Q3 Conference – FY 2022-23

SG&A Optimization Project

 What is SG&A?

The category of selling, general, and administrative expenses

(SG&A) in a company's income statement includes all general and
administrative expenses (G&A) as well as the direct and indirect
selling expenses of the business.

Selling Expenses General Expenses Administrative Expenses

• Sales Expenses - includes salaries and
wages of salespeople including
commissions, taxes, and benefits.
• Marketing - includes expenses directly
related to a company's product line,
services, brand, or image.
• Advertising - includes expenses related
to promoting a company's product line,
services, brand, or image.
• Travel expenses - includes in-person
events or trade obligations such as trade
shows or client meetings.
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• Rent – includes the cost of renting an • Accounting payroll
office or headquarter space & • Information technology / IT payroll
encompasses other items necessary for • Human resources payroll
renting. • Legal council - These may be in-house
• Utilities - relates to electricity, water, salaries or paid to external firms.
sewer, or garbage expense not part of • Consulting fees - These are often paid
the business.
to external parties for administrative
• Office equipment - includes the cost to purpose
rent equipment or make one-time, non-
material costs that do not meet Capex
requirements.
• Supplies - includes general office
supplies necessary for admin personnel
to carry out their jobs.
• Insurance - includes the broad coverage
necessary for operating the business.
 Why are we discussing SG&A here?
SIS INDI A SG&a COST , EBI TDA & SHARE PRICE TREND

9% 426 430
424
8%
8% 420
7%
7% 7% 7%
7%
410
405 400
6%
6% 6% 400
5%
5% 390
4% 4%
4%
380
3%
378
370
2%

1% 360

0% 350
FY19 FY20 FY21 FY22 Q1FY23

SG&A Cost EBITDA Share Price

Over the years, increasing SG&A Cost, decreasing EBITDA & thereby decreasing Share price has become the trend.
Is this a healthy sign?

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 Increasing SG&A Cost is like accumulating fat in the system

Like cholesterol squeezes the

blood vessels narrow, similarly
SG&A costs narrow the
profitability of the organization
thereby bringing down the share
price.

Now it is time to regulate SG&A costs and improve profitability (EBITDA) of the organization to achieve Vision
2025 and drive up the share prices of SIS Group.

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 Types of SG&A Cost
EMPLOYEE COST NON-EMPLOYEE COST

Employee Cost includes – Non-Employee Cost includes –

1. Salary costs 1. Travelling costs

2. Variable Conveyance 2. Meeting & Conference costs incl. Training

3. Performance Linked Incentive / Bonus / Quarterly incentive 3. Consultancy / Agency costs

4. ESOP, etc. 4. IT systems upkeep costs

5. Vehicle costs incl. fuel, repair & maintenance, etc.

6. Office rentals & electricity costs

7. Cost on Welfare measures – GMC, Practo, Zyla, etc.

8. Courier & printing, etc.

To control overall SG&A cost, it is needed to control both these types of costs simultaneously.

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 Our Targets for Employee & Non-Employee SG&A Cost

Target for SG&A cost reduction – Rs. 50 Cr (Rs. 25 Cr from Employee Cost
& Rs. 25 Cr from Non-Employee SG&A Cost)

Overall target for Employee Cost – To reach Rs. 318 Cr total employee cost
post increment in FY 23-24.

Projected cost saving targets are for FY 2023-24, impact of this exercise in
current FY shall be of additional benefit to the Group.

Since the target of this exercise is to bring cost saving in Employee & Non-Employee SG&A cost for FY
2023-24, the measures which will be taken to achieve these shall be quick-impact & effective to bring
maximum benefit within minimum time period (Jan-Apr’23) and minimum disruption.

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 EMPLOYEE COST OPTIMIZATION

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 Employee Cost Optimization Approach

 Remove consistent non-performers, support function employees against

Non-Performers whom administrative actions (such as fines) have been taken.

Non-productive employees in  Rationalize those high-value critical employees who are not productive & are
critical roles performing poorly consistently.

Non-productive roles in  Rationalize those roles in the organizational structure without which the
organizational structure business operations will not be hampered & remove the employees in them.

Increased Productivity /  Rationalize employees who are consistently under-productive & assign their
Replacement Saving responsibilities to another employee internally, increasing their load.

 Rationalize branches which are not growing, are in an area with limited
Branch rationalization potential, etc. & save cost in terms of employee & non-employee SG&A.

