Security and Intelligence Services (India) Limited

Company Introduction:
• SIS is India’s second largest and fastest growing security services company, 2nd largest cash logistic company and 3rd largest facility management
company in India. Also, the company is also the largest security services company in Australia through its subsidiary, MSS (acquired in 2008) with market share of 21%.

• Company came with an IPO last year

• Below snippets provide a details of company business

image image

Company structure:

Services Offered:


Company’s Journey:

The below table provides details of company’s journey and how it has evolved

The company has scaled up its operation by adding security guards year after year and has a national presence


Below graphs provide information about historical evolution of the company

Market Size Opportunity:

Company operates in manpower industry focusing on security management in India and Australia, Facility Management and Csh Logistics in India. In one of previous blog/post, I had written about market size opportunity which is available here:

In summary Rs 150000 Crore market size opportunity is open for company where company has currently 3% market share being in top 3 in each of the businesses. Also, there is an unorganized to organized shift also happening apart from high double digit growth of the industry in most of the business verticals except cash logistics which is undergoing a slowdown



The Jockey:

The company is driven by Rituraj Sinha who is son of a BJP politician (well reputed and father has no involvement in business now). I came across his profile while reading this book “The Consolidators” and this is an inspirational story for what he has achieved in last 15 years at young age of 36. However, it also highlights his risk taking abilities which has worked so far but something to be cautious about


Financial Performance

The company has been able to grow its topline and bottom line through both organic as well as inorganic mode with a healthy double digit growth rate. Also, slowly the share of Indian business is increasing compared to Australian business

image image



The company has been continuously gaining market share from competitors. Also, credit rating of some of competitors has been deteriorating off late. Company follows a decentralized model with better reach in tier 2 & 3 cities compared to number 1 player



Here is a break up details of each of the business vertical

Security Management Business India


Security Management – Australia


Facility Management – India


Cash Logistics – India


Overall Financial Performance Analysis:

The financial statement details are below:




The key highlights/questions of financial performance analysis are:

  1. Topline and bottom line growth has been very impressive
  2. Company has used debt as one of means to grow. However, its leverage position has improved
  3. Company is generating cashflow from operations which is good
  4. 600 Cr loan line open from Australian banks
  5. CFO/EBITDA = 69%
  6. Acquisitions will be fewer but bigger to fill geographical gaps or capability enhancement
  7. CFO generated from Indian business is only Rs 75 Cr
  8. Security SBU contributed 90% in 2016 but every year its share falling by 2%
  9. Revenue from Australia security is 57% and is falling by 4% every year
  10. Rs 220 Cr on Rs 1092 Cr capital employed but India contributes only 75 Cr, what is capital employed for India and ROCE? Specially considering Australian share of EBITDA is 48% but CFO IS 66%?
  11. Share of losses from associate companies should come down slowly
  12. Interest cost should come down
  13. Share of high margin businesses is growing
  14. Economies of scale should help
  15. Invested capital has doubled in last 2 years on new acquisitions, will it lead to better profitability?
  16. Margins increasing YoY but will it go up?
  17. Given scope for margin improvement and growth opportunity in terms of market size, is 30 times valuations too high considering the cash profit discrepancy between Indian and Australian business
  18. Why return on capital numbers not matching?
  19. Why tax paid was lower in recent years?




Other Relevant Information:

IPO Fund usage:


Subsidiary and JVs:


Management Remuneration:



Shareholding Pattern:

Other Key Points:
• ‘Man Tech’ services is adding human+technology, the solution aspect of security
• 2nd largest security provider , still, 3.5% market share
• Attrition down from 50% to 20%
• Some of top players not doing well as per credit rating report and SIS snatching market share
• Graduate Trainee Officer (GTO) – 6 month training
• 19 training institutes with 25000 capacity
• Revenue from Australia security is 57% and is falling by 4% every year

• Australian business generating free cash flow of Rs 150 Cr
• Operating leverage possibilities in Indian security and higher margin facility management business
• Economies of scale possibility reflected in margin improvement
• Huge market size opportunities with high growth rate and unorganized to organized shift (PSARA act)
• Young and able promoter who is snatching market share from competition
• Increasing role of technology and service layer
• Ability to form JV with some of best international players
• Some of competitors not doing well which can benefit company (

