Business is booming for SIS Group | Economic Times

On November 8, 2016, Prime Minister Narendra Modi announced that the currency notes of Rs 500 and Rs 1,000 would no longer be valid. Demonetisation of about 86% of the currency in circulation sent shock waves across the country. The nation of 1.3 billion people went into a frenzy trying to find ATMs that had valid currency notes. Banks had to deal with long serpentine queues of citizens trying to replace the demonetised notes with the new Rs 500 and Rs 2,000 ones. The lenders also struggled to recalibrate all the ATMs, as the new notes were of a different size.At the centre of this melee was Rituraj Sinha, Group MD of SIS Group Enterprises, a provider of security services and cash logistics services. He got a ringside view of the events as he was on an ATM task force created by the Reserve Bank of India to deal with the demonetisation cash crunch and was also the President of the Cash Logistics Association of India.For SIS Group, it was an overwhelming as well as transformational event. “ATMs and banks weren’t prepared to make such large-scale changes across the country. The key issue here was that the banks don't own a company that specialised in the cash logistics,” says Sinha. The group was well equipped to fulfil the requirements.Sinha says the cash logistics industry deployed about 10,500 cash vans to replenish currency notes and to help recalibrate the 2.2 lakh ATMs across the country then. SIS deployed all its 2,400 vans. “The tasks included arranging the necessary equipment and shipping it across India; training technicians and moving them around and transporting the old and new currency notes. We managed to recalibrate over 2 lakh ATMs in 60-65 days,” he says.That was no mean feat for a company that started off by providing security guards on hire. The credit goes to Sinha for nurturing a vision and working on it steadfastly to make SIS Group “the first Indian multinational firm in the security industry”. The company is worth Rs 1.2 billion and has over 7,000 clients in multiple countries.Journalist to EntrepreneurSIS was founded in 1974 by Sinha’s father RK Sinha in Patna, where he was a journalist with a newspaper called Searchlight. While covering the 1971 India-Pakistan conflict, he spent time with personnel of the Bihar Regiment posted in a border outpost. The relationships that blossomed there would help him later. In 1973, Sinha Sr got involved with the activities of Jayaprakash Narayan. “As a result, I got into trouble with the company management and was asked to resign,” he had said earlier. 85199172Around the same time, an industrialist friend of his asked for reference to hire ex-servicemen as security staff for his project in Ramgarh near Ranchi, then part of unified Bihar. Rituraj Sinha says instead of looking around for a job, his father decided “to do something to create jobs for youngsters like himself”. He started SIS in 1974 by employing 14 retired personnel of the Bihar Regiment as private security guards.“This happened back in the ’70s,” says Rituraj Sinha, who handles SIS’ operations now. His father is the group chairman. “The company was incorporated as a private limited one in 1985. Nobody had a clue that this could turn out to be a listed Indian MNC one day.”The senior Sinha was a man adept at turning challenges into opportunities. As the business grew, he realised the importance of having access to trained manpower as retired army men “did not want to go and work in a faraway industrial site”. So RK Sinha set up a residential training facility in Garhwa. “For the last 25 years, the academy has produced trained security guards, supervisors, firefighters, cash van drivers, dog handlers and security officers,” says Rituraj, adding that he takes pride because SIS is among the top five private sector firms, with over 2.4 lakh staffers.Though latest numbers are not available, the sector is estimated to employ some 85 lakh security guards, according to a FICCI-PwC report in 2016. The Indian personal security market was around Rs 57,000 crore in 2016 and likely to touch Rs 1.5 lakh crore by 2022, it estimated.Industrialisation’s ImpactThe 1990s saw many multinationals setting up a base in India, leading to this optimism in the segment. A Bain analysis says the number of MNCs in India jumped to over four times between 1991 and 2012. There was a sudden rise in demand for trained security guards at factories, buildings, offices and residences.Once again, SIS was equipped to fulfil the requirements. “In the ’70s, Gorkhas used to be employed as security guards. But it was an informal system. The industry took shape on the back of aggressive industrialisation and the spurt in economic activity seen during this time. SIS started focussing on industrial and mining security in parts of Odisha and Jharkhand,” says Rituraj Sinha, who was then not keen on joining the family business. After graduating from Leeds Business School, he was pursuing his aspirations of becoming a banker. 