SIS may topple multinational G4S to become India's biggest security solutions provider by next fiscal

The company was founded by his father RK Sinha in 1974. Sinha handed over reins of the company to Rituraj in 2002, when the son came back from the UK after completing his business management course, and a stint in the banking sector.

In the first nine months of the current fiscal, the company’s security business grew by 38.5 percent to Rs 1,574 crore, almost at par with its annual numbers of last year. At the same rate of growth, the business will end the financial year with a revenue of nearly Rs 2,100 crore.

“That would be just about a few hundred crores less than the topline of G4S’ security business. While the British multinational has grown by an average rate of 11.5 per cent in the last five years, SIS’s growth has been much faster at 32 per cent over the same period,” said an industry executive who didn’t want to be named. The security industry, overall, has grown by 18 per cent over the last five years.

In FY16, G4S logged revenues of Rs 2,300 crore, according to a report by broking firm IIFL.

“We project that it (SIS) will record a 29 percent CAGR (compounded annual growth rate) over FY17-20, in the process emerging as the market leader,” said IIFL’s Abhijit Akella and Ankur Shah in a report on the SIS.

Sources close to SIS say it may emerge as the country’s biggest security in the 2019FY itself. Apart from the organic growth, the company would also need a push from deals to get that crown. Rituraj and his team have readied a war chest of Rs 1,000 crore for  pursuing acquisitions in the segments company operates.

“We have four term sheets out in the market. These are in the verticals of security, cash logistics and facilities management,” said Rituraj.

G4S declined to participate in the story.

At present, SIS company is the second largest in the country in the security segment. In its two other major businesses – cash logistics, SIS is the second largest in the country; and in facilities management, it’s fourth on the pecking order.

The company has also entered niche segments of pest control and electronic security and home alarms.

Inorganic push

Acquisitions have played an important role in the rise of SIS, which had a revenue of Rs 25 crore in 2002. Since then inorganic strategy has added fuel to the topline growth.

Its deals include the 2008 acquisition of Chubb Security, the largest security company in Australia. In 2016, SIS acquired Dusters to become the fourth largest facilities management provider in India.

In between, SIS has formed joint ventures with global companies to push its services in cash logistics and facilities management.

Half of the Rs 1,000-crore war chest has been earmarked for deals in Australia. “Our presence in Australia gives us the unique advantage of accessing capital at low cost,” said Rituraj.

At the same time, stresses Rituraj, SIS will remain dependent on organic growth. “The highest returns come for organic growth. And there is tremendous growth in demand for our services in India,” he says.

That is right. Even as SIS emerges as the biggest player in the security industry, the company’s market share in minuscule, reflecting the fragmented nature of the sector. According to a Frost & Sullivan report, quoted by IIFL, SIS had a market share of 2.8 per cent in the 2017 FY, up from 2 per cent four years earlier.

The fragmentation is similar – albeit a tad lower – in cash logistics and facilities management sectors.

Taking note that “security services are not tied up to economy upturns and downturns,” an Axis Capital report on SIS said that the Indian security market has grown three times faster than the rest of the world. And each of the businesses – security, cash logistics and facilities management – the penetration in the market is much lower in India, indicating higher growth opportunities.

For instance, cash logistics centers around managing ATMs. But the density of ATMs in India stands at 19.7 ATMs per 1 lakh adults, much lower than the global average of 40.

“Till now no one has built pan-India operations and a multi-sector presence. Each of our vertical is headed by a CEO,” says Rituraj.

As of September 2017, SIS employed over a lakh security guards on more than 11,500 premises across the country.

Since the company got listed in August last year, SIS scrip has risen by nearly 55 percent.