What are the growth drivers for security services?

Bavadharini KS | Updated on June 24, 2018 Published on June 24, 2018

Rituraj Sinha, managing director, SIS India

The sector is recession-proof — industries need to be safeguarded even in a downturn

Security and Intelligence Services (India), a leading provider of security management, cash logistics and facility management services has a pan-India presence and international operations in Australia. The company, which listed on the bourses last year, plans to be No 1 in its businesses, says Rituraj Sinha, Group Managing Director, SiS (India), in an interview with BusinessLine.

Edited excerpts:

Can you take us through the operations of SiS and its growth drivers?

SiS, founded by my father RK Sinha, began operations with just three or four people in 1985, with a security management contract in Ramgarh (now in Jharkhand) for an industrialist. Today, the company has over 1,70,000 employees and operates through 253 branches in India and has operations in Australia. Our large workforce is spread over 11,000 customer sites in over 630 districts of India. The company’s revenue has scaled up from ₹25 crore in 2002 to about ₹6,000 crore (FY-18).

In all the three segments it operates in — security services, cash logistics and facility management services — SiS is a leading player. What has essentially contributed to the company’s growth has been our focus on training and service quality.

While each of our business verticals has different growth drivers, at the underlying core, all our businesses are closely linked to how the economy grows. We are a close proxy for the India growth story.

On a daily basis, you would have interfaced with any of our three verticals without actually knowing it. For instance, in your building, you would have a CCTV camera or a watchman. The security industry in India is over ₹65,000 crore and only 35 per cent of this sector is organised and operated by national or regional operators. The balance 65 per cent is dominated by micro and small-scale security companies.

In this scenario, SiS has a well-diversified risk portfolio. The largest customer is not even 2 per cent of our consolidated revenue. So we are not dependent on a single sector. The demand for our services is high. If you want to build a large factory, right from land acquisition to building walls, you will need security throughout the life of the company and even after the company closes. It is a recession-resistant sector — even if any other industry faces downturn, security and facility management will still be required.

How is your business in Australia doing?

We acquired Chubb Security, Australia’s largest security company, in 2008. Our Australia business revenue has registered compound annual growth rate (CAGR) of 9.5 per cent over the past five years. The Indian operations have grown at a CAGR of 32 per cent in this period. But having said that, the Australian market is much more mature with well-defined labour regulations. There is much greater focus on specialisation of services and use of technologies. We have acquired a good amount of knowledge from Australia, and that has helped us develop the Indian market rapidly.

How is SiS different from a staffing company?

Our business is a service-oriented model. We take contracts based on service-level agreements, that is, we undertake contract for outcomes, not for inputs. Staffing companies would give you inputs, say, an accountant or a receptionist.

But in our case, if SiS provides facility management to an airport, the job is not to provide people or machines. It is to provide services as per the service-level agreement. So, the rest rooms are regularly serviced, the carpets are cleaned, dustbins cleared every three hours, and so on. In security services too, if I were to secure a large factory or establishment, my contract for security is not to provide 100 people; it is to have access to material and people, maintain all registers and documentation for inward and outward movements, ensure that parking is in order at the facility, and so on.

So, it is a far more sophisticated service than staffing. The per head per margin we make is three times that made by staffing companies. Given the potential, we can notice some of the staffing companies shifting towards servicing these days.

How does the company manage its day-to-day operations?

It is a highly operation-intensive business. There is no barrier to entry, but to scale. It is a low capital-intensive business and has a recurring revenue stream. For instance, once you provide security to a customer, the same security stays back for two to four years. This generates healthy cash flow for the company and the return on capital employed is very attractive — more than 20 per cent.

To manage the operational complexities, we run 19 residential training academies. Besides, we have built a lot of proprietary software for recruitment and operations. For instance, the ‘Trainer’ (software) for providing online training and mobile phone-based training and development for employees. Also, iOps is a mobile phone-based application for controlling all day and night checks and attendance. There is Sales Maxx to manage our sales force across the country.

What are the future goals for the company?

Our goal is to become the No 1 operator in all the three segments we operate in. We are the No 2 in security, but have been the fastest-growing in the past 10 years back-to-back. We are No 2 in cash logistics and No 3 in facility management. In the past five years, we have steadily picked up market share in all three segments. We believe the pattern will continue in future.

By introducing new technologies, SiS has been a thought and knowledge leader in the sector. We have been the first to bring in artificial intelligence and mobile-based applications. We will bring more technology platforms to ensure higher degree of productivity in our operations.

To control and manage operations in over 11,000 sites across the country, one has to be technology-dependent — not people-dependent.

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Published on June 24, 2018
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