sis ltd share price Directors report


Dear Members,

Your directors are pleased to present the 39th Annual Report on the business and operations of SIS Limited ("the Company") together with the audited financial statements (standalone and consolidated) for the financial year ended March 31, 2023.

Financial Highlights

The financial performance of the Company for the year ended March 31, 2023 is summarized below:

Amounts in H Million except share data

Standalone

Consolidated

2022-23 2021-22 2022-23 2021-22
Net Revenue 39,849 33,178 113,458 100,591
Revenue Growth % 20.1 10.4 12.8 10.2
Earnings before financial charges, depreciation and amortization, and taxes (EBITDA) 1,870 1,461 4,916 4,985
Depreciation and Amortization 543 379 1,347 1,116
Financial charges 670 561 1,149 984
Others (Other income and effect of business combination) 692 634 327 527
Share of Profit / (Loss from Associates) - - 102 26
Reported Earnings/Profit Before Tax (PBT) 1,349 1,155 2,849 3,439
Tax Expenses (552) (183) (616) 179
Add / (Less): Exceptional Items - - - -
Reported Net Earnings/PAT 1,901 1,339 3,465 3,259

On a standalone basis, the Company?s revenues, at H 39,849 Million during the year under review, increased by 20%, EBITDA at H 1,870 Million increased by 28% and, profit after tax at H 1,901 Million increased by 42%, as compared to the previous year. On a consolidated basis, during the year under review, the Group?s revenues at H 1,13,458 Million increased by 13%, EBITDA at H 4,916 Million decreased by 1% and, profit after tax at H 3,465 Million increased by 6%, as compared to the previous year. During the year, there has been no change in the nature of the business of your Company.

Significant Developments

Acquisition of remaining shareholding of Terminix SIS India Private Limited

During the year under review, the Company acquired the entire remaining shareholding of 49.99% in Terminix SIS India Private Limited ("Terminix"), a subsidiary of the Company, for an aggregate consideration of H 7.77 Million. As a result, Terminix became a wholly owned subsidiary of the Company

Acquisition of shareholding of Safety Direct Solutions Pty Limited

During the year under review, the Company, through its wholly owned subsidiary, acquired 85% of outstanding equity shares of Safety Direct Solutions Pty Ltd for an aggregate consideration of H 270.50 Million.

Acquisition of remaining shareholding of SLV Security Services Private Limited

During the year under review, the Company acquired the remaining shareholding of SLV Security Services Private Limited ("SLV") and the Company now holds 100% of the capital of SLV.

Buyback of Equity Shares

The Company successfully completed its second consecutive buyback, amounting to H 800 Million comprising of 14,54,545 equity shares of face value of H 5/- each, at a price of H 550 per share through the tender offer route. The buyback offer size represented 0.99% of the total paid-up equity share capital of the Company as of March 31, 2022. The total outflow of funds including taxes was H 997 Million. The Buyback was undertaken to optimise returns to shareholders and enhance overall shareholders? value. During the buyback acceptance period, the eligible shareholders submitted valid bids, resulting in a subscription of 7.83 times the maximum number of shares proposed to be bought back. The settlement of bids and the payment of the . buyback consideration was made on October 28, 2022, and the shares were extinguished on November 2, 2022.

Operations and Business Performance

The standalone business, which includes manned guarding and electronic security solutions, achieved a healthy growth of 20.1% in revenue in FY23 despite multiple economic fluctuations. The business reported an EBITDA H 1,870 Million

at a Margin of 4.7% for FY23 up from H 1,461 Million at 4.4% EBITDA Margins % for FY22, an improvement of 0.3% in EBITDA Margin %.

Despite a challenging business environment, FY23 has been a landmark year as the annual revenue crossed H 113,400 Million+. All the business segments have reported healthy revenue growth of 12.8% during the year with an EBITDA margin of 4.3%. The Facility Management segment was ahead of the pack with 36.2% revenue growth. Security Solution India achieved a revenue growth of 19.9% followed by Security Solution International (0.7%) and Cash Logistics (38.3%).

Security services – India

The Group provides security services in India through its subsidiaries, SLV Security Services Pvt Ltd., Uniq Security Solutions Pvt Ltd, Tech SIS Ltd and SIS Alarm Monitoring and Response Services Pvt Ltd.

SIS continues to be the largest security service company in India. The superior service provided to its clients has reinforced this leadership position.

The Security services India segment recorded its highest ever annual revenue at H 46,261 Million, a growth of 19.9% over FY22 revenue primarily due to several significant wins in segments viz., financial, manufacturing, transportation, education, retail, healthcare, oil & gas, and IT.

The strong revenue growth in the segment is a result of minimum wage revision across states like Sikkim (~67.0% increase), Karnataka (23.0% increase), Bihar and Punjab (15%-17% increase) and central minimum wage hike as well, in addition to new order wins. New order wins and minimum wage hike had a positive impact on both our revenue & EBITDA and improved employee retention and manpower availability. As a result, FY23 EBITDA margins have increased from 4.3% at H 1,657 Million in FY22 to 4.6% at H 2,119 Million in FY23. FY23 saw an overall improvement in India business margins as business growth normalized with the economy bouncing back post pandemic. This year?s results illustrate the predictability of our business model, as an essential service business, which continues to grow at a healthy rate. The post COVID period witnessed record organic growth in the Security Solutions India business indicating the strength of the SIS sales engine which continues to leverage and capitalize on the growth of the economy in India. The number of employees employed by the Group in India as on March 31, 2023 was 1,81,381. Significant operational improvements were achieved by leveraging technology-based solutions and it has contributed to the growth in productivity for FY23.