• Low margin and low barrier to entry business
• Indian security business on a revenue of Rs 2144 Cr has made hardly 15 Cr cash profit and Rs 65 Cr accounting profit. So, basically, most of cash profit is coming from Australian security business or facility management business. So, Is Indian security business worth consideration despite of all growth projections? Also, loss making subsidiaries
• Auditors have not audited foreign subsidiaries which includes Australian business which is a major cash profit contributor
• Provisions as a % of PAT seems very high, getting rid of unviable contracts
• Bulk of balance sheet asset is goodwill acquired from multiple acquisitions
• Company has historically used debt as a vehicle for acquisition
• Not sure if company has adequately hedged the loans it has taken from Australian sources
• Possibility for recession in Australia
• Operational, reputational and political risk
• RBI regulations on cash logistics business will lead to higher cost on security related expenses and hence may not give adequate profitability. Also ATM installations stagnant and pricing pressure increasing
• Aggressive acquisition history
• High attrition industry and company’s attrition is 20%
• Litigations related to labor laws (Rs 20 Cr quantitative impact)
• Regulatory wage hike
• Dependence on JVs and partners to grow

Overall Summary:
• In India, it is a high growing industry (15-20% CAGR) which is still highly non-complaint and unorganized
• Very less entry barrier and very less margins
• Relatively, facility management area seems to be a better area and has higher
• Catering management is another emerging industry ($B dollar businesses in developed nations like Sodexo, Compass group) with better financial ratios slowly picking up in India
• Security management is a low margin business where market leaders are trying to add technology services layer over pureplay manpower. Economies of scale might lead to margin gains
• Formalization of economy, compliance, PSARA act etc. might give additional benefit to organized players
• Compliant players are gaining market share. Government (specially Railways) could be a big opportunity

Valuation Rationale:
• For global staffing companies, the average one‐year forward PE is 15.5x, while EPS CAGR stands at only 9% (PEG of 2.1x).
• In this context, considering that TeamLease and Quess are estimated to clock 24‐31% EPS CAGR, their PE multiples of 33‐35x (PEG of 1.1‐1.4x) are not expensive, in our view.
• Also, RoEs of Indian and global companies are similar and hence the high growth in India justifies our implied target multiples.


Current price is almost 25% down from the above analysis done by Edelweiss. However, I believe that there are critical questions on overall business model viability and sustainability which are still open and need to be addressed before doing any kind of valuation exercise.

Key Questions for Management:

  • Indian security business on a revenue of Rs 2144 Cr has made hardly 15 Cr cash profit and Rs 65 Cr accounting profit. So, basically, most of cash profit is coming from Australian security business or facility management business. So, Is Indian security business worth consideration despite of all growth projections? Why Indian security working at <1% cash profit which means very poor return on capital?

  • Status of loss making subsidiaries

  • Auditors have not audited foreign subsidiaries which includes Australian business which is a major cash profit contributor

  • Provisions as a % of PAT seems very high, getting rid of unviable contracts

  • Fixed cost of branch and hub opening (capex fixed + fixed nature in opex)

  • Optimum revenue limit at branch range

  • Bulk of balance sheet asset is goodwill acquired from multiple acquisitions

  • Company has historically used debt as a vehicle for acquisition

  • Not sure if company has adequately hedged the loans it has taken from Australian sources

  • Employee count different, ROCE difference

To do list:

  • Study other companies in similar business : Teamlease, Quess Corp, Apollo Sindoori, Karya Facilities, ANI Integrated Facilities

  • Study JV partners how they have done in respective countries

  • Study world leaders like Sodexo, Compass Group


I have a tracking position in this stock and this is still under study


Had taken a look at this co. earlier, but stepped back after coming across this:


Needed security guards for my residence. Faced a lot of difficulty to contact the SIS people in Jaipur. Firstly all the numbers which I googled were not working or were of that of Securitas(another sec agency) listed under SIS. No way to get in touch with their office in Jaipur. Then called their Delhi office and got hold of the branch manger’s cell number and called him. He said he will ask his junior to call me. That person called after nearly 8 days and said will meet my requirement of security guards. Still to hear from them.


Concall details.

