Security and Intelligence Services IPO (SIS IPO) – Should you invest?
Patna based Security and Intelligence Services IPO (SIS IPO) would open for subscription on 31st July, 2017. Security and Intelligence Services (India) Ltd is a leading provider of private security and facility management services in India. Its consolidated revenues grew at 15% CAGR in last 5 years. It earned thin profits of 2% for FY17. What are the positive factors in Security and Intelligence Services IPO? Are there any hidden factors in Security and Intelligence Services (India) Ltd IPO? Is Security and Intelligence Services IPO Price is reasonably priced? In this article, I would provide some interesting insights and do Security and Intelligence Services (India) Limited IPO Review.
About Security and Intelligence Services (India) Ltd
They are a leading provider of private security and facility management services in India. Its portfolio of services includes
a) private security services including security services, cash logistics services, electronic security services and home alarm monitoring and response services.
b) Facility management services in India include cleaning, janitorial services, disaster restoration and clean-up of damage, as well as facility operation and management such as deployment of receptionists, lift operators, electricians and plumbers, and also pest and termite control.
c) As of April 30, 2017, they have a widespread branch network consisting of 251 branches in 124 cities and towns in India, which cover 630 districts.
d) They employed 148,678 personnel in India and rendered security and facility management services at 11,869 customer premises across India.
e) In Australia, they operate in each of the eight states and employed 5,754 personnel servicing 245 customers, as of April 30, 2017. Its widespread branch network enables them to service a large number of customer premises and render customized services across India and Australia.
Security and Intelligence Services IPO Issue details
- IPO open date: 31-Jul-2017
- IPO close date: 2-August-2017
- Face Value: Rs 10 per share
- Issue price band: Rs 805 to Rs 815 per share
- Issue size: Rs 780 Crores
- Security and Intelligence Services IPO Lot size: 18 shares and in multiples of 18 shares there-of.
- Minimum investment: Rs 14,580 on lower price band
- Leading Managers: Axis Securities, ICICI Securities, IIFL Holdings, SBI Capital Markets, Yes Bank, IDBI Capital
- Listing: BSE / NSE
- Download Security and Intelligence Services IPO RHP Prospectus at this link.
Objects of the Security and Intelligence Services Ltd IPO issue
Here are the objects of the IPO issue.
1) The Offer for Sale: Company will not receive any proceeds from the Offer for Sale by the Selling Shareholders and the proceeds received from the Offer for Sale will not form part of the Net Proceeds.
2) General corporate purposes.
3) Repayment and pre-payment of a portion of certain outstanding indebtedness availed by the Company;
4) Funding working capital requirements of the Company
Company Financials (reinstated-standalone)
1) The company generated revenue of Rs 582.6 Crores for the year ended Mar-13 and Rs 1,619.9 Crores for the year ended Mar-17.
2) The company posted profit of Rs 29.8 Crores for the year ended Mar-13 and profit of Rs 26.5 Crores for the year ended Mar-17.
3) Its restated basic EPS for FY ending Mar-17 is Rs 3.87 and last 3 years weighted EPS was Rs 4.18.
Company Financials (reinstated-Consolidated)
1) The company generated revenue of Rs 2,657.7 Crores for the year ended Mar-13 and Rs 4,577.1 Crores for the year ended Mar-17.
2) The company posted profit of Rs 54.3 Crores for the year ended Mar-13 and profit of Rs 90.5 Crores for the year ended Mar-17.
3) Its restated consolidated basic EPS for FY ending Mar-17 is Rs 13.2 and last 3 years weighted EPS was Rs 11.9.
What are Security and Intelligence Services Key Strenghts?
Here are Security and Intelligence Services strengths.
- Diverse portfolio of private security and facility management services.
- Leader in providing security services in India and Australia.
- Second largest cash logistics service provider in India.
- Leading position in facility management services in India.
- Widespread and integrated branch network in India.
- Diverse customer base.
- Established systems and processes leading to a scalable business model.
- Experienced management and operational team
- What are its Key Strategies?
Company is focusing on few key strategies.
- Grow its businesses across customer segments.
- Use and upgrade technology to improve productivity and customer satisfaction.
- Leverage its existing branch infrastructure to achieve operational synergies.
- Inorganic growth through strategic acquisitions
Reasons to invest in Security and Intelligence Services IPO
- Its consolidated revenues grew at 15% CAGR in last 5 years. Its standalone revenues grew at 29% CAGR in last 5 years.
Risk Factors / Reasons not to invest in a Security and Intelligence Services Ltd IPO
- It earns thin profits of around 2%. Such low margins can wipe out with increase in salaries of security personnel or increase in associate costs.
- Its Promoter and the Chairman of its Company, Ravindra Kishore Sinha, has been named as one of the respondents in criminal proceedings initiated by certain regulatory authorities.
- Operational risks are inherent in its business as it includes rendering services in challenging environments.
- A failure to manage such risks could have an adverse impact on Its business, results of operations and financial condition.
- They have a large workforce deployed across workplaces and customer premises, consequently we may be exposed to service related claims and losses or employee disruptions that could have an adverse effect on its reputation, business, results of operations and financial condition.
- Its businesses are manpower intensive and Its inability to attract and retain skilled manpower could have an adverse impact on Its growth, business and financial condition.
- Company will be required to prepare financial statements under IND AS. The transition to IND AS in India is very recent and there is no clarity on the impact of such transition on its Company.
- They are subject to several labIts legislations and regulations governing welfare, benefits and training of Its employees and we are also a party to several litigations initiated by Its former or current employees.
- Any increase in wage and training costs or if any decisions in pending cases are against us, could adversely affect Its business, financial condition and cash flows.
- There are outstanding proceedings against its Company, and certain of its Subsidiaries, Promoters, Directors and Group Companies and any adverse outcome in any of these proceedings may adversely affect.
- Its profitability and reputation and may have an adverse effect on Its business, results of operations and financial condition.
- Its Board of Directors has recently approved a scheme of rearrangement to de-merge and transfer certain businesses to a member of Its Promoter Group, which is subject to the approval of the shareholders of Its Company, creditors, lenders and other statutory, regulatory and cItst approvals and consents required pursuant to contractual obligations. In case we are unable to obtain any of these approvals and consents, or if we are unable to achieve the expected benefits of the proposed demerger, Its business, financial condition and results of operations could be adversely affected.
- Its security services and cash logistics businesses include the carrying and handling of firearms and ammunition by certain of Its employees. Any misuse or contravention of laws or policies relating to firearms by its personnel may adversely affect Its reputation and expose us to potential liabilities.
- Other risk factors (Internal and external) can be viewed in the draft prospectus.
Recommendation / Investment strategy – Security and Intelligence Services IPO
a) On the upper price band of Rs 815 and on consolidated FY17 EPS of Rs 13.2, P/E ratio works out to 61x. Even based on last 3 years consolidated EPS of Rs 11.9, P/E ratio works out to 68x. Means, company is asking higher price band of Rs 815 in the P/E ratio of 61x to 68x. Its listed peers like Quess Corp Ltd is trading at P/E of 95. Hence Security and Intelligence Services IPO Price is reasonably priced.
b) Company consolidated revenues grew at 15% CAGR in last 5 years. Its IPO price is reasonably priced. However it earns thin profits. However it is already reflected in the IPO price. Investors with high risk can invest in this IPO for 2-3 years time frame. If one can get good listing price, they can do party.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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Security and Intelligence Services IPO (SIS IPO) – Should you invest