We continue to focus and invest in our capabilities in electronic security services in which we operate two businesses.

1. ManTech: Our electronic security business recorded a revenue of H 422 Million for FY23. We continue to sell and provide technology-based security solutions to our customers to complement manpower deployment and providing customized solutions.

Our electronic security business segment has won significant orders from leading PSUs and private banks have been encouraging an increase in our solution sales revenue. In the evolving security landscape especially, customers have been demanding MANTECH solutions wherein security guards are coupled with and supported by technological solutions to provide a superior and more efficient outcome for the clients.

Some of the noticeable solutions this year, includes, one of the single largest AI projects in the country at 80 Locations for large PSU in the Oil sector and Surveillance & Command Control for a large PSU in the Gas sector.

2. Alarm Monitoring and Response: We provide customized AI-enabled intrusion detection and response services to individual homes, small business establishment, retail chains, bank branches, ATMs, Offices, and commercial establishments and operate this business under the VProtect brand. During FY23, we continued to aggressively expand our presence in the B2B space and won contracts in the BFSI segment and also successfully implemented customized solutions for large logistics customers.

We have clearly established our capability of providing monitoring and response services to customer locations and sites pan-India and the number of sites secured by us, stand to reach over 8,000 sites and over 14,000 connections as of March 2023. We are confident of strengthening our presence further in this space with the BFSI and Logistics sector constantly looking at innovative solutions to help their security needs.

Security services – International

The Group provides security services internationally through its subsidiaries in Australia, Singapore, and New Zealand. In Australia, we operate through MSS Security Pty Ltd and Southern Cross Protection Pty Ltd, in New Zealand through Platform4Group Limited ("P4G") and in Singapore through Henderson Group. We also completed the acquisition of Safety Direct Solutions Pty Ltd. during the year. The Security services International segment business has recorded its highest ever annual revenue at H 48,759 Million.

Our International Security solutions business continued to demonstrate strong growth and maintained its No. 1 position in the Australian market. Labour shortages across international geographies continued to have an impact on the costs. We continue to hold a leadership position in pure play security & safety services in the APAC region focusing on regulated markets and generating consistent profitable growth.

The segment continues to demonstrate strong growth. For FY23 the International segment recorded a significant number of new order wins. We acquired key contracts in the segments viz., retail, logistics and real estate.

On a consolidated basis, the Security services International segment, recorded revenues of AUD 887 Million during FY23 against AUD 883 Million in FY22.

We continue to be No.1 in Australia with over 21% market share. High margin special contracts have now completely wound down and the segments which were most impacted by the pandemic viz., Aviation, Universities & Special events started ramping up and rapidly returning to pre covid levels. In New Zealand, P4G continued to build on its market position and client base and enhanced its market share and service portfolio.

The FY23 EBITDA for the segment was AUD 36 Million (4.1% of revenues) against AUD 49 Million (5.6% of revenues) for FY22 due to the winding down of special COVID related contracts and labour shortage.

Facility Management

The Group?s facility management business comprises: i. Service Master Clean Limited, Dusters Total Solutions Services Private Limited and Rare Hospitality & Services Private Limited in the business of housekeeping and cleaning services. ii. Terminix SIS India Private Limited ("Terminix SIS"), in the pest control business; and iii. Adis Enterprises Private Limited, specializing in Operations & Maintenance in the Pharmaceutical vertical. The Facility Management business is the fastest growing vertical in the group?s portfolio and is currently the No. 1 facility management provider in India. The business recorded its highest ever annual revenues at H 18,998 Million in FY23, up from H 13,947 Million in FY22, a robust growth of 36.2%. The revenue growth is largely driven by key business segments like Healthcare, Manufacturing, IT and Transportation segments. The One SIS programme, which aims to provide integrated solutions comprising security services, facility management, pest control and other allied services to the clients, under a common contractual arrangement is spearheaded primarily by the FM business. During FY23, we achieved a revenue of H 163 Million from One SIS program.

Our Pest control business Terminix SIS forayed into paid audits and launched the Audit X app which was well received. We introduced powerful engineering solutions AUNOA (Automation and Guaranteed energy savings) and CAMFIL (Smart Air Filtration with sustainability for better ROI). We see an increasing trend of large customers looking to consolidate their service providers to achieve cost savings and be more compliant, which is favorable for organized players like SIS and our integrated business service solutions offering One SIS. The use of technology in service delivery is increasing with increasing interest from customers in more mechanized and advanced facility management solutions. The consolidated EBITDA of the facility management segment grew by 28.7% from H 636 Million in FY22 to H 818 Million in FY23. Focused execution of margin improvement initiatives primarily contributed to the improvement in Q4 FY23 margins.

