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1. Security & Surveillance Market ‐
Security & Surveillance Market India
January 2009

2. Executive Summary
 Market size: Estimated at ~USD 438 mn in 2008; 50% of total security market (incl. services)
Market  Growth: Historic rate of 20‐30%: Forecast 45% till 2010; 33% p.a. until 2012
 Import driven market
 CCTV (55%) and access control (30%) systems are major segments
Segments  Northern region is the largest market followed by South India
 Government and industrial are largest customer segments; residential is very small
 Government and large enterprises purchase primarily through tenders while most private
Government and large enterprises purchase primarily through tenders while most private
Business companies solicit quotations or consider referrals; retail is a recent new format
model  The distributor model is important in the Indian market
 Drivers: Significant boost in demand from government and businesses post Nov 08 attack
Drivers: Significant boost in demand from government and businesses post Nov‐08 attack
Drivers &  Challenges: Lack of awareness ; Disorganized industry; High import duties and taxes; Lack of many
Challenges comprehensive solution providers
 Organized sector: Estimated ~50 players (20 major and 30 mid‐sized)
Organized sector: Estimated 50 players (20 major and 30 mid sized)
Competition  Unorganized sector: Estimated at 300‐350 units but concentrating on basic, low‐end products
 Despite many unorganized players, organized sector accounts for 80% of industry revenue
 Demand for reduction in import duties and taxes may materialize
Future
Future  IP and video analytics technologies are important in the future
d id l i h l i i i h f
Outlook  Private equity investment is expected to increase significantly at least till 2010
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 2

3. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 3

4. India is a frequent target of terrorist attacks and it is only
recently that serious efforts began to strengthen security
•India has borne the brunt of maximum terror attacks in the world ‐ higher than hotspots such as Iraq,
Afghanistan and the Middle East
Afghanistan and the Middle East
•Apart from threats along its borders and long porous coastline, the country faces significant levels of
threat from home‐grown terror outfits in various parts of the country
•Despite the rise in attacks over the years, the government’s response has been inadequate and has
failed to effectively counter terrorism with surveillance, intelligence, and first‐response measures
•Individuals too had a lackadaisical approach or attitude toward security
•However, the recent attack of November 2008 in Mumbai had a huge impact on the mindset of all
quarters of society including government, businesses and citizens
quarters of society including government businesses and citizens
•Immediately, it spawned an overhaul of national and state security infrastructure while businesses,
large and small, scrambled to protect their assets and interests
The boom in security services and equipment is unprecedented in India s history and against the
The boom in security services and equipment is unprecedented in India’s history and against the
backdrop of geopolitical and internal conflicts, awareness and demand is bound to increase.
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 4

5. The Indian market for security and surveillance products is
robust and growth is expected to accelerate in the future
Overview Estimated Market Size and Growth
•The Indian security market including human Terror attacks in Nov‐
guards, electronic security systems, intelligence USD mn 08 spurring growth in
systems, fire protection and detection systems is 2009 and 2010
1,500 1,437
worth ~USD 820 mn +33% 1,150
•Security and surveillance systems account for
~USD 438 mn in 2008, according to estimates of
, g 1,000 920
industry experts 634
•Historic and forecast growth rates were earlier 500 438
292 350
estimated at 20‐30%
•However, following the Mumbai terror attacks,
•However following the Mumbai terror attacks
0
security spending is expected to surge by 40‐50% 2006 2007 2008 2009 2010 2011 2012
over the next two years at the least
•India is an import‐driven market with ~60% of Assumptions & factors
security and surveillance equipment imported by
it d ill i ti t db • Consensus on 2007 market size: USD 350 mn
Consensus on 2007 market size: USD 350 mn
• 2006‐2008 growth rate: 25%
foreign manufacturers with local presence or • 2008‐2010: Average growth of 45%
domestic importers/distributors • Post‐2010: Average growth of 25%
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 5

6. US, UK, Germany, Japan, and Israel are major exporters to India
while Asian countries compete with lower prices
Accounts for
nearly 45% of Emerging threat to Indian
Indian imports U.K. Germany manufacturers from
cheaper Chinese goods
Japan
Israel
Exporters from Hong
Kong, Taiwan, Korea
and Singapore
compete on price
S.E. Asia is major
source of smuggled
gg
goods for grey
market
Major exporters
Minor exporters
Hong Kong, China, Singapore, Taiwan, Korea
• High dependence on imports since domestic production is low and concentrated in low‐end, basic products, primarily
because most Indian firms have small‐scale operations and limited technological expertise
• Due to technological advances made in foreign countries, it is unviable for new Indian companies to start indigenous
development from scratch and invest large amounts of capital required for product development
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 6

7. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 7

8. CCTV followed by access control systems are products that have
the maximum demand
Product Categories Share of total market
•CCTV
CCTV
 Cameras, housings, monitors, DVRs and NVRs
55%
 Accounts for large share of security budgets
 Expected to continue growing the fastest
•Access Control
 Becoming a norm in most organizations
Becoming a norm in most organizations 2%
Intrusion Detection 2%
 Cost inhibits sale of quality products Intercom
11%
•Intrusion detection Others 30%
 Small market due to lack of awareness Access Control
 Cultural factors such as community living and
l lf h l d
reliance on human security inhibit market growth 80%
•Intercom (Audio and Video)
 Used primarily in apartments Proximity Cards
Swipe Cards
Swipe Cards
 Retrofits negligible; mostly sold through builders
Smart Cards
offering it as a value add feature Biometrics 8% 10% 2%
•Others (X‐rays, metal detectors etc.)
 Greater demand from government & retail
establishments as security efforts are stepped up
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 8

9. The northern region has the highest proportion of security
installations in comparison to other regions
Geographic distribution
•North India is the largest market
 Political capital of Delhi and the surrounding NCR
Delhi, NCR region,
D lhi NCR i
(National Capital Region) require major security
Haryana, Punjab,
•South India is the second largest market Uttarakhand, West
Uttar Pradesh, Largely lacking
 Cities like Bangalore and Hyderabad are home to
North East in security
many multinational and IT firms, which typically Rajasthan despite major
despite major
demand quality security infrastructure threat from
•West India terrorist attacks
East Gujarat,
 Mumbai is a major market by virtue of being the Mumbai,
financial capital, large number of offices, and Goa,
,
dominance of apartment housing Maharashtra
•Home Ministry’s Mega City Policing scheme
provides special funds for procurement of Hyderabad,
security and policing systems to the following: Bangalore,
Chennai,
 Mumbai, Ahmedabad ‐ West
Coimbatore,
 Bangalore, Hyderabad & Chennai ‐ South Mangalore,
 Delhi ‐ North Trivandrum
 Kolkata ‐ East
Kolkata
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 9

10. Government and industrial customers form the largest customer
segments compared to a negligible residential segment
Sector Segmentation Purchase profile
• Prominent government buildings, agencies, and institutions • High‐tech security
• Defense establishments, space installations, R&D laboratories • Surveillance
Government /
G t/ • St t i i d t i
Strategic industries ‐ Oil d
Oil and gas, nuclear, power, defense production
l d f d ti • Id tifi ti &
Identification &
Public Sector • Law & order enforcement agencies access control
• CISF – Protects more than 267 vital public sector units • Scanning
• Transportation ‐ Airports, ports, railway stations and metro transport
• Banks and financial institutions
Banks and financial institutions
• Industrial units • Access Control
Commercial/ • Offices, warehouses, unmanned telecom sites • Alarm systems
Industrial • Gems and jewellery industry • Surveillance
• Hotels, malls, multiplexes, and hospitals • Scanning
• Retailers
• This sector accounts for the lowest share in the industry
Residential • Builders offer security equipment like video or audio intercoms, as a USP of • Door Intercoms
construction
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 10

11. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 11

12. Government and large organizations invite tenders while private
companies solicit quotations or consider referrals
Buyer Purchasing Process Characteristics Sales advisory
• Government • Tenders • Tenders mostly in two parts: • Relationship with
• Large • Solicit quotations  Technical government officials and
organizations  Commercial decision makers is a
• Time consuming decisive factor
• Decision usually favours lowest bidder • Well‐connected
distributors/agents are
• Some large purchasers import directly to
very important for
, p,
save costs, avoid distributor mark‐ups, use
winning tenders
i i t d
their export earnings, or purchase systems
unavailable locally
• Enterprises • Solicit quotations • Quality is main factor among MNCs and • Direct B2B sales
• Small firms • Consider referrals large domestic enterprises • Quality as differentiator
Q y
• Most firms are price conscious and seek • Attractive pricing is must
the best deal from the market
• Residential • Direct purchase • Builders open to partnerships • Focusing on partnering
u de e b ds
• Builder invite bids ce se s y s ey g
• Price sensitivity is very high with construction firms or
• Appoint suppliers • Strong competition from unorganized bidding for projects is the
players offering low‐priced products only route
• Retrofits and retail sales is negligible • Retail outlets in long‐term
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 12

