Home / Companies / News /  Topsgrup to raise $100 million from international PE firms

Mumbai: Security firm Topsgrup, run by Tops Security Ltd, is planning to raise $100 million from international private equity (PE) firms to fund acquisitions and provide existing investors a profitable exit.

The 1,200 crore company would conclude the private equity deal in four months to facilitate an exit for existing investors, Diwan Rahul Nanda, global chairman at Topsgrup, said in an interview.

ICICI Venture Funds Management Co. Ltd and Everstone Capital hold 19% in Topsgrup while ace investor Rakesh Jhunjhunwala holds 12%.

“While ICICI Venture and Everstone Capital may exit, Jhunjhunwala may retain partial stake in the company," Nanda said. “We are not looking at a listing opportunity in the immediate future." He said the company is close to buying a south Indian security agency firm, while it is looking at buying two more companies in Europe.

The company has acquired three companies in the past five years. In 2008, Topsgrup acquired stake in UK-based the Shield Guarding Co. and bought Bengaluru-based Guardwell Detective Services Pvt Ltd. It has also bought stake in Chennai-based Adtech Systems Ltd.

The global private security services industry was estimated to be worth $132 billion in 2011 and is expected to grow at a compounded annual growth rate of 7% to reach $220 billion by 2019, according to a report by lobby group Federation of Indian Chambers of Commerce and Industry and consultancy firm EY that was released in 2013.

However, the Indian private security services industry is expected to grow much faster, at 20% over the next few years, and is estimated to grow from 36,500 crore in financial year 2013 to 64,000 crore by 2018, the report said.

When compared with some other markets, while India ranks significantly high on the terror activity index (7.15 incidents versus 3.5 incidents for the US and 2.5 incidents for Europe), it has one of the lowest police-to-citizen ratios (1.3:1,000 against the global median of 3:1,000), the report noted.

This fact coupled with the expected rapid economic development and growth in financial services suggest that private security services in India will grow at a faster rate than some of the other developed and matured markets, it added.

The security market is growing in India, Nanda said. In December last year, a 27-year-old woman was allegedly raped by an Uber cab driver in Delhi. In the same month, a Taliban attack on an army-run school in Peshawar in Pakistan left 132 children and nine school staff dead. On 26 November 2008, Mumbai saw a terrorist attack that killed at least 160 people. Nanda said these instances make security a compelling reason for families and companies.

These incidents, along with cyberattacks on corporate networks, are driving the growth of security solutions companies, said Sanchit Vir Gogia, chief analyst and group chief executive officer, Greyhound Research, an information technology and telecom research and advisory firm.

“Security services including consultation, implementation and support and managed security services have been generating substantial revenue in recent years and this trend will continue to develop as enterprises move towards disruptive technologies," Gogia said.

Topsgrup will clock 1,200 crore in revenues for the current financial year with an EBITDA (earnings before interest tax, depreciation and amortisation) of 120 crore and is expected to register EBITDA of 190 crore on revenue of 2,000 crore for the next financial year, Nanda said. “We want to become a billion dollar company in the next three years," he said.

Identification is the biggest threat for these companies. “The issues faced by security agencies are while procuring licences for private security agencies, verification of antecedents of security guards, training and problems faced by the controlling authority," Gogia of Greyhound said.

He said challenges faced by cyber solutions providers is in terms of real-time solutions of attacks.

“With the advent of emerging technologies, mobility and social media the number of threats have gone up. The security vendors have to be on their toes to provide solutions to those problems as and when it happens. Another challenge is in terms of threat identification," said Gogia.

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