Cash Logistics (a joint venture with Prosegur)

The cash logistics business is a joint venture with Prosegur, a global leader in cash solutions. Services offered by the Company under this segment are Safe keeping and vault-related solutions, ATM related solutions, Cash-intransit, Doorstep banking, Cash pick-up and delivery, bullion management and customized cash processing and deposit solutions.

FY23 has been a record year with robust growth for the Cash logistics business. India?s high GDP growth rate and cash in circulation, at an all-time high (growing at a 2016-2023 CAGR of 12.5%) are the key drivers for growth of the cash logistics industry.

The business has transformed into a Bank Outsourcing and Support Solutions provider and not merely a provider of cash logistics solutions. Moving beyond the ATM business to focus on services like currency chest management, cash processing etc. will enable the business to become a formidable industry participant.

While quarterly revenue run rate has almost doubled in the last three years, EBITDA has quadrupled, with Q4 FY23 EBITDA at H 243 Million, a 6.5% growth over the same quarter previous year and 11.6% increase over the previous quarter, illustrating the quality of revenue growth and execution excellence with international best practices. FY23 revenue was at H 5,430 Million, a growth of 38.3% over FY22 and FY23 EBITDA was H 857 Million, a growth of 60.9% over FY22. We reduced exposure to the ATM business and continue to focus on the non-ATM business, which includes retail banking and cash-in-transit business. We now operate 3,000 cash vans, service 10,000 ATMs and provide doorstep banking services across 22,000 pickup points and operate 60+ vaults and strong rooms across the country. The business focused on solution selling and sales in new segments which now contribute ~4% of overall revenue with ~26% of currency chests outsourcing to us.

We were the 1st player prepared for phase 1-cassette swap in 2023, 3 months ahead of the industry. By the end of FY23, almost 60%+ of ATMs serviced by us were functional on Cassette swap operations. We continue to focus on new solutions to reduce dependence on traditional products and services.

The global cash logistics market is expected to reach $ 26.8 billion in 2027 at a CAGR of 6.9% from $ 20.5 billion on the back of rise in deployment of ATMs.

Outlook

Despite the global slowdown, India?s economic growth rate is the highest globally and reflects relatively robust domestic consumption and lesser dependence on global demand. Improving labour market conditions and consumer confidence is likely to drive private consumption. The central government?s commitment to significantly increase capital expenditure FY24, despite targeting a lower fiscal deficit of 5.9% of GDP, will also spur demand. Helped by recovery in tourism and other contact services, the services sector will grow strongly in FY23 and FY24 as the impact of COVID-19 wanes. However, manufacturing growth in FY23 is expected to be tamped down by a weak global demand, but it will likely improve in FY24, However, geopolitical tensions and weather-related shocks are key risks to India?s economic outlook. Overall economic growth of the country directly fuels demand for Security, Facility Management (‘FM?), and Cash logistics services. Along with a low economic base in FY21-22, the growth moderation for India in FY23 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices. According to Asian Development Bank (ADB), India?s gross domestic product (GDP) expected to grow at 6.4% in FY23, however, FY24 is expected to see a faster growth in GDP at 6.7% owing to high investment in the country, supportive government policies and sound macroeconomic fundamentals. Despite the global slowdown, India?s economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand. India is expected to be the fastest growing economy globally with GDP growth at 6.1% for 2023 and 6.8% for 2024. Economic growth boosts demand for security services leading to volume growth for SIS. The security services industry?s formalization augments market share for organized players like SIS. This combined with the growth in Infra (rapid urbanization, smart city projects) and manufacturing sectors to enhance demand for security solutions and allied services indicates a long-term robust growth potential for the sector.

Similarly, in the FM vertical, significant growth in the real estate sector on account of shifting preferences towards a safe, clean, and secure environment represents one of the primary factors bolstering the market growth in India. IMARC Group has forecasted that the FM vertical will grow at a CAGR of ~12.6% during 2023-2028.

With the booming information technology (IT) sector and the growing popularity of e-commerce platforms, the overall need for infrastructure and organized spaces is increasing, which is also influencing the FM services market positively. Furthermore, post-pandemic there has been an increasing emphasis on hybrid workspaces and return-to-the-workplace strategies are anticipated to augment the demand for FM services to maintain safety, health, and productivity. The security solutions industry is evolving. Given that minimum wage increases twice a year, human resource costs are increasing Pan-India. This coupled with rapid urbanization, smart city projects and large infrastructure developments are increasingly adopting e-security solutions driving the growth of the electronic security market. This positions the Company in a favorable position to be able to cater to customer requirements with integrated man-tech security solutions. The Company continues to focus on delivering robust organic growth and it is expected that inorganic growth will provide additional growth enhancement. We are open to acquisition opportunities with niche capabilities / customer segments which can further augment our service offerings or presence in specific service segments especially in the India businesses. Continued investments in technology for improving internal processes and systems and driving synergies across business divisions / entities will enable us to achieve cost savings and superior profitability.

Material changes & commitments, if any, a_ecting the financial position of the Company from the end of the financial year till the date of the report.