13. The distributor‐led model is important in the Indian market and
the setup of local offices by foreign firms is a recent trend
Market entry options
Market entry & distribution model
Foreign
•Although, distributors are the preferred route, manufacturer Preferred
many companies have setup local offices for Route
direct sales and import equipment
Indigenous Tie‐up with
•Tie‐ups between foreign and local firms is Import
production local firm
common for technology, support and sourcing
•Viability of distributor model:
Viability of distributor model:
Role of Distributor in India
 Apt since minimal investment is required to
support current market size Manufacturer
 Agents have strong knowledge of local business OEMs
, p
environment, access to information on potential
opportunities, and well connected with personnel Independent
and decision makers in government agencies Installers
Distributor
 Typically handle import, sales, installation, and
after‐sales support or maintenance with trained Systems
Integrators
staff since technical manpower is abundant
 Distributors also supply equipment to OEMs, End User
systems integrators and independent installers
Given the future potential of the market, it is likely that more foreign firms will enter the
market by setting up local subsidiaries or partnering with domestic firms.
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 13

14. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 14

15. Drivers & Challenges
Rise in terrorist attacks
Ri i t i t tt k
and the November 2008 Challenges
attack in Mumbai Lack of awareness and attitude toward
significantly pushing security
demand
Disorganized market
High duties and taxes inflating prices
Drivers
Government demand Lack of end‐to‐end solution providers
Corporate demand
Retail and residential sector demand
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 15

16. Various government ministries and agencies are spending
significant amounts in emergency procurement
Government sector Impact
•In order to strengthen internal security, various government ministries are
expediting emergency purchases without tendering or following tedious procedures
•The largest expenditure will be from the defense, home and shipping ministries
•Surveillance equipment is on the purchase list of many agencies:
 Airports’ planned expenditure of USD 3.2 bn by 2016 is geared towards surveillance
equipment as well as securing the perimeter using motion detectors, and passenger &
equipment as well as securing the perimeter using motion detectors, and passenger &
baggage screening systems
 Indian railways has allocated USD 164 mn to be spent on high‐end IP‐based CCTV systems,
access control, and personal & baggage screening systems
 Shipping ministry has allocated USD 20 mn to be spent on securing ports and docks with
pp g y p gp
CCTVs, vehicle‐tracking systems and other high‐end technology apart from two dedicated
interceptor boats for each port
 Police forces in cities are deploying or considering installing a metro‐wide surveillance
system using CCTVs
•Home Ministry’s police modernization programme and the sub‐plan for mega city
policing will provide a major impetus to the electronic security industry
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 16

17. Home Ministry’s police force modernization plan includes large‐
scale expenditure on surveillance systems
Home Ministry’s MPF scheme Mega City Policing
• Among the many objectives of the Home Ministry’s • Under MPF, the Home Ministry introduced Mega City
scheme for modernization of state police forces Policing concept in 2005‐06 focusing on Mumbai,
(MPF), equipping police forces with the latest
(MPF) i i li f ih h l Bangalore, Hyderabad, Chennai, Delhi, Kolkata and
l d b d h lh lk d
technology and equipment is a priority. Ahmedabad
 Surveillance equipment is among the major items  Cities receive financial assistance for procuring
supported by the scheme sophisticated equipment including surveillance camera
 Allocations have been increasing substantially, especially systems, CCTV, portable x‐ray machines, vehicle scanners,
in the wake of increasing terror attacks in India and vehicle number plate identification system
 Scheme also provides for other equipment like night vision
devices, GPS/GIS for dial 100 system and patrol cars etc.
Funds released under MPF scheme
Funds released under MPF scheme Funds released for Mega City Policing
Funds released for Mega City Policing
USD m USD m
300
256 30 2006 27
250 219
205 205 197 210 25 2007 21 20
200
20 2008
150 143 145 15 15 14
15 13 13
100 10
10 8 9
50 4 4 5
5 3 3 3 2
0
0
2001 2002 2003 2004 2005 2006 2007 2008 Ahmedabad Bangalore Chennai Hyderabad Kolkata Mumbai
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 17

