SIS Limited sees new labor codes as "GST moment for labor"

SIS Limited views the recently notified labor codes as a "growth tailwind," formalizing India's workforce and benefiting organized, compliant players. The company, India's largest fully compliant security and facility management platform, expects increased business as stricter rules push clients away from non-compliant, unorganized vendors. SIS’s contracts are structured with full statutory pass-through, meaning any increases in PF, ESIC, or other statutory elements are passed on to the client, preserving margins.

The new codes standardize wages, tighten the definition of "wage," and are expected to introduce a national minimum floor wage. Gratuity will now apply to fixed-term employees from the first year of service, a change SIS expects to have a negligible impact on its financials due to existing contractual pass-through clauses. The company expects the reforms to trigger organic consolidation in the industry and a shift towards organized players.

SIS also clarified that its pricing model for both security and facility management is percentage-based, linking service fees to overall cost, including minimum wages, which are revised regularly. This ensures that any increases in minimum wages directly boost revenue and potentially margins for SIS. The company has been preparing for these labor reforms since the Code on Wages was enacted in 2019.