No material changes or commitments that could affect the financial position of the Company have occurred between the end of the financial year and the date of this report.

Other significant matters since the end of the financial year

No significant transactions have taken place after the closure of the financial year and until the date of this report.

Dividend and Dividend Distribution Policy

The Board of the Company does not recommend any dividend for the financial year ended March 31, 2023 on the Equity Shares of the Company.

As per the provisions of Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), your Company has formulated a Dividend Distribution Policy. This Policy is available on the Company?s website at https://sisindia.com/policies-and-code-of-conduct/.

Transfer of unclaimed dividend to Investor Education and Protection Fund (IEPF)

In compliance with the provisions of the Companies Act, 2013 and the Investor Education and Protection Fund (Accounting, Audit, Transfer and Refund) Rules, 2016 (IEPF Rules), the Company is not obligated to transfer any unpaid or unclaimed dividend amounts or shares, for which the dividend has not been claimed or paid for a continuous period of seven years or more to the IEPF.

Transfer to reserves

The Company does not propose to transfer any amount to the general reserve for the year ended March 31, 2023.

Credit Rating

Nature of Instrument Name of Credit Rating Agency Credit Rating Assigned
Non-Convertible CRISIL Ratings CRISIL AA- (Stable)
Debentures Limited

 

Note: During the year under review, your Company redeemed the entire outstanding 1,900, 7.90% Secured, Redeemable, Rated, Listed Non-Convertible Debentures of face value of H 10,00,000 each amounting toH 1,900 Million on March 29, 2023.

Share Capital

As of March 31, 2023, the authorised capital of the Company stands at H 1,350.00 Million divided into 27,00,00,000 equity shares of H 5 each. The paid-up equity share capital of the Company is H 728.65 Million, consisting of 14,57,29,441 equity shares of H 5 each.

Subsequently, in November 2022, the Company extinguished 14,54,545 equity shares of H 5 each following a buyback from all eligible shareholders. Additionally, during the year under review, the Company issued and allotted 1,52,936 equity shares of H 5 each pursuant to the exercise of stock options under the Employee Stock Option Plan.

Your Company has not issued equity shares with differential rights as to dividend, voting or otherwise, nor have any sweat equity shares been issued during the year under review.

Particulars of Loans, Guarantees and Investments

Pursuant to the provisions of Section 186 of the Companies Act, 2013 ("the Act") read with the Companies (Meetings of Board and its Powers) Rules, 2014, disclosures relating to

Loans, Guarantees and Investments as of March 31, 2023, are provided in Note 18 to the Standalone Financial Statements.

Deposits

During the year under review, your Company has not accepted or renewed any deposits within the meaning of Section 73 of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Consequently, no amount of principal or interest was outstanding as of the date of the Balance Sheet.

Non-Convertible Debentures

During the year under review, your Company redeemed the entire outstanding 1,900, 7.90% Secured, Redeemable, Rated, Listed Non-Convertible Debentures of face value of H 10,00,000 each amounting to H 1,900 Million on March 29, 2023.

Corporate Governance

The Company?s business and operations are managed by a professional team of managers led by the Managing Director, under the supervision and control of the Board of Directors. The Company maintain and adhere to the highest standards of Corporate Governance as stipulated by the Securities and Exchange Board of India (SEBI) and the Act. A comprehensive report on Corporate Governance, as required under Regulation 34 of the SEBI Listing Regulations, forms part of this Annual Report. A certificate issued by Mr. Sudhir V Hulyalkar, Practicing Company Secretary, on compliance with the conditions of Corporate Governance is annexed to the Corporate Governance Report.

Corporate Social Responsibility

In accordance with the provisions of Section 135 of the Act read with the Companies (Corporate Social Responsibility) Rules, 2014, the Company has a Corporate Social Responsibility (‘CSR?) Committee, chaired by Mr. Ravindra Kishore Sinha. Other members of the Committee include Mr. Arvind Kumar Prasad and Mr. Uday Singh. The CSR Policy is available on the Company?s website at https://sisindia.com/policies-and-code-of-conduct/.

The SIS Group, comprising SIS Limited and its subsidiaries, associates, and joint ventures ("SIS Group"), has been at the forefront of bringing social change in the lives of thousands of people in India. It employs more than 2,83,322 people, of which a large majority come from the less privileged sections of society with limited means for education, development, and livelihood. The SIS Group has played a vital role in improving the lives of these people through training, development and employment opportunities.

Our Board of Directors, Management and Employees are committed to the philosophy of compassionate care. We firmly believe that businesses must give back to society, the environment and the communities in which they operate. CSR has been an integral part of the way the SIS Group conducts its business since its inception. The SIS Group established the SEWA trust for the betterment of the lives of the employees and has engaged in various community activities that have positively impacted thousands of people over the years. The Company has actively participated in and encouraged skills-based training for individuals from underprivileged and less developed communities across the country. The CSR Policy is based on the vision and principles of the SIS Group. The main objective of this CSR Policy is to lay down guidelines to make CSR a key business process for sustainable and beneficial engagement with the society and the environment in which the Group operates. It aims at enhancing welfare measures of society based on the immediate and long term social and environmental consequences of the SIS Group?s activities. This Policy specifies the projects and programmes that can be undertaken, directly or indirectly, the execution modalities and the monitoring thereof. The scope of the Policy has been kept as wide as possible, so as to allow the SIS Group to respond to changing and immediate societal needs while focusing on specific activities that bring long term benefit to society.