Disc - Invested

1 Like

Hi @suru27 Company is granting stock options to employee do u consider this as -negative or something we should be careful?

1 Like
1 Like

This looks like a promising organisation in a high growth sector. The major risk highlighted in this thread is political due to promoter’s affiliation. I would add my 2 cents that it should not be an issue here.

  • The Chairman has been associated with politics since 1975 so nothing new for him. As far as I know he commands respect among Lohiaites.

  • SIS has achieved most of its growth journey during UPA so it does not affect them.

  • Their main focus is services sector and adjoining residential sector where govt interference is less even if it gets impacted.

  • They have ops in Australia and now in Singapore so India specific risks have been contained to a great extent.

disc: In the watchlist

1 Like

Hi Suru
Although you narrated the story very well indeed that is very convincing but when I try to check the fundamentals with Donald sir work sheet I found that story is not conversant with numbers I may be wrong



Hi @yourraj
Please help me more with your Donald Sir worksheet.

Hi satya Donald sir has shared his excel below

I have made some changes in that sheet in corporating DCF and other small tweaks whoch I learned from VP forum
Only need one Input : In excel file you need to fill the Book value manually

Rest once you upload on the screener it will fetch the data
Rain Industries.xlsx (111.0 KB)
I am also learning please provide your feed back as I am on earning curve
Thank you


It’s more of a balancing act. Giving some equity helps to motivate n keep skin the game. Too much of equity diluted value for shareholder. In this case, I don’t think ve seen anything worrisome

Please let us know the pain point areas apart from what has been highlighted. Will help to revisit analysis m realign if required

Have been spending some time and pondering over this from last 3-4 months as it looked something which turn out into a big story but on the other side there have been risks and execution related uncertainty considering the valuations did not look cheap on a normal PE type metrics. So, finally, came up with this concept that I will try to build a framework why this story looks exciting to me and then I will try to put loop holes in the story and then try to see net net where we stand. I am keeping any discussions related to valuations aside now as the 1st part of debate is - Is the story worth interesting to get into valuation discussion

Here is my summarized view of all research

It is very interesting to see how G4S is doing on LSE and what kind of valuations it attracts. has all the basic numbers.

Welcome for data and fact driven opinions. Also, would be glad if one can provide clarity on above questions backed by data and reasoning:

•What is the optimum topline and PAT each hub location can generate?

•When automation/robotics/drones can become a threat to business model?

•How to take a call on promoter integrity?

•How to build confidence that acquisition was not a one time wonder and risks would be calculated one?

•How to build confidence over unaudited subsidiaries?

•Is there a way to find what could be long term sustainable margins?

•How to valuate loss making subsidiaries?

•How to build trust over balance sheet with so much intangible assets (G4S also has bulk of assets in intangibles, is it an industry trend)?

Below are links for content for all the points mentioned above on top 5 competitive players and SIS:

Competition (Why competition is in bad shape)
Rating Rationale

Rating Rationale;vw=kr&amp;SecurityToken=0P00007ODS]3]0]E0WWE%24%24ALL&amp;Id=0P00007ODS&amp;ClientFund=0&amp;CurrencyId=BAS

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

G4S - Wikipedia

Management – Panama Paper, Political Inclinations

[Management Interview]

SIS_ACE_EQUITY2.xlsx (188.0 KB)

G4S.pdf (1009.8 KB)


SIS Q4’FY19 results


1 Like

I see Indian operations contributing more than 150 crores in EBITDA and Australian operations contribute only 130 crores as EBITDA

@suru27 How do you came to this conclusion?

Very first slide with Title “Leading Market Position in Diverse services” shows their security services stats as

India Revenues - 1587 crores
India Employees - 110, 928

Revenue per employee – 2.15 lakh – makes sense

Australia Revenues - 2394 crores
Australia Employees - 6929

Revenue per Employee – 1.6 crores – Even I convert it to Australian dollars I don’t think so a security guard in Australia will be earning so much.May be others are contract Employees or something, need to find out

Also, if you can highlight the reason for the reason fall in last 7-8 months?