 Delay planned new hirings as much as possible until it doesn’t impact

New Hirings Optimization business & optimize the productivity of internal staff.

Keeping with our objective of minimum disruption and adhering to our ‘Family culture with professional
approach’, we are not advocating for mass lay-offs. Rather, we are trying to remove the excess fat in the
system (consistent non-performers who are with us) and make SIS a lean organization.

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 NON-EMPLOYEE COST OPTIMIZATION

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 Non-Employee Cost Optimization Action Items (1/2)
CONSULTANCY & PROFESSIONAL AGENCY COSTS MEETING & CONFERENCE COSTS
1. Re-negotiate with consultants for 10% – 15% lesser rates. 1. No Annual conference to be held for FY 23-24.
2. Terminate identified consultant agreements as per business 2. No Sales, HR & Finance conferences to be held for FY 23-24.
requirement. 3. No SBU-specific conferences to be held in FY 23-24 other than
3. Restrict usage of all placement agencies for hiring in FY 23-24. those sanctioned by SIS Group Management.
4. Plan & freeze MDP plan for FY 23-24 at 10% lesser than FY 4. Q1 conference to be organized on restricted basis (RH +
22-23. laggard BHs). Q2 conference to be held normally (same as this
year). Decision on Q3 conference to be taken later.

IT COSTS OFFICE RENTAL COSTS

1. Re-negotiate with product partners to reduce costs based on 1. Identify high rental offices to be shifted to low rental sites in FY
reduced services being taken or re-negotiated rates. 23-24 to reduce 10% rental costs.

INSURANCE COSTS COURIER & PRINTING COSTS

1. Re-negotiate with insurers for reduced rates during renewal of 1. Re-negotiate rates with Corporate printer partners to get 10%
insurance policies. reduced rates as compared to current rates.
2. Employees to bear the cost of premium for endorsing parents 2. Restrict unnecessary couriers between SIS offices.
(optional) in the Group Mediclaim policy.

WELFARE COSTS ELECTRICITY COSTS

1. Decide on continuation of Practo / Zyla schemes basis usage 1. Implement energy saving guidelines for each office provided
& subscription data in April 2023. by DTSS team.

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 Non-Employee Cost Optimization Action Items (2/2)
VEHICLE COSTS
1. Fix KPL benchmarks of Boleros at 12 kmpl & Innovas at 10
kmpl. Reward / fine drivers upon actual achievement.
2. Restrict usage of Corporate vehicles for personal purposes &
branch vehicles to travel more than 100 km away from location
for internal meetings.
3. Negotiate agreement with Mahindra for discount on Repair &
Maintenance charges.
4. Negotiate with insurers to get reduction in vehicle insurance
rates.
OTHER COSTS
1. All AMC rates to be re-negotiated with vendors to bring at least
10% cost reduction.
2. Appoint dedicated Supply Chain Manager & convert physical
Central Store to virtual Store.
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TRAVELLING COSTS
Revise the travel policy to incorporate the following points –
1. Restrict usage of personal vehicles for official tours with
approval of Controlling Officer made mandatory.
2. Any deviation over travel entitlements to be passed only if prior
approval (before trip) of competent authority is obtained.
3. Air ticket requests to be sent at least 10 days in advance.
4. For booking ‘urgent’ tickets, employee needs to send approval
of Controlling officer along with valid reason for delay.
5. Travel desk will have the discretion to book the lowest cost
flight at the given timeslot.
6. Ticket amount for ‘No show’ to be recovered from employees.
7. Employees to stay in hotels having rate tie-ups with SIS only.
8. Night stay for one-day meetings to be avoided. Deviation shall
draw prior approval from Controlling officer.
9. Employees having Local Conveyance Allowance to be
restricted from local conveyance reimbursement claims.
10. TA budget for every function to be fixed & adhered to.
 Review Mechanism & Schedule for SG&A Optimization Plan

• Rituraj Sinha, GMD

• Dhiraj Singh, CEO
Reviewers • Devesh Desai, CFO
• Brajesh Kumar, CFO (SIS India)

• Employee Cost – Group HR

Committee members
Participants • Non-Employee Cost – SBU HR
Leaders, Finance Controllers,
Bhupendra Gosain & Sanjay Pandey

• Monthly Reviews – In Q4 of FY23

(by 10th Feb, 10th Mar & 10th Apr for
previous month targets)
Review Schedule • Quarterly Reviews – In FY24 (by
10th Jul, 10th Oct & 10th Jan for
previous quarter targets)

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THANK YOU!