One of the internal objectives of the CSR Policy is to encourage active participation from employees at all the locations. Employees are encouraged to volunteer their time and effort in respect of SIS Group sponsored programmes or on their own initiatives. The Company recognises and appreciates contributions of the employees to CSR activities. A widespread awareness of the CSR initiatives of the SIS Group will be conducted and the SIS Group seeks an active and wide participation from employees and encourages any suggestions and project ideas from them.

A detailed disclosure on CSR initiatives undertaken by the Company during the year is annexed herewith as Annexure I.

Disclosure under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013

The Company is committed to promoting a work environment that ensures every employee is treated with dignity, respect and provided equitable treatment regardless of gender, race, social class, disability, or economic status. We priortise providing a safe and conducive work environment for our employees and associates. In compliance with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder, the Company adopted a policy on prevention, prohibition, and redressal of sexual harassment at workplace. During the year under review, 5 complaints were received and resolved. Your Company constituted an Internal Complaints Committee to enquire into complaints received, and to recommend appropriate action, as per the requirements of the said Act.

Nomination and Remuneration policy

Directors and their Appointment

In compliance with the provisions of the Act and SEBI Listing Regulations, the Nomination and Remuneration Committee of the Board approved the criteria for determining the qualifications, positive attributes, and independence of Directors, including Independent Directors. This policy, inter alia, requires that Non-Executive Directors, including Independent Directors, be drawn from amongst eminent professionals with expertise in business, finance, law, public administration and enterprises. It endeavors to create a broad basing in the composition of the Board to make available the right balance of skills, experience, and diversity of perspectives appropriate to the Company. The Articles of Association of the Company provide that the strength of the Board shall not be fewer than three nor more than fifteen. Directors are generally appointed or reappointed for a period of three to five years or a shorter duration, as determined by the Board, with the approval of the members. The Policy relating to remuneration of Directors, Key Managerial Personnel, Senior Management, and other employees is available on the Company?s website at https:// sisindia.com/policies-and-code-of-conduct/.

Business Responsibility & Sustainability Report

Pursuant to Regulation 34(2)(f) of the SEBI Listing Regulations, a separate section on Business Responsibility & Sustainability Report, describing the initiatives taken by the Company from environmental, social and governance perspective, forms an integral part of this Report.

Sustainability for your Company is about being responsible to the multiple stakeholders and creating shared value for each of them in a way that reinforces and amplifies our commitment. Our approach aligns with the ESG framework, which emphasizes creating economic value in an ecologically sustainable, socially responsible and governance-driven manner. We extend our considerations beyond economic and financial aspects and address our broader role in society and the communities we engage with. Consistent efforts have been made to minimise environmental footprint, reduce emissions and pollution, and optimise land and water usage.

Related party transactions

During the year under review, all contracts/arrangements entered into by your Company with related parties were conducted on an arm?s length basis and in the ordinary course of business. No material Related Party Transactions entered by the Company during the year that required shareholders? approval under Regulation 23 of the SEBI Listing Regulations. As per the requirements of the Act and SEBI Listing Regulations, all related party transactions have been approved by the Audit Committee, which reviewed them on a quarterly basis. Your Company formulated a Policy on Related Party Transactions, which is available on the Company?s website at https://sisindia.com/policies-and-code-of-conduct/. Since all the contracts/arrangements/transactions with related parties, during the year under review, were at arm?s length and not material, disclosure in Form AOC-2 under Section 134(3)(h) of the Act, read with the Companies (Accounts of Companies) Rules, 2014, is not applicable to the Company for the financial year 2022-23 and hence does not form part of this Report. The details of contracts and arrangements with related parties for the financial year ended March 31, 2023, are provided in the Notes to the Standalone Financial Statements, which form part of this Annual Report.

Risk Management

The Board of Directors has approved the risk management policy and the main objectives of the policy are (a) identifying, assessing, quantifying, mitigating, minimizing and managing key risks; (b) Establishing a framework for the Company?s risk management process and ensuring its implementation; (c) Developing risk policies and strategies for timely evaluation, reporting and monitoring of key business risks; and (d) Ensuring business growth with financial stability. The Board of Directors has formed a Risk Management Committee to oversee the risk management plan. As on March 31, 2023, the Committee comprises of the following directors:

1. Mr. Upendra Kumar Sinha, Independent Director,

2. Mr. Sunil Srivastav, Independent Director, and

3. Mr. Rajan Verma, Independent Director.

Mr. Upendra Kumar Sinha is the Chairman of the Committee. The Committee is responsible for monitoring and reviewing the strategic risk management plans to ensure their effectiveness.

The Company has a comprehensive risk management framework that is periodically reviewed by the Committee. Risk evaluation and management are an ongoing process within the organisation. The Committee periodically reviews identified risks and their mitigation plans. The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis. In the opinion of the Board, there are no risks that pose a threat to the existence of the Company.