18. Businesses are increasing budgets to enhance security on a
priority basis
Corporate sector Impact
•According to feedback from ASSOCHAM members, private sector firms from sectors
like power, petroleum, petrochemicals, refining, mining, steel, ports, seaports,
shipping and hospitality have prioritized strengthening of security infrastructure
•Budgets are increasing by 35‐40% to enhance security and eliminate loopholes by
spending on both systems and trained personnel
•Further large scale industrial expansion in infrastructure under the 11th Five Year
Further, large scale industrial expansion in infrastructure under the 11th Five Year
Plan is also contributing to demand for security and surveillance equipment
•Feedback indicates maximum demand for:
 High‐tech CCTV and video surveillance
 El t i
Electronic access control
t l
 Intrusion detection systems
 Others: Wireless equipment/technology; installation tools, supplies and accessories; Fire
extinguishers and rescue devices; Security bodes and doors; screening systems
•Even religious and educational institutions, which are high profile targets are
l d d l h h h h fl
spending on equipment like CCTV and metal detectors
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 18

19. Retail sector demand is expected to continue while increased
awareness in residential segment may spur demand
Expanding housing and the retail sector Impact
•Organized retail, malls and multiplexes have already invested in equipment like
CCTV, metal detectors, baggage screening equipment, intrusion detection systems
 Nevertheless there is a demand for more sophisticated systems in the installed base and
growing demand from new locations
•In the residential segment, real estate and housing sector has suffered a set‐back
due to the economic crises. However, demand for electronic security is not expected
to subside since:
 Construction companies use high‐tech security systems as a value added feature and give an
upscale feel to their product
 Greater awareness is expected to stimulate growth from consumers.
– Zicom’s launch of retail stores for security equipment with a target of USD 20 mn in 2008‐09 revenues is
a testimony to the market’s potential
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 19

20. A general lack of awareness on security and a significantly large
unorganized sector are inhibitors to growth
Lack of awareness and attitude toward security Impact
• India does not have a security conscious culture and both institutional and individual customers
have low awareness of security requirements and possible measures
• Preemptive security measures are uncommon and steps are taken only when a threat is actually
i i d k l h h i ll
experienced
• Price sensitivity is a major issue since many view expenditure on security systems as frivolous
and not a necessity
 One effect is the continued existence of an unorganized sector, which compromises on quality standards
One effect is the continued existence of an unorganized sector, which compromises on quality standards
and competes primarily on price
• Significant importance is placed on human security vis‐à‐vis systems indicating that the market
needs to be made more aware of the role of systems in overall security arrangements
Competition from unorganized players
• Organized players accounting for 20% of the market but 80% of revenues:
 Unorganized sector primarily caters to lower‐end of the market with cheap basic products
 Government and corporate end‐users that require sophisticated systems are out of scope for most
unorganized players
 Since the distributor model and import route is common, entry barriers are low and contribute further to the
i h di ib d l di i b i l d ib f h h
disorganized industry structure
• Growth of the organized sector is necessary to establish, adopt and maintain critical quality
standards as well as increase the lobbying power of the industry
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 20

21. High duties and taxes for a market reliant on imports is another
major concern for the industry and customers
High duty and taxation structure Impact
• Security equipment and components fall under different product categories (as per industry HS
codes) and import duties for most products amounts to approximately 32‐37% depending on
the product classification
th d t l ifi ti
• Since most equipment in the market is imported (directly by foreign companies having domestic
marketing/operations or by distributors), the price of most equipment is artificially inflated
• High prices in a price conscious market inhibits growth, which in turn reduces volumes and
consequently impacts the flexibility of vendors to reduce prices
consequently impacts the flexibility of vendors to reduce prices
• With security now being viewed as a necessity, reduction of duties and taxes will make products
more affordable and enable the private sector and individuals to enhance their security
Lack of end‐to‐end solution providers
• Few companies in the market offer end‐to‐end solutions. Most distributors offer limited
products depending on their partner’s product range
• Customers are forced to scout the market and source equipment from multiple entities to fulfill
their requirements, which is tedious and increases system integration costs
• In the enterprise customer segment, there appears to be a demand for single solution provider
to source, install and maintain all equipment or components of a security system
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 21

22. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 22

23. The market includes many unorganized participants but sales is
concentrated with the largest players due to their capabilities
Competitive Landscape Market Structure
•The competitive landscape comprises
organized and unorganized players
Organized
O i d
•Organized sector is estimated to comprise of 20%
Unorganized
~50 players including 20 major and 30
medium‐sized manufacturers
•In comparison the informal or organized is
In comparison the informal or organized is 80%
estimated at 300‐350 units
•However, industry estimates indicate that the 80%
organized sector accounts for bulk of sales
•Prominent organized players are
P i i d l
 Foreign companies with Indian subsidiaries
20%
 Local companies in partnership with foreign firms
•Manufacturers of high‐end security systems
Players Revenue
are few in number with the informal sector
geared toward manufacturing basic, cheap
equipment
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 23

24. Product Portfolio Matrix (1/2)
Company CCTV Access Intercom Intrusion Others
Eureka Forbes Ltd   
Magnetic Auto Control P Ltd 
Schweitzer Systemtek   
Faradays Micro Systems 
Sivananda Electronics 
Siemens Building Technologies
Si B ildi T h l i    
Honeywell International P Ltd    
Helio Engineering P Ltd 
Ceasefire Industries Limited
Ceasefire Industries Limited   
Micro Technologies (INDIA) Ltd.     
Innovative Ideals & Services [India] Pvt. Ltd 
Cradle Technologies
g 
Note: Above list is not exhaustive
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 24

25. Product Portfolio Matrix (2/2)
Company CCTV Access Intercom Intrusion Others
Solas Fire Safety Equipment P.Ltd 
FIREPRO SYSTEMS PVT. LTD    
Zicom Electronic Security Systems Ltd   
Vista Security Technics P Ltd     
Kores India Ltd.
Kores India Ltd    
Gunnebo India Ltd   
Smith & Sharks Projects India P Ltd  
Intek Security Systems P Ltd  
e‐zone security    
No Climb Products Ltd    
Note: Above list is not exhaustive
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 25

26. Strategy Snapshots (1/3)
Company Strategy
• 200 retail outlets and 800 shop‐in‐shops by 2009‐10, agreement with Future media for retailing
Zicom Electronic Security
• Targeting global markets namely Middle East, Sri Lanka and Bangladesh
Systems Ltd • Setting up manufacturing units at cost effective destinations such as China
• Investment of USD 235 mn by 2010 for expansion
• Acquisition of small companies towards consolidating their position in the market
Bosch Limited • Targeting the untapped residential segment
• Marketing their superior products and technology
•TTargeting the boom in real estate and construction, providing integrated building solutions
ti th b i l t t d t ti idi i t t d b ildi l ti
Honeywell Automation • Concentrate on R&D to produce cost effective products
India Ltd • Focusing on establishing a pan‐India presence by partnering with small‐ and medium‐scale installers and
targeting the largely untapped local customer base
• Technological developments are being used as a competitive advantage
• Emphasis on product differentiation and major cost considerations towards making products unique
• Working towards interoperable products and systems that are part of customers’ IT
Siemens Building
• Targeting customers like buildings, campuses or multiple distributed premises with advanced video
Technologies management systems
• Acquisitions towards achieving large scale integration
• Expanded into RFID business and products that have strong potential for growth
Expanded into RFID business and products that have strong potential for growth
• Delivering customized security solutions is the core strategy to attract clients
Alba Control Systems • Offering a wide range of products in order to meet the needs of all the sectors
Note: Above list is not exhaustive
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 26

27. Strategy Snapshots (2/3)
Company Strategy
• Tie‐ups with world's leading companies in security solutions like Notifier, Honeywell, Bosch
Eureka Forbes Ltd • Targeting customers in residential and business segments
Magnetic Auto Control
Magnetic Auto Control • Using proven reliability and low maintenance costs as USP
Using proven reliability and low maintenance costs as USP
Ltd • Products created to suit local requirements by constantly adapting to the market needs
Schweitzer Systemtek • Associated with leading manufacturers in order to provide the latest available technology
• Strong distribution network across the country
Faradays Micro Systems
d i S • Specializing in development and manufacture of premium grade access hardware products
• Focusing on responsive customer service, effective technical support, fast delivery, installation ease
Sivananda Electronics • Maintaining high quality standards coupled with competitive pricing
• Creating strong fundamentals by providing timely service backup in order to gain customer confidence
• Constantly developing products through investments in R&D, technology and expanding technical
Ceasefire Industries
support
Limited • Establishing a large distribution network
• Geographical expansion and enhancements of product offerings
• Developing marketing and sales alliances
Developing marketing and sales alliances
Micro Technologies
• Maintenance of the existing customer base towards providing round the clock customer service
(INDIA) Ltd. • Focusing on brand equity
• Growth through acquisitions and subsidiary formation
Note: Above list is not exhaustive
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 27

