Synopsis
According to a Crisil report, India's organized domestic security and facility management services sector is expected to achieve a revenue growth of 10-12% in the next financial year, driven by urbanization, industrial investments, and the expansion of commercial spaces.Key Takeaways
- Organized security and facility management services to grow 10-12%.
- Stable operating profitability at around 5%.
- Challenges include rising labor costs and workforce shortages.
- Technological adoption enhances service offerings.
- Government initiatives can help address labor shortages.
New Delhi, March 11 (NationPress) The rapid pace of urbanization, increasing industrial investments, and the expansion of commercial spaces are projected to propel the organized domestic security and facility management services sector to achieve a revenue growth of 10-12 percent in the upcoming financial year, as detailed in a report by Crisil published on Tuesday.
This optimistic forecast is bolstered by a robust compound annual growth rate of 13 percent over the four financial years leading up to March 2025, according to the report.
As revenues rise, operating profitability is expected to remain stable at approximately 5 percent, supported by stringent cost management and enhanced operational efficiencies, despite facing challenges such as escalating labor costs, high employee turnover, and workforce shortages. The resulting increase in cash flows and reduced reliance on working capital debt will help maintain stable credit profiles.
This analysis is based on the performance metrics of 35 entities evaluated by Crisil Ratings, which represent about a fifth of the organized segment’s Rs 1.15 lakh crore revenue for fiscal 2024.
The report emphasizes that a wave of new office buildings, shopping malls, hotels, and residential complexes, along with a heightened focus on safety and hygiene, has driven demand for security and facility management services, particularly with the growing mandates for employees returning to offices.
In addition, consistent industrial capital expenditures (capex), especially in manufacturing, and growth in warehousing, paired with government investments in railways, airports, and metro networks, are generating a need for specialized facility management services. This trend is expected to provide significant support for the organized security and facility management services sector.
Himank Sharma, Director at Crisil Ratings, stated, “The escalating demand for integrated support services and compliance standards will enable organized facility management providers to achieve revenue growth of 10-12 percent in the next fiscal year. Furthermore, the increasing embrace of technology, including AI-integrated surveillance systems, remote monitoring, and automated cleaning technologies, is allowing companies to broaden their service offerings and reach a wider customer base.”
While technological advancements are a catalyst for growth, the rise of automation and smart buildings may lessen the dependence on traditional manned services. Companies that adopt technology are improving operational efficiencies by optimizing shifts and scheduling, ensuring better resource utilization, as outlined in the report.
These operational efficiencies will facilitate the absorption of rising recruitment and training costs amid increasing labor expenses and high employee attrition. Moreover, labor law reforms and government initiatives in skill development can help mitigate workforce shortages, which remain a significant challenge. With a focus on employee retention, enhanced operational efficiency, and increased technology adoption, the operating margin is expected to stabilize at around 5 percent over the medium term, the report concluded.
