Private Security Services: A New Industry On The Rise
Published by Sharekhan Education | July 30, 2022
By Amit Pathak | Sharekhan Education
Private Security Services: A New Industry On The Rise
Private security agencies offer a wide range of commercial and residential services. Services vary from providing security to top industrialists and celebrities; accompanying bank consignments containing cash; to monitoring the movement of visitors at residential apartments, shopping malls, construction sites, and industrial units. They are also deploying multiple technologies like alarm monitoring, fire suppression, and perimeter protection automation to effectively secure larger areas with lower workforce requirements.
Growth Prospects:
According to Freedonia research, the security solutions market in India is poised to grow at a CAGR of 14% between 2019 and 2024. The revenue streams in the security industry are recurring in nature, which gives a high degree of predictability to the revenues and cash flows. The demand for security services is increasing due to rising urbanization; the organization of new sporting and entertainment events; the real and perceived risks of crime and terrorism; and the belief that public safety measures are insufficient. Security and safety are more important than ever.
The security services industry in India is highly fragmented. Unorganized players hold around 65% of the market share. Organized players are gradually gaining market share on the back of stricter enforcement of regulations such as minimum wages, provident fund norms, gratuity, etc., and more focus on compliance after the implementation of the GST and the recently passed Labor Reforms bills. The reforms will increase the compliance burden on weaker players, leading to accelerated formalization in the sector. Customer preferences are gradually shifting to organized service providers due to the benefits of value-added services, better-trained personnel, the use of advanced technologies, and streamlined solutions.
The Private Security Sector is the second-largest employer of manpower in India after the Agriculture Sector. Leading industry players are setting new standards in the industry by focusing on the training and skill development of their people; establishing employee welfare funds; and defining career progression paths for high-performing employees. The sector garnered outstanding customer goodwill by supporting businesses throughout the COVID-19 pandemic. The government declared the industry “essential,” enabling it to work through various lockdowns.
About SIS:
In this space, we have a positive view of SIS. It enjoys a leadership position in the organized security services business. It has exposure to several business lines, such as security services, facility management, cash logistics, and pest control. This helps expand its earnings base and allows it to cross-sell services. As enterprises move away from manpower to technology, SIS could see a massive tailwind to its gross margins. SIS is expected to deliver a 17% revenue CAGR during FY22–24E on the back of a strong order book, a healthy pipeline, and longer-term tailwinds from sector consolidation.
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