Management Discussion and Analysis

Management Discussion and Analysis Report for the year under review, as stipulated under the SEBI Listing Regulations, is presented in a separate section and forms an integral part of this Report.

Internal Financial Controls

Our rapid growth, while a matter of great satisfaction, continues to put pressure on our internal systems and processes. It is crucial that we work to ensure that these systems continue to keep up with our business growth and that our policies remain relevant in the ever-changing business landscape. Information systems are being continuously evaluated and revamped to provide timely and relevant information to various stakeholders equipping them with the necessary tools to compete in a challenging market and environment. We recognise the critical role of IT and information systems in today?s world, and we have several dedicated groups of people constantly working to enhance and improve these systems to stay ahead of the rapidly changing environment. The Company?s system of continuous internal audits ensures that laid down processes and practices are followed and complied with and that quality processes are strictly adhered to. Financial discipline is emphasized at all levels of the business and adherence to quality systems and focus on customer satisfaction are critical for the Company to retain and attract customers and business and these are followed rigorously. At the same time, the Group is strengthening its core business systems to enhance robustness and achieve uniformity and consistency in practices and processes across the Group.

An Audit Committee comprising independent members of the Board has been constituted which plans and monitors the various Internal Audit programmes and reviews the reports and assesses action plans. The Director Finance and the Chief Financial Officers are invitees to the meetings of the Committee.

The Internal Auditors, who function independently within the Group, review the adequacy and efficacy of the key internal controls. The annual audit plan, approved by the Audit Committee, guides the scope of audit activities. Additionally, we engage professional and reputable audit firms from time to time to conduct internal audits of the larger and more critical operations of the Group.

In addition to financial audits, quality management system procedures are continuously audited by internal and external auditors to ensure that the Company?s business practices conform to the requirements of customers.

The Directors believe that the Company has in place adequate internal financial controls with reference to financial statements. The Company?s internal control systems are commensurate with the nature, size and complexity of its business and ensure proper safeguarding of assets, maintaining proper accounting records and providing reliable financial information. The Internal Audit team of the Company evaluates the effectiveness and quality of internal controls and reports on their adequacy through periodic reporting. During the year under review, these controls were tested and no reportable material weakness in the design or operation was identified.

Subsidiaries and Joint Venture Companies

As on March 31, 2023, the Company has 34 subsidiary companies and 4 joint venture companies. There has been no material changes in the nature of the business of the subsidiaries.

The following additions were made during the year:

• Effective, September 12, 2022, Safety Direct Solutions Pty Ltd and Safety Direct Solutions Pty Ltd. NZ became subsidiaries of the Company. The Alarm Centre Limited and MSS AJG Pty Ltd ceased to be subsidiaries of the Company effective January 20, 2023 and March 5, 2023, respectively.

In accordance with the provisions of Section 129 (3) of the Act read with the Companies (Accounts) Rules, 2014, a report on the performance and financial position of each subsidiary and joint venture company is provided in the prescribed ‘Form AOC-1?, in Annexure II to this Report.

In accordance with the provisions of Section 136 of the Act, the Annual Report of the Company, including the audited standalone and consolidated financial statements and related information of the Company are available on the Company?s website, https://sisindia.com/annual-report/. Further, the audited financial statements of subsidiary companies are also available on the website of the Company at https://sisindia.com/financials-subsidiary-companies/ Dusters Total Solutions Services Private Limited, a wholly owned subsidiary, is considered as a material subsidiary of the Company. Your Company has in accordance with the SEBI Listing Regulations adopted the Policy for determining material subsidiaries. The said Policy is available on the Company?s website at https://sisindia.com/policies-and-code-of-conduct/. The Audit Committee and the Board review the financial statements and significant transactions of all subsidiary companies. The minutes of unlisted subsidiary companies are placed before the Board for their review.

People and Training

We continuously strive to improve and develop tools and processes to recognize and reward employees at all levels within the Company. We highly value their contribution to the Company?s performance and invest in their training and development programmes including leadership development initiatives. The Performance Management Process ("PMP") tool implemented across the Group enables us to scientifically measure and track employee performance at all levels. This approach helps us to recognize and reward performance, retain and attract talent, and establish a common platform for performance management throughout the Group. As of the end of the year under review, the total number of employees in the SIS Group exceeded 2,83,322.

Particulars of Employees

The information under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in Annexure III to this Report.

A separate annexure containing the names of top ten employees in terms of remuneration drawn and the particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is included in this report. However, the Annual Report is being sent to the Members excluding the said annexure. In terms of Section 136 of the Act, the annexure is available for inspection and any interested member can obtain a copy may write to the Company Secretary at shareholders@sisindia.com.

Employee Stock Option Plan (ESOP)

To reward employees for their contribution to your Company and to provide an incentive for their continuous contribution to the organization?s success, the Company has instituted an employee stock option scheme, namely, ESOP 2016 on July 27, 2016. ESOP 2016 envisages the grant of such number of options (together with exercised options) enabling the eligible employee stock option holders the right to apply for equity shares of the Company.