28. Strategy Snapshots (3/3)
Company Strategy
• Continuous enhancement of existing technological capabilities
Innovative Ideals &
• Strong marketing team
Services [India] Pvt. Ltd • Strong focus on after sales service, strong clientele
Strong focus on after sales service, strong clientele
• Large scale associations towards providing quality products
Firepro Systems Pvt. Ltd • Strong marketing through core teams assigned to zonal markets with necessary support network to
reduce time required for installation
• A Siemens company
• Markets to end‐users and consultants
Vista Security Technics P
• Sells only to system integrators
Ltd • Growing regional sales, marketing and distribution network
• Wide product range
p g
• Offers a central monitoring system (CMS)
• Strategic tie‐up with Raicon Solutions LLC, a US‐based technology solutions company; ERP People Pvt.
Ltd., a security company in Melbourne, Australia; in order to provide the latest technology
E‐zone security • Strong partnerships and distributor agreements, through MoUs that enables it to competitively deal with
wide range of electronic security products
wide range of electronic security products
• Continuously analyzing the global market to ensure that its product quality is high
No Climb Products Ltd • Strategic alliances with detector manufacturers solving industry wide problems
Note: Above list is not exhaustive
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 28

29. Indicator of profitability – Zicom financial snapshot
Since financials for most security system companies in the domestic sector are unavailable or
consolidated with other business segments, the historic financials of Zicom Electronic Security Systems
are presented as an indicator
Zicom Electronic Security Systems Ltd
INR mn 2004 2005 2006 2007 2008
Total Income
Total Income 449.5
449 5 561.7
561 7 742.1
742 1 1576.3
1576 3 1635.2
1635 2
Revenue Growth N.A. 25% 32% 112% 4%
Gross Profit 126.5 145.9 244.5 540.8 404.1
Gross Profit Margin 28% 26% 33% 34% 25%
EBITDA 70 98.3 121.7 201 207
EBITDA Margin 16% 18% 16% 13% 13%
PAT 31.4 54.3 55.2 79.4 80.4
Profit Margin 7% 10% 7% 5% 5%
ROCE (%) 14.7% 21.0% 14.3% 15.0% 16.5%
RONW (%) 10.2% 16.5% 14.7% 15.1% 11.4%
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 29

30. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 30

31. The future will likely see reduction of duties and taxes, shift
toward IP and video analytics technologies, and PE investment
Government may accede to industry
demand for reduction in import
Duties & taxes duties and taxes to reduce cost and
give citizens affordable access to
security
IP‐based surveillance and video
Future Outlook Products analytics are considered to be the
future in India
Private equity investment is
Private Equity expected to increase significantly at
least till 2010
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 31

32. Since imports form a significant portion of security systems,
there are demands to reduce import duties and taxes
•Industry demands from the union and state governments:
 Classification of security systems as life safety equipment.
 Reduction in their import customs duty to 5%
R d i i E i d
Reduction in Excise duty to 4%4%
 Reduction in state VAT to 2%. (At par, if not lower than the tax that IT industry enjoys)
 Abolition of Service Tax levied on guarding services
 An allowance of 60% depreciation per year on purchase of security equipment
 Tax holidays to promote indigenous manufacturers
•ASSOCHAM recommendations for reducing import tariffs
 Reduce import tariffs by half on electronic products from over 37% to 18.5%
 Reduce import tariffs on telecom equipment and power conditioners to 0%
p q p p
 Priority on strengthening security in public and private sector calls for urgent rationalization of import tariffs
 Reducing import tariffs on security components will spur domestic production, promote self reliance, and enable
domestic manufacturers to compete with imports
In light of increasing concerns over security, it is possible that the government will
accede to demands and make security more affordable for industry and citizens.
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 32