85199150Then 9/11 happened. “In 2001, everyone was talking about security and risks every day. I felt that if I continue to pursue a career in banking, I will be a small cog in a large wheel, but if I head back to India, there is a security business that I can transform. It was destiny that 9/11 happened around the time I had passed out and was toying with all these ideas,” he says.The next year, Sinha joined the family business. Till 2006, he focussed on re-engineering SIS’ processes — training, sales and operations — and introducing technology wherever possible. It paid off. SIS went from being an entity with a revenue of Rs 22.31 crore in 2001-02 to Rs 96.56 crore in 2006-07. SIS recently said its Q1 FY22 consolidated revenue grew 9.8% year-on-year to Rs 2,379 crore.The Private Security Agencies (Regulation) Act of 2005 was a tailwind to SIS. “It made licensing mandatory. I think that was a big turning point for the industry because it got a status, a structure and a framework,” he says. Sinha had trained personnel and clients but realised he needed capital to scale up. In 2007, SIS raised an estimated Rs 300 crore for a 14% stake from DE Shaw, valuing the company at about Rs 2,150 crore. The following year, SIS decided to go international and acquired Australian security firm Chubb, which had “four times more revenue than SIS”. The estimated $235-million deal made the Bihar-born company one of the largest manpower security firms in Asia-Pacific. “Those were the times when mega deals were happening globally, such as Tata buying Corus and Mittal Steel buying Arcelor,” says the junior Sinha.Then the 2008 Mumbai terror attacks happened. “People understood that security was not just an administrative job. Security needed to be discussed at the boardroom because when the attacks happened, we all saw Mr Ratan Tata in the front lines. That’s when people really felt it could happen to any establishment,” he says.The ensuing business catapulted SIS from a Rs 100-crore company in 2007 to a Rs 1,500-crore one by 2010. That year, SIS diversified in terms of technology and services, creating joint ventures with international firms. In 2010, it set up a joint venture with Prosegur for cash logistics and in 2011, it joined hands with Singapore-based Terminix for pest control and incubated Tech SIS for electronic security. In 2012, it raised funds from CX Partners. 85199126Ajay Relan, founder of CX Partners and Xponentia Capital, has admiration for the way the company has capitalised opportunities. “I think what drove me to SIS was this vision and ambition it displayed. It was impressive how it ventured into new areas such as cash and facilities management and was able to make a great turnover out of it. Furthermore, I was surprised to see how many managers in the company had initially started as a security guard. SIS is willing to give them opportunities,” he adds.Keeping with the times, Sinha’s ambitions were also growing. He knew CX Partners would want an exit in five years. And the best way to do that was by taking SIS public. The company was listed on the BSE on August 10, 2017. However, its shares ended the day at Rs 756.70 against the IPO price of Rs 815. On August 9, it traded at Rs 471.75, 0.15% lower than its previous close.“An important reason to take SIS public was that it gave visibility and credibility,” says Sinha. The company had issued ESOPs in 2008 and 2012-13, and would do it in 2016 and 2021, too. “It was important that the employees see a value associated with the shares they held, and the only way to achieve that was to list the company.” 85199092Recession-Proof?The security services major has fended off the pandemic-induced recession. Sinha explains that during the outbreak, private security and cash logistics and facility management were tagged as essential services. Security services, guards, cleaners, CCTV cameras, facility management and video analytics were in demand. “In the last 20 years, I have seen this sector grow 2-3 times every year. The unique part is that when the economy shuts down, when there is a national lockdown, when malls and schools are closed, they do not take away CCTV cameras. They do not remove all the security guards. In fact, places like healthcare double it,” Sinha says. For FY21, SIS reported consolidated revenue at Rs 9,127 crore at a growth of 7.6%.SIS’ nearest competitors in India are Peregrine Guarding, a flagship of Tenon Group, which had estimated revenue of over Rs 1,800 in 2019, and British Security firm G4S Security, known as the world’s largest security firm with an estimated net worth of $5.2 billion.However, according to a Crisil note, “The security services industry comprises around 20,000 small to medium unorganised players and only 8-10 national players. The consequent intense competition continues to constrain scalability, pricing power, and profitability. Unorganised players hold around 65% of the domestic market.”SIS currently has 5% market share in security in India, 4% in facilities management and around 15% in cash logistics. The security services provider is looking to double its market share in five years. It seems to be in a secured spot.(Editing by Ram Mohan. Illustrations by Sadhana Saxena)