During the year under review, the Company had granted a total of 35,700 options to employees of the Company under the Employee Stock Option Plan 2016.

Disclosures with respect to stock options, as required under Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("the Regulations"), are available on the Company?s website, https://sisindia.com/ annual-report/.

Mr. Sudhir V Hulyalkar, Secretarial Auditor of the Company, has provided certification confirming that the implementation of Employee Stock Option Plan is in accordance with the Regulations and the resolutions approved by the members regarding the plan.

Directors and Key Managerial Personnel ("KMP") a. Appointment/Re-appointment of Directors

• In accordance with the provisions of Section 152 of the Act read with the Companies (Appointment and Qualification of Directors) Rules, 2014, and Articles of Association of the Company, Mr. Rituraj Kishore Sinha, Managing Director and Mr. Arvind Kumar Prasad, Director Finance, are liable to retire by rotation at the ensuing Annual General Meeting (‘AGM?). They are eligible for re-appointment and have offered themselves for re-appointment.

• Based on the recommendation of the Nomination and Remuneration Committee and the Board of Directors, the Shareholders have appointed/reappointed the following Directors: i. Mr. Rituraj Kishore Sinha (DIN: 00477256) has been re-appointed as the Managing Director of the Company, for a period of 5 years effective April 24, 2022. ii. Mr. Arvind Kumar Prasad (DIN: 02865273) has been re-appointed as a Whole-Time Director (designated as Director Finance) of the Company, for a period of 5 years effective 24, 2022. iii. Mr. Upendra Kumar Sinha (DIN: 00010336) has been appointed as an Independent Director of the Company, not liable to retire by rotation, for a period of 3 years effective June 29, 2022 iv. Mr. Uday Singh (DIN: 02858520) has been appointed as an Independent Director of the Company, not liable to retire by rotation, for a period of 5 years effective July 26, 2022. v. Mr. Sunil Srivastav (DIN: 00237561) has been re-appointed as an Independent Director of the Company, not liable to retire by rotation, for another period of 5 years effective October 24, 2022. vi. Ms. Rivoli Sinha (DIN: 05124090) has been appointed as a Non-Executive Director of the Company, effective November 2, 2022.

b. Cessation of Directors

• Mr. Amrendra Prasad Verma (DIN: 00236108), Mr. Devdas Apte (DIN: 03350583) and Mr. Rajan Krishnanath Medhekar (DIN:07940253), completed their second consecutive term as Independent

Directors on September 24, 2022 and consequently ceased to be Directors of the Company with effect from the end of that day.

• Mrs. Renu Mattoo (DIN: 08050374) completed her second consecutive term as an Independent

Director on January 28, 2023, and consequently ceased to be a Director of the Company with effect from the end of that day.

The Board expressed its sincere appreciation for the valuable guidance and contributions provided by Mr. Amrendra Prasad Verma, Mr. Devdas Apte, Mr. Rajan Krishnanath Medhekar and Mrs. Renu Mattoo during their tenure with the Company.

Declaration of Independence

Your Company has received declarations from all its Independent Directors, confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Act and Regulation 16(1)(b) of the SEBI Listing Regulations. These declarations also affirm that there have been no changes in the circumstances affecting their status as

Independent Directors of the Company.

The Board is of the opinion that the Independent Directors possess the requisite qualifications, experience and expertise including proficiency and they uphold the highest standards of integrity.

Committees of the Board

As on March 31, 2023, the Board constituted the Audit . Committee, Nomination and Remuneration Committee, Corporate Social Responsibility Committee, Stakeholders? Relationship Committee, and a Risk Management Committee. The composition of the Board and its committees is provided in detail in the Corporate Governance Report. In addition, the Board constitutes other committees to perform specific roles and responsibilities as may be specified by the Board from time to time.

Meetings of the Board

During the year under review, the Board of Directors met 7 (seven) times to deliberate on various matters. The meetings were held on April 19, 2022, May 4, 2022, June 29, 2022, July 26, 2022, November 2, 2022, February 2, 2023, and March 24, 2023.

Further details are provided in the Corporate Governance Report which forms an integral part of this Annual Report.

Board Evaluation

Pursuant to the provisions of the Act and SEBI Listing Regulations, the Board of Directors adopted a formal mechanism for evaluating its performance as well as that of its committees and individual Directors, including the Chairperson of the Board. The evaluation was conducted using a structured questionnaire that covered various aspects of the functioning of the Board and its Committees. The Board expressed satisfaction with the overall functioning of the Board and its Committees based on the evaluation results.

To familiarise Independent Directors with the Company, its stakeholders, leadership team, senior management, operations, policies and industry landscape, a familiarisation program is conducted. The program aims to provide insight and understanding of the Company?s business. Independent Directors are informed about their roles, rights, and responsibilities through a formal letter of appointment at the time of their appointment or re-appointment.

Further details regarding the annual evaluation of the performance of the Board, its chairperson, its committees and of individual Directors are provided in the Corporate Governance Report which is an integral part of this Report.

Auditors and Audit Reports

SS Kothari Mehta & Co., Chartered Accountants (Firm Registration No. 000756N) were appointed as Statutory Auditors of the Company for a term of 5 consecutive years in the 38th AGM held on August 30, 2022 to hold office till the conclusion of the 43rd AGM of the Company.