1 Like

Below is image from AR and you can see FY 18 security revenue from India was Rs 2144 Cr


Regarding Australian revenue per employee, it might look higher due to multiple reasons : currency difference, they ve security plus patrolling business,so, it may not be comparable to pure man power security business, we do not know if there are contractual employees contributing and not considered in headcount

No comment on price movement

Notes from SIS AR 2019:

Key Highlights:

• Vision 2020: We aim to be number one in each of our verticals – Security, Facility Management and Cash Logistics.
• 21.6% revenue growth, 17% EBITDA growth, 31.7% PAT growth and 29.6% EPS growth

• 18.6% ROCE and 50% OCF/EBITDA

• India security, Australia & APAC security and India facility management contributed 38%,49% and 13% of revenue respectively
• The consolidated revenues and financial results include the financial results of SLV and Uniq for 7 months and 2 months respectively and hence the full effect of these acquisitions will occur only in the next financial year.

• During the year under review, we also incurred significant costs on account of deployment of the three-year contract from Cognizant Technologies and provisioning on account of the receivables from certain customers who were going through an insolvency process.

• Now, #1 security player, #2 facility management player and #2 cash logistics player in India

• 215429 employees and 17,800 sites under management

• Facility management business is 1000 cr+ business in < 10 years
• made five acquisitions across three geographies,
• In India, market growth is closer to 3x GDP for the last 15 years. see the same trend continuing in the near to mid term.

• The customer preference is clearly moving away from unorganised—non-compliant—operators to the organised service providers

• has less than 5% market share in each of these segments. In other major markets like the US, the UK and Australia, market leaders tend to have 15-20% market share. Hence, we believe that there is substantial headroom for growth

• Our inorganic strategy is centered around building partnerships and not acquisitions in the traditional sense. We believe that only by incentivising the target company founders through an earnout structure following a majority stake acquisition upfront, will they be able to grow faster. The case of DTSS is a perfect example of this; where the revenues have grown at a CAGR of 25% and EBITDA at 42% in the three years since acquisition. Our M&A programme is geared to ensure that downside is protected while sharing the upside with the target company promoters and management.

• We are bullish about the prospects of solutionbased selling as technology increasingly becomes cheaper and more efficient.

• We have delivered some interesting solutions during the year, case in point being our work on leading oil & gas companies. Solutions offer higher margin potential and longer duration contracts, and can transform the nature of the industry.

• Despite increasing competition, we have consistently grown at 1.5x the industry growth, thus gaining market share. We feel that we are making the right investments in people, technology, inorganic growth and new business solutions that establish a clear moat.

• Scope: 80,000+ Crore Indian market growing at 18-20%. Potential to be a 150,000+ Crore market by 2025.

• With acquisition of Rare Hospitality, our healthcare offerings and credentials have deepened.

• SLV provides Security Solutions, electronic surveillance, event security/ management and security consulting services. The acquisition of SLV provides SIS a market-leading position in Delhi-NCR, which is among India’s top three security markets. SLV closed FY19 at 260 Crore in revenues with a majority of the revenues coming from the NCR region. Effective September 01, 2018, the Company has acquired 51% shareholding of SLV for an aggregate consideration of 505 Million.

• Uniq provides industrial Security Solutions, electronic surveillance, Facility Management and security consulting services to 430+ customers. Uniq’s acquisition provides SIS a strong position in Bangalore, the second-largest and fastest-growing market for security solutions in India. Uniq has a high quality and long-standing clientele. The business generated over 165 Crore in revenues in FY19 with a majority of the revenues coming from Karnataka region. Effective February 01, 2019, the Company has acquired 51% shareholding in Uniq Detective and Security Services Private Limited for an aggregate consideration of 515 Million.

• RARE Hospitality provides Facility Management services to 80+ customers through 4,000 employees. has an especially strong presence in Western India. It has a reputed customer base in the healthcare vertical, an area of focus for SIS. Effective November 01, 2018, the Company has acquired 80% shareholding in RHSPL for an aggregate consideration of ` 319.66 Million.

