Jottings: Protection Money

Rising terror threats, along with growth in public infrastructure and retail, are set to fuel demand for private security companies in the country and trigger a boom for the Rs 40,000-crore private security services market. The job market is likely to feel the direct impact of all this.

So, at a time when all eyes are on new sectors such as e-commerce and mobile for growth and job creation, this is a traditional sector that increasingly looks promising. It could well be the next growth area, and not just for a select few but for the masses.

Already, with more number of roads, airports, multiplexes, ATMs, and commercial complexes in the past few years, demand for security services has grown manifold. Indications are that it will accelerate even further as India’s economy expands rapidly.

And it’s not just the development of infrastructure, industries and residential complexes; a slew of government initiatives, too, are likely to throw up opportunities for private companies in the security business. These include the development of 100 smart cities and the ‘Make in India’ campaign. So in the current context of policy and regulatory frameworks in the country, the private security industry is definitely going to play a critical role.

According to a study jointly published by Grant Thornton and FICCI, the private security sector is expected to witness a huge jump. The study estimates that it will grow into a Rs 80,000-crore industry over the next five years and generate around five million additional jobs by 2020. Currently, around seven million people — mostly semi-skilled — are employed in this sector. Globally, too, the sector is expected to get a boost, especially after the Paris attacks, which showed that security has room for improvement in other countries, too. Globally, the sector is expected to grow by 7.4 per cent annually, and reach $244 billion by 2016, the study notes.

Private security includes manned guarding, electronic security, cash management, and other services. Manned guarding is the largest segment in this sector in India, with around 75-80 per cent market share. Cash services is the next big segment, and is expected to account for 25 per cent of market share in the next five years.

Sensing the growing business opportunity, a host of private equity giants — both local and global— have taken exposure in this sector. These include names such as Standard Chartered Private Equity, DE Shaw, and CX Partners. Domestic companies that have been in news for private equity funding include SIS and Tops Security. The sector has seen significant merger and acquisition activity, too, with a host of global firms entering the country and partnering with private securities companies.

All in all the security business is likely to see a lot of action. Be on the lookout!

(This story was published in BW | Businessworld Issue Dated 28-12-2015)