The Hindu Business Line : Security biz gearing up to tap opportunities

Hyderabad, March 4 While the general mood in the industry is down, and every one is struggling to come to terms with the impact of economic recession, one sector that is seeing robust growth is the security business.

Mr Deepak Chopra, President and Chief Executive Officer of OSI Systems Inc, a fast-growing player in the security business worldwide, says, “We live in a dangerous world, and securing and safeguarding lives is becoming very important.”

The Mumbai terror attacks and the increasing threats India faces pose big challenges to companies in the security business. OSI Systems, through its Rapiscan Systems, which has a major presence in India, is gearing to tap the opportunities.

The $700-million turnover, California-based, OSI Systems has three business groups — security, healthcare and Opto-electronics and manufacturing. The security business contributes over $300 million of the turnover. It has over 3,500 employees worldwide and 600 in India.

In a recent visit to India, the India-born Mr Chopra, a first-generation entrepreneur who founded OSI Systems and forged a joint venture with ECIL, Hyderabad, to form ECIL-Rap scan, spoke to Business Line on the company’s plans, research and the way ahead in the business. Excerpts:

In the light of increasing security concerns at airports, seaports, cargo movement, etc., how do you see the business prospects?

Rapiscan Systems is among the few global companies to possess a broad arsenal of technologies that help in detection. It has an installed base of more than 70,000 security and inspection systems across the globe. We are also integrating multiple technologies to improve accuracies. Business is growing quite robustly, and at the same time, users are becoming more demanding.

As India increases its trade with global economies, security systems at customs, airports, border crossing, seaports etc. will grow. Demand for X-ray scanning will expand. Recently, Rapiscan has sold two sophisticated systems for the Jawaharlal Nehru Port Trust and they are working 24/7 for inspecting cargo and hazardous material.

Rapiscan has produced and installed over a thousand X-ray baggage scanners at airports through its joint venture from its facilities in Hyderabad, where it also has a research and development (R&D) centre.

How do you see the Indian market for security products and healthcare business?

We see great growth in these spheres as India builds its infrastructure and becomes a global trading major. The Indian, or for that matter even the global, market for security business, is not very big, but is definitely growing fast.

In India, the demand for high quality equipment and healthcare is up. The growing middle-class wants new products to keep healthy. Also, the rural areas also need improved health infrastructure.

OSI has a turnover of $300 million in healthcare. Its facilities are in the US, Scotland, the UK and India. . While the recession has not affected the security business, the healthcare segment has been impacted as hospitals are not buying equipment.

What are your growth plans for India? Is more investment/expansion on the anvil?

In India our operations are set to grow. The R&D centre in Hyderabad for Rapiscan, which has 50-60 software engineers, will see additions. There will also be technology transfers to the Rapiscan joint venture, which would mean increasing activity. We are expanding our footprint in R&D, especially software.

Similarly, OSI has about 400 people in Hyderabad working on healthcare and some high-end electronics, essentially targeted at export market. We see prospects of growing this business in tune with emerging demands in the domestic market as well. We are exploring opportunities in manufacturing and strategic partnerships in India.

How strong is the R&D and technology development programme?

The global R&D investment for the company is around $25 million. In addition, the company gets grants from the US Government through the Defence and Energy Departments for research projects in the range of $15 million. The research centres are in California, Manchester and Hyderabad. The company has the broadest technology platform. It produces X-ray inspection equipment used in airport screening, for cargo inspection, and other scanning applications. Use of radiation techniques for detection is fast developing and Rapiscan is among the top few in the development process.

The company is also into aerospace. How big is the business?

We essentially make subsystems for aerospace companies. For example, we have made an important subsystem for the Indian Space Research Organisation (ISRO) for its Chandrayan-1 (moon mission) programme.

Our turnover is a modest $100 million at present. We focus on electro-optic sensors for the aerospace, and construction industries. Our clients include Lockheed Martin and HAL. OSI Systems also makes optoelectronic devices used in a variety of aerospace and office products, such as printers and weapon sighting systems.

How has the global economic downturn affected OSI Systems? How are you managing?

The downturn is certainly affecting us. We are into consolidation of operations and employees. I am confident that we will come out unscathed as the security business is growing fast. Healthcare overall is not in a bad shape, but affected, and we see opportunities here. In the last two years, we have set up a manufacturing facility and an R&D centre in China for healthcare. We see India, China and North America as growing markets for the healthcare products we make.

What are the major challenges in terms of product acceptance and who are your competitors?

To be ahead of the bad guys and continue to develop better products that will keep us safe are the big challenges. As for competition, Europe and China are expected to pose serious competition in the near future.

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