India's largest security service provider saw international operations growing must faster in the first quarter of FY21
In 2008, when Rituraj Sinha-led SIS to acquire Australian security firm Chubb that was seven times bigger, it was as outlandish a risk as Tata Steel buying Corus, or Tata Motors bagging Jaguar-Land Rover.
While the acquisition may have paid off over the ensuing years, a question never left Sinha. "For a long time, 99 percent of the people thought that our international operations have been a drag on us," Sinha told Moneycontrol.
Industry experts questioned SIS' substantial international presence in Australia, New Zealand and Singapore, where the markets had matured. On the other hand, India was seen as the growth driver. About 40 percent of SIS topline comes from its international operations.
But a look at the first quarter earnings of India's largest security solutions provider shows that SIS' international presence has helped it keep its head above the water, especially given the challenges posed by COVID-19.
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While revenue from international security operations grew 11.7 percent year-on-year, EBITDA improved 11.8 percent. On the other hand, revenue from its domestic security operations grew slower at 6.1 percent, with EBITDA falling 13 percent. The facilities management vertical saw a sluggish one percent growth in revenue, with EBITDA falling 17 percent.SIS is the country's second largest provider of facilities management services.
SIS is the market leader in Australia and in the top three players in Singapore and New Zealand.Overall, SIS reported a consolidated net profit of Rs 58 crore for the first quarter ended June 30, even as it has made COVID-19 related provision of an almost similar amount. The firm had posted a net profit of Rs 75 crore in the year-ago period.
Sinha, the Group Managing Director, said international operations were far more stable than domestic ones in Q1.
It helped that the COVID-19 pandemic hasn't forced Australia to announce a lockdown similar to the one seen India, where the government clamped down from March onwards.
While New Zealand has declared itself as COVID free, Sinha said these countries have benefitted from government incentives "to support workers and businesses, aiding a steady recovery."
Despite reduced activity in sectors such as aviation, retail and tourism in these countries, provision of special ad-hoc security and strategic medical and emergency response services helped SIS offset the revenue reduction from affected segments.
Experience from international markets also helped SIS devise a strategy to face the challenge posed by COVID-19 in India. "While in India, we were hit by the virus in March, these countries have been facing it since February," Sinha said.
"From planning to devising a strategy for India, we used a lot of that experience from our units in Singapore and Australia," he added.
SIS trained its personnel and also quickened the process of sourcing material. For instance, the company used its WhatsApp group to clear purchasing requests from managers of its 170 branches across the country.Two broad trends
In the Indian market, Sinha said, two broad trends have played out since amid the COVID-19 disruption. "Even though companies are looking to reduce their costs, spends on security and sanitisation has increased."
With companies looking to ensure business continuity, which can be compromised when an employee reports positive for the virus, spends on sanitation have risen by up to 25 percent.
The second trend, Sinha sees, is companies looking for more and better solutions. It's not just about increasing quantity.