The Auditors? Report does not contain any qualification, reservation or adverse remark. The auditors have provided an unmodified opinion on both the standalone and consolidated financial statements of the Company.

The statutory auditors have confirmed that they meet criteria of independence as per the Code of Ethics issued by the Institute of Chartered Accountants of India and the provisions of the Act.

Secretarial Audit

As per the provisions of Section 204 of the Act read with the rules framed thereunder, Mr. Sudhir V Hulyalkar, Company Secretary in Practice, has been appointed as the

Secretarial Auditor to conduct the Secretarial Audit of the

Company. The Secretarial Audit Report for the financial year 2022-23, issued by Mr. Sudhir V Hulyalkar is provided in Annexure IV-A to this Report. In the Secretarial Audit Report, it has been stated that the Company did not comply with the proviso to Regulation 17 (1) (a) of the SEBI Listing Regulations, as there is no independent woman director on the board of directors since the end of tenure of existing independent woman director on January 28, 2023. In response to this, it is stated that, Mrs. Renu Mattoo completed her second term as an Independent Director on January 28, 2023, and ceased to be a Director of the Company on the same day. The Company is currently actively searching for eligible and suitable candidates to fill the position of independent woman director.

The Secretarial Auditor also reported non-compliance with

Regulation 21(3C) of the SEBI Listing Regulations, as there was a one day delay between two consecutive meetings of the Risk Management Committee, exceeding the stipulated 180 day time frame. In response to this, it is explained that the delay in holding the meeting of the Risk Management Committee by one day was due to intervening holidays and the unavailability of all committee members.

Further, the secretarial audit report of material subsidiary company, Dusters Total Solutions Services Private Limited issued by Mr. Jayarama Korikkar, Company Secretary in Practice, is provided in Annexure IV-B to this Report.

Compliance with the Secretarial Standards

During the year, your Company is in compliance with the mandatory Secretarial Standards specified by the Institute of Company Secretaries of India.

Reporting of Frauds by Auditors

During the year under review, there were no instances of fraud committed against your Company by its officers and/ or employees, which required the auditors to report to the Audit Committee and/or the Board under Section 143(12) of the Act.

Conservation of Energy, Research and Development, Technology Absorption

Considering the nature of activities of the Company, the provisions of Section 134(m) of the Act and Rule 8 of the Companies (Accounts) Rules, 2014 relating to Conservation of Energy, Research and Development, Technology Absorption are not applicable to the Company.

Foreign Exchange Earnings and Outgo

The details of the foreign exchange earnings and expenditure are as follows:

H Million

Particulars 2022-23

Foreign exchange earnings 520.13 Foreign exchange expenditure 61.34

Annual Return

In terms of the provisions of Section 92 of the Act and the rules made thereunder, the annual return of the Company as on March 31, 2023, is available on the Company?s website at https://sisindia.com/annual-report/.

Significant & material orders passed by the Regulators/Courts, if any

During the year under review, no significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company?s operations in the future.

Your Company had neither filed any application, nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 at the end of the year.

Vigil Mechanism / Whistle Blower Policy

Your Company has established a mechanism for reporting concerns through the Whistle Blower Policy of the Company in compliance with the provisions of Section 177 of the Act and the SEBI Listing Regulations. The Policy provides for a framework and process, for the employees and directors to report genuine concerns or grievances about illegal or unethical behavior, actual or suspected incidents of fraud, instances of leak of unpublished price sensitive information that could adversely impact the Company?s operations, business performance and/or financial integrity of the Company. During the year under review, no person was denied access to the Chairman of the Audit Committee. The Whistle Blower Policy is available on the website of the Company at https://sisindia.com/policies-and-code-of-conduct/.

Directors? Responsibility Statement

In terms of the provisions of Section 134 (5) of the Act, the Board of Directors of your Company, to the best of their knowledge and ability, hereby confirms that:

• In the preparation of the accounts for the year ended March 31, 2023, the applicable Accounting Standards have been followed and there are no material departures from the same;

• Accounting policies have been selected and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit of the Company for the year;

• Proper and sufficient care for the maintenance of adequate accounting records have been taken in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

• The Annual Accounts have been prepared on a going concern basis;

• Internal financial controls have been laid down and followed by your Company and that such internal financial controls are adequate and operating effectively; and

• Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Appreciation/Acknowledgement

Your directors express their gratitude to the Central Government, various State Governments as well as the Company?s Bankers and advisors for their valuable advice, guidance, assistance, co-operation, and encouragement provided to the SIS Group on various occasions. The Directors also take this opportunity to thank the Company?s customers, suppliers, vendors, and investors for their consistent support to the Company. Last but not least, the Directors sincerely acknowledge and applaud the significant contributions made by all the employees of the Company for their dedication and commitment to your Company.

Cautionary Statement

Statements in this Report describing the Company?s objectives, projections, estimates and expectations may be ‘forward looking statements? within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied.

For and on behalf of the Board of Directors

New Delhi Ravindra Kishore Sinha
May 03, 2023 Chairman