• Henderson Security is the third largest security company in Singapore. Effective February 28, 2019, SIS Group International Holdings Pty Ltd., a subsidiary of the Company has acquired 60% of shareholding in SIS Henderson Holdings Pte. Ltd. for an aggregate consideration of ` 2,280 Million

• Platform 4 Group is a relatively small but important vehicle that provides us a foothold in New Zealand. Many customers in Australia look at combined contracts across the region and a New Zealand presence was vital to bid for these contracts. Effective February 28, 2019, SIS Australia Group Pty Limited, a subsidiary of the Company has acquired 51% shareholding in P4G for an aggregate consideration of ` 66 Million.

Security Management – India
• Recorded 17.6% organic growth on the back of strong customer wins and retentions.

• The EBITDA margin declined from 6.9% in FY18 to 5.6% in FY19 primarily due to significant costs incurred by us on account of deployment of the three-year contract from Cognizant Technologies and provisioning on account of the receivables from certain customers who were going through an insolvency process

• Registered customer retention ratio at 95%.
• Crossed 200 Crore monthly revenue run rate and ended the year at a monthly revenue run rate of 265 Crore (including SVL and Uniq)
• Won the single largest contract ever in India’s security industry with the Cognizant contract.
• Rolled out M-Trainer—our digital learning platform—on tab/app and on wheels, enhancing on-job-training for our field staff.
• Being India’s largest Security Solutions player with 4% market share, we continue to enjoy significant growth headroom

• Going forward, we will continue to optimise synergies in the acquired companies, strengthen brand salience and build more traction in Man-Tech solutions. Additionally, we will focus on consolidating our position in key regions and enhance our working capital management.


Security Management – International
• On a consolidated basis, the Security services – International segment, comprising MSS, SXP, Henderson Group and P4G recorded revenues of AUD 691.35 Million during the year under review against AUD 603.46 Million in the previous year. This represents a growth of 14.56% over the previous year. In Australia, our revenues grew by 13.64%, which is noteworthy considering that the Australian industry is a fairly developed and stable market and its economy grew at 2.9% in 2017-18.

• New contracts representing annualised revenue of AUD 45 Million were won during the year and an overall retention rate of 96% was achieved
• 20% market share in Australia
• During FY19, we forayed into New Zealand and Singapore with the acquisition of Platform 4 Group Ltd. (51% holding) and Henderson Group (60% holding), respectively. The acquisition of Platform 4 Group Ltd. will enable us to bid for customers who require joint contracts for Australia and New Zealand while Henderson Group offers significant opportunities to bid for large government and quasi-government contracts in Singapore. Henderson enables us to access regional APAC level contracts, which are decided out of Singapore.

• A mandatory increase in the minimum wage is the most significant driver of revenue growth for security solutions.

• Executed Commonwealth Games contract.

• Ended the year with Days Sales Outstanding (DSO) of 46 days – in the process, generating free cashflow of AUD 27.3 Million

• Our present strategy will focus on strong organic growth in these regions and integrate these entities to realise optimum synergies and cost savings. Going forward, we will concentrate on delivering solution-based service offerings that will enable cost-effectiveness.


Facility Management – India
• The year saw a significant increase in our facility management business with revenues going up from 6,744.85 Million in FY18 to 9,499.17 Million in FY19, an increase of 40.84%.

• The consolidated EBITDA of this segment also went up from 332.50 Million in FY18 to 639.90 Million in FY19, an increase of 92.45%, and the EBITDA margin also went up from 4.9 % in FY18 to 6.7 % in FY19. All businesses contributed to this increase in revenues and EBITDA.

• has been focusing on the healthcare, hospitality and commercial facility segments

• We also increased our B2G business with our Railways vertical expanding significantly with more services and more stations under coverage.

• We also launched our Total Facility Management (TFM) programme which will target selling integrated services to our customers

• Our FM business has the largest branch network among all FM companies in India.

• We have made steady investments in technology across onboarding, payroll, audit, quality assessment, training etc. to establish a clear differentiator for customers while also improving productivity.

• Also, the market is witnessing a significant shift from unorganised sector to organised sectors owing to the increased regulatory interventions.

• We operate three brands in India’s Facility Management industry: ServiceMaster Clean (SMC) Dusters Total Solutions Services (DTSS) and Rare Hospitality (Rare). While SMC has been in operation for the past ten years, we acquired DTSS in August 2016.

• Growing preference for integrated players who provide a one-stop shop for facility management needs, rather than unorganised companies that are incapable of providing integrated services and do not have a good track record of compliance.

