Global Outlook

Needs in safety and protection make security a recession-proof industry

Contributed by Nirmal Bang

By Nirmal Bang

The Indian Security Market is farm fresh. It has not yet been tapped fully. Not many people think of having a business in this sector and investors are not even smelling the profit it holds. But it is an industry in the making. It has the potential to be a rather large sector in the very near future, given the lifestyle changes the world is witnessing.

A small example would be the terrorist attacks. Now there might have been a drought or a killing or a mini-riot in the 19th century but was ‘terrorist’ even a word back then? Not really.

However, the new century has brought with it a number of evils in the form of racism, fascism and ultimately terrorism. These are a few reasons why ‘security’ has found a new meaning in our dictionaries.

India has had a long history of attacks beginning from the turn of the century but nothing concrete has been done as of now. If we look at the last decade alone, we’ve had a series of deadly attacks in the country such as serial blasts in Mumbai in 1993, a plane hijack in 1999, attack on the Kashmir Assembly in 2000, attack on the Indian Parliament in 2001, Akshardham Temple attack in 2002, serial blasts again in Mumbai in 2006 and finally the 26/11 attacks also in Mumbai in 2008. These are just a few examples, not an exhaustive list.

Only recently has the Indian government begun taking efforts to prevent more such attacks by giving security the importance it deserves. The government has announced a first ever ‘Global Security Conference’, which will be held in the Indian capital soon to talk on such issues.

‘Automated Surveillance’ was launched at the IFSEC India - 09 and Gujarat has plans to build over 100 Quick Response Teams (QRTs) to tackle terror. Home Minister P Chidambaram was recently seen urging police chiefs to ‘think out of the box’. He has promised to create an IT-enabled security system on the lines of the US to secure the country from terrorist attacks in addition to the four NSG hubs being set up in the country post-26/11.

There are talks of making Crime and Criminal Tracking Network and Systems (CCTNS) and the National Intelligence Grid (NATGRID) on the steps of the FBI. The government also has plans to launch as many as 20 anti-terror schools.

The Delhi Police Commissioner has announced a budget of Rs 380 crore for implementing integrated security systems project for the Commonwealth Games. These are just a few of the measures the Indian government has promised to implement, some of which have been announced and some of them have already been implemented by the authorities.

Budgetary allocation on defence has also seen an incredible increase of Rs 60 crore in 2000-01 to Rs 140 crore in 2009-10. India Inc on the other hand has started paying through its nose for security, trying to get in governmental security agencies.

On 1st Aug ’09 Infosys became the first private firm to receive Central Industrial Security Force (CISF) at a cost of Rs 2.6 crore per year, which it will spend just on its Bangalore facility. CISF Inspector General RK Mishra said: “This is the first time since its creation in 1969 that CISF will be providing security cover to a corporate organization in India.”

CISF has 79 pending security requests from private establishments. These include: Reliance Jamnagar Refinery, Wipro, Taj Hotel (Mumbai), Trident Hotels (eight locations), Hotel Marriott (Mumbai), Delhi Public School (three branches in Delhi), Jaypee Group of Hotels (eight hotels) and Torrent Power (Ahmedabad). This in itself shows that enough is enough and now India Inc will not let such events hamper business.

India is growing at a fast pace and the government obviously wants to protect it as much as possible. The number of airports is expected to jump from the current number of 85 to 400 in the next 10 years according to Civil Aviation Minister Praful Patel. In addition to this, India has 6,856 railway stations with 8,702 passenger trains carrying 14 million people.

Under the Federation of Hotel & Restaurant Associations of India (FHRAI) there are 2,052 hotels and 1,016 restaurants. The hotel industry is also inextricably linked to the tourism industry and its growth has added fillip to the hotel industry.

Moreover, with Conde Nast Traveller ranking India as the fourth most preferred travel destination and Lonely Planet selecting the country as one of the top five dream destinations from 167 countries, India has finally made its mark on the world travel map.

The hospitality sector is expected to rise to US$ 275 billion in the next 10 years. The domestic hospitality sector is expected to see investments of over US$ 11 billion in the next two years with 40 international hotel brands making their presence felt in the country in the next few years.

It shouldn’t be hard to realize that the way we perceive security today has to change as we have to change our mindsets from traditional personnel, to technology enabled security systems. Old methods will not stand good in the future because terrorists and criminals are changing. But are we?

Even today, increasing crime rates are denting development. India is a developing country and when we talk about getting into the elite league of developed countries, what we talk about is industrial growth, increasing income, improving health standards.

Even the Human Development Index (HDI) does not constitute national security as a component, which is shocking considering what is the use of development when we cannot offer basic security to citizens.

It is more an irony that Iceland which ranks 3rd in the world in HDI also tops the chart for the highest reported crime rates along with Norway. The latter tops the (HDI) chart and also stands fifth in the world in terms of the number of crimes taking place.

The question that arises is whether we are actually developing because these reports signify that the faster a country grows, the faster its crime rate grows.

The traditional methods of security are not advanced enough and technology scores over manned security because CCTVs do not sleep nor can they be bribed. Thus, the demand for advanced security products is on a rise.

With the introduction of technology, every field has changed and so has the way we perceive security. CCTVs have replaced security guards. Motion sensors and new age devices have taken over traditional methods of security.

Now we see cameras installed at every strategic location in the country and corporates are taking their own measures in adopting technologically advanced methods of security.

Technological breakthrough has made it possible to decrease costs, which have led to an increase in demand for these products. Price sensitivity has been an issue, which has been addressed, as security is now a key cause of concern.

Since different kinds of companies and households have different security needs, this is a recession-proof industry and hence a good investment option. Electronic security solutions companies are finding clients in banking and insurance, malls and multiplexes, IT sector and construction among others.

Analysts believe that this industry will never cease to exist. Over the last 60 years of independence, countless reports of insurgencies suggest that these activities will not subside in the future. Terrorist attacks, be it in whatever form or even technological hazards not only result in catastrophic losses in terms of human casualties, property destruction and economic effects but also results in profound damage to public morale and confidence levels.

Security concerns have risen to alarming levels as terrorism and unseen dangers cause huge damage to human life and intellectual property. To safeguard against these hi-tech attacks and intrusions, we need equally sophisticated security devices.

Technology over the years has revolutionized the way people generally perceive security. The only hurdle in the deployment of these seemingly foolproof security measures is people’s acceptance. Compared to the prohibitive 250% import customs duty of the 80s, the current rate of 35% is also to be considered as the growth driver for the industry.

This industry has a bright future ahead. The Indian security market is estimated at around US$ 1 billion for 2009-10 and the major sectors that will benefit are airports, mass transport and maritime. The market is estimated to be US$ 9.7 billion by 2016.

The Indian electronic security market is growing at 23% CAGR with the potential to grow at 40%. According to Nigel Luke Brown, project director of United Business Media Ltd, growth of security products in India has risen in the wake of the upcoming Commonwealth Games, surge in retail and hotel segments, growing infrastructure and a remarkable growth in metros.

Organized players constitute only 20% of the market but account for 80% of the revenue. This shows that a large part of the market is still untapped by the organized lot and has a great potential.

Today our country is on the road to development and that means starting of many critical energy ventures, which will go a long way in developing our national security. The present security situation portrays a grim picture and these assets need to be de-risked and safeguarded if our future needs to be secured.

Thus, companies in this segment will go a long way because of ever-increasing opportunities in the sector. Zicom Electronic Security Systems Ltd and Honeywell Automation India Ltd are two companies, that are doing particularly well in this sector. Though stock prices of security companies have gone up, they have abundant opportunities that can be exploited.