Outlook positive for MSMEs in security services: CRISIL SME Tracker

Rising private capital expenditure and demand for commercial spaces are expected to help the security services industry in India log a healthy 9-11 per cent increase in revenue this financial year, keeping up the momentum after an estimated increase of 10-12 per cent in financial year 2024 to ₹1.4 trillion.  

This is expected to aid the growth of micro, small and medium enterprises (MSMEs), which constitute 40-45 per cent of the industry that has large multinationals and Indian players as well as smaller, unorganised ones. The government’s thrust on developing infrastructure, increasing urbanisation, growing incidences of crime and terrorism, and low police-to-popu–lation ratio are also expected to drive growth. Further, breakthroughs in cutting-edge technologies such as artificial intelligence, biometrics, and drones have aided the growth of the industry. Amid soaring labour costs, scarcity of skilled resources, there is an unpre–cedented surge in demand for sophisticated, technology-driven security solutions. 

   

That said, MSMEs in the space face tighter profit margins due to lower working capital efficiency, limited scalability, and vulnerability to labour wage inflation. All of this makes it challenging for them to compete with the larger players in securing contracts for high-demand sites such as shopping malls, special economic zones, townships, and information technology parks. 

Indeed, as margins shrink, the smaller players are exiting, leading to market consolidation.  

As such, private security players primarily offer manned guarding, cash management, and electronic security services. Manned guarding, which involves securing premises and individuals with personnel, constitutes 75-80 per cent market share. Labour costs dominate input costs for companies in the space, making them vulnerable to margin pressures from regulatory changes, compliance requirements, and minimum wage hikes.