• Increased overall revenues on the back of strong wins in Railways, corporate and Integrated Facility Management (IFM) contracts.

• Our priority is to work towards expanding our revenues through pan-India presence, high-value large contracts and integrated Facility Management contracts. We will continue to focus on healthcare, pharmaceutical, hospitality, manufacturing and IT & ITES sectors with ‘smart solutions’, based on digital drives and smart mechanised cleaning, aimed towards productivity and process improvements.

• The biggest opportunity in Facility Management is in offering more technical services, more vertical specialisation and integrated services. Newer models of facility management are evolving which are more output oriented and we are working actively to develop and make changes to our business and contractings model and internal systems to adapt to this changing requirement from the customers. Government outsourcing can be a big opportunity for facility management in India and we have won significant business from the Railways who have now commenced outsourcing certain facility services in railway stations.


Cash Logistic


During FY19, the segment grew by 46.7% and recorded a five-year CAGR of 83%.

• Our security services business is expected to see an increasing role of technology in the way we deliver our services and also run our operations. We have been making significant investments in offering security solutions through technology

• The revenue streams in the security or facility management industry are recurring in nature, which gives a high degree of predictability to the revenue and cash flows. However, with a widespread operational network covering close to 17,000 sites, we need to ensure that each of these sites operates to the same exacting quality standards across the length and breadth of the country.

• The Group’s operations expose it to market risk, credit risk and liquidity risk. The Group’s focus is to reduce volatility in financial statements while maintaining balance between providing predictability in the Group’s business plan along with reasonable participation in market movement

Management and Employee Salary Growth


Consolidated Audited Financial Results

Goodwill and Intangibles


• We did not audit the financial statements/ financial information of 38 subsidiaries, whose financial statements/ financial information reflect total assets of 31,127.53 Mn as at March 31, 2019, total revenues of 46,168.04 Mn, total net profit after tax of 1,439.40 Mn and total comprehensive income of 1,423.42 Mn for the year ended on that date, as considered in the Consolidated Results included in the Statements. The Consolidated Results also include the Group’s share of net profit of ` (-)135.39 Mn for the year ended March 31, 2019, as considered in the consolidated Ind AS financial statements, in respect of 3 associates and 2 jointly controlled entities, whose financial statements have not been audited by us.

Balance Sheet

  • Service sector-based acquisitions creating lot of goodwill creation on balance sheet
  • Higher share of deferred tax asset
  • Significant increase in debt




Current taxation has regulatory benefits but not sure how long it will last




Segment wise Info



Related Party Transactions



Overall, slowly valuation concerns are getting addressed personally but the risk items highlighted above through various posts are still open , continues to be accumulate with execution at reasonable valuation story for me

Disc: Invested

  • Hailing the contribution of private security guards in the country, Union minister Piyush Goyal said the segment was among the fastest growing in India’s security sector.

  • Employment generation will play a big role in turning India into a $5 trillion economy and that is why private security agencies are crucial as they employ a large number of people.

  • Private security guards can act in tandem with national security personnel.

  • Looking into areas where government security can be replaced by private security, so that the nation’s security apparatus can be engaged in critical areas and that is something the Centre will look into.

  • Industry needs to look closely into the training of security guards and providing of basic equipment to them, and that it was imperative to bring everyone under the ambit of regulation and unregulated security service providers need to be tracked.

  • Prime Minister Narendra Modi’s call to recognise and respect the contribution of private security guards in different sectors is an indication of the importance of their work.

  • In the days following demonetization, the role of private security guards came to fore when they were required to man ATMs and cash vans.

Don’t read too much into what he says on security industry . He is one of the key shareholder of SIS. Also, promoters of SIS have relation with BJP. So, without taking any credit away from what Rituraj has done, we should not read too much into comments of people who may have reasons to be biased.


According to this article, he was speaking regarding the industry in general during the Private Security Industry Conclave (PSIC) at FICCI. So, the context / occasion and the fact that he is the Minister of Commerce and Industry caught my attention. There wasn’t anything specific regarding SIS at-least in that article.

A report on security industry from FICCI.

Few other reports from FICCI

P.S. I am aware that he is a key shareholder. :smiley: