much better now.

Okay. Great. Thank you for a very insightful presentation, Murli. A couple of questions from my side. First is I wanted to get some sense on this B2C business and alarm monitoring because nowhere in the presentation we mentioned because whatever alarm monitoring, we are doing, it seems more on B2B side. So how big is B2C market of alarm monitoring in Australia and given a developed country status, one would believe that that's a bigger market, a much bigger market like probably in the U.S. So if you can share some insights into that market and if there are other bigger companies who are much bigger than us in that market, which is more driven by an ARPU kind of in the market? That's the first question.

Sure, Shalabh. You're right that our alarm monitoring business is largely B2B. B2C is not a forte that we work in. There are specific companies such as Sham or SMC, which do alarm monitoring as a stand-alone business, which is more tech-enabled business for them. And those businesses cater to B2C. Again, they do B2B as well, but largely, they do B2C as well. And you are right that it is an ARPU-based business in the B2C and -- and I would reckon the market is probably around -- I just a guess here based on my experience. I think it is nothing less than $0.5 billion kind of market. On the other monitor, which is when I say $0.5 billion, I'm saying B2C and those smaller B2B as well, right?

Sure, sure. So second related question, Murli, is like at the start of the presentation, you categorically mentioned that you don't want to be in FMS or other businesses. Any specific reason why like we haven't made any foray into B2C alarm monitoring, which is more a profitable business or say, which again would have a similar characteristics as our security business. Any specific reasons why we have stayed away from these or it's difficult to enter market given maybe other incumbent players?

Yes. I think you've partly outset the question, Shalabh. On the FM side, there are established players in the market. Again, in India, we do understand this market. Internationally, it takes a bit for us to understand this. We do not want to -- there's quite a bit for us to grow in the security and safety space itself. So we do not want to divert our attention to FM space. So that's the answer on FM. The customers are the same. That's just our strategy to just stay focused on the safety and security side. So it be pace. If you look at historically, we have doubled the revenues in -- between FY '17 and FY '22. So there is ample growth and arms space and leg space available for us to grow within this business. The B2C alarm monitoring is a totally different gamut of business. Again, this mapping, is still the safety and security side of the business. The only thing out here is, can I do a cross-sell of a B2B or can I do the -- what can we do with the customers on the B2C business? Can I say something else from out of this thing? So that's a very difficult answer. I don't think we have got an answer to this. And therefore, we could not -- we did not recur into that space. It's not that we don't want to enter into that space. But again, some thoughts coming into my mind in terms of why B2C, what kind of challenges will be there with respect to a B2C alarm monitoring business. Having said that, it's a very good business, mature business, ARPU-based business, high margins, established players are there, and they are very high levels of customer takes no talks about any of these. It's a good business, right? But again, some thoughts will have to go into, we can't organically grow that capability in that within our business. We will have to do an acquisition, it need be. Again, it's a good thought, good thought. We should cut us that.

Okay. So what I get from you is we may be open for an inorganic route to get into a B2C if something comes up. But even on FMS, we might not even consider an inorganic route? Is that ...

In the near term, you are right with respect to FM. In the near term, we are like with respect to FM that we will not consider even with an acquisition right? On the B2C space, again, it requires a level of rechecking and rethinking about our strategy. But if we do go down that part will only be on acquisition, small or a large player, but we can't generate that capability within in-house to on our business from the way [indiscernible].

I think Vivek has a follow-on question. Vivek, please go ahead.

I just wanted to understand about I think you had touched upon the market size of the manned guarding business. So I just wanted to understand like what's our standing in the manned guarding business -- in the manned guarding market as such, any Australian, New Zealand and Singapore because when I asked you about the realization thing, you had said that you charge a premium versus the market rate. So I mean, what's the basis for charging that premium? Do you -- like what's the market share that you command in those markets?

Vivek, I'm not too sure if I understand your question well, but I'll still go ahead and give it a crack. So we have 22% share of the market in Australia, that is also overall security. Are you specifically asking me for the manned guarding market?

Yes, manned guarding also, mainly manned guarding only, I was talking about, because the Solution business is very minuscule as of now.

Yes, correct. So it is largely minor the overall business, yes. It is largely be on the overall business. We are the #1 player in Australia. We come out at 28% market share. We are #1. And there is the #2, #3, which are fairly around there. So fairly consolidated market, and we are the #1 player around there. Similarly, in New Zealand, we are looking at top 3. There are 2 players ahead of us. Not very far from each of us to get to the leadership position fairly soon. So again, in terms of market share there, again, I would roughly estimate us to be -- nothing has been on a market share [indiscernible].

Sorry, can you repeat the last part?

Yes. I'm saying in Australia, we are the #1, and we have about a 22% market share. The manned guarding business will largely miller the overall market share that part of the business. Singapore we are within in the top 3 and the top most players is not very far away from us, certainly not double the range of what we have at this point in time. So I would probably hazard a guess out here, but we are, again, not shy of 15% -- 10% to 15% market share in New Zealand.

So actually, the reason for me to ask this question is to understand like how many players are there in the market? And what's the -- I mean, depending on how many players are there in the market, is there any price competition within the market?

[Audio Gap] specifically cites in the iteration space. Certus, the Singapore-based company entered into [indiscernible] acquisition. So yes, these are 3 major ones that quickly come to my mind with respect to competition in Australia. And in New Zealand companies [indiscernible] ahead of us. So again, in terms of price competition, yes, there will be -- it's a highly consolidated market, right, mature market, highly consolidated market. But again, there is a lot of customer stickiness in these markets as well. If you have proven service, customer thinks more than twice to kind of change and operate as well.

Thanks, Vivek, for your question. I think that was the last question that we had for today. Thank you, Murli again, for a wonderful session. And I hope the participants were able to address all of their queries as well. Thank you, everybody. This session is being recorded and will be uploaded on the website. In case there are any additional questions, feel free to reach out to us, and we'll circle back with you on any other information that is required. Thank you all for attending this session. You may now disconnect your lines. Thank you.

Thank you, everyone.