33. The future lies in IP and video analytics technologies, especially
in government and large enterprises
•At a broader level, there is a visible shift from analog toward digital systems
 Smaller establishments such as retailers, malls and multiplexes are an exception due to the higher cost of digital
and IP‐based surveillance equipment
 Prices of DVRs are coming down spurring growth in the sale of these systems Therefore the demand for time lapse
Prices of DVRs are coming down spurring growth in the sale of these systems. Therefore the demand for time lapse
recorders is declining.
•IP‐based systems are the future in demand with a trend towards remote surveillance and networkability
 Growing demand in government and large industrial segments
M j
Major players are spreading awareness in the market for IP‐based systems
l di i th k t f IP b d t
 Smaller institutions are expected to retain DVR‐based systems, where already installed
 Demand for IP‐based systems may be constrained by:
– Limited bandwidth availability
– Hi h
High cost of such systems
t f h t
– Lack of volumes will further constrain flexibility of vendors to bring down prices
•Apart from IP‐based systems, video analytics‐based surveillance is cited as one of the hottest
technologies in the surveillance market
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 33

34. The growth in security business in the Indian market is attracting
PE firms with two companies receiving investment till now
Company Deals
•In August 2007, ICICI Venture and Indivision Capital, the PE arm of Future Capital Holdings,
invested USD 34 mn for a 16% stake.
Tops Security
Tops Security  ICICI invested INR 1 15 bn or USD 28 mn for 13 69% equity stake
ICICI invested INR 1.15 bn or USD 28 mn for 13.69% equity stake
 Indivision increased its existing stake of 4.94% to 7.08% by investing an additional USD 6 mn
•This is the first PE transaction in the Indian security business.
•In May 2008, ICICI Venture provided funding to Tops Security towards an overseas acquisition.
•In January 2008, DE Shaw acquired a 14% stake for a reported sum of INR 3 bn or USD 75 mn
I J 2008 DE Sh i d 14% t k f t d f INR 3 b USD 75
valuing the company at INR 21.5 bn or USD 525 mn.
Security and
•This is the first PE transaction by a foreign fund in the Indian security services market.
Intelligence
•In August 2008, SIS acquired a business in Australia for a reported sum of USD 235 mn. Although
Services (SIS)
the acquisition was expected to be funded by a mixture of debt, equity and internal accruals,
the acquisition was expected to be funded by a mixture of debt equity and internal accruals
raising funds from DE Shaw and State Bank of India were also a possibility.
Comments from Ranjan Biswas, partner, Ernst & Young, on the DE Shaw – SIS transaction
PE interest in
PE interest in • “The demand for security services has been steadily growing as for companies security has become a
The demand for security services has been steadily growing as, for companies, security has become a
Indian security major issue. Since the PE players want to tap the opportunity, they want to invest in the sector.”
market • “200‐300% hike in the PE investment in security firms could be expected in two to three years”
• “Even though the sector is unstructured, around 15‐20 companies are on the PE radar.”
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 34

35. •Market Overview
•Segments
g
•Business Model
g
•Drivers & Challenges
•Competition
Future Outlook
•Future Outlook
•Key Developments
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 35

36. Key Developments
Date Development
12‐Dec‐08 Luxury hotels such as Taj Mahal Palace, Oberoi Trident and Leela are making large purchases of security equipment in view of
the recent terrorist attacks with purchases ranging from CCTV to X‐Ray machines.
12‐Oct‐08 Indian Railways has allocated INR 8 bn to install integrated security systems in major railway stations including suburban
y g y y j y g
stations. The installed security system will comprise of high‐end Internet protocol (IP) based CCTV surveillance system,
electronic access control, personal and baggage screening system and explosive detection and disposal system. Installation
will be done through a public‐private partnership model.
17‐Sept‐08 Godrej Security Equipment Division I is planning to offer security solutions on a turnkey basis. Their products, premises
security, electronic security and physical security, will be configured on a turnkey basis for specific requirements of individual
or institutional customers.
l
4‐June‐08 Bosch Security Systems is looking to expand inorganically via large scale acquisitions allowing them to capture a larger market
share.
15‐April‐08 Zicom is targeting the retail surveillance market segment and is targeting a turnover of INR 100 crores for 08‐09.
SECURITY & SURVEILLANCE MARKET – INDIA.PPT 36

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