New Delhi, March 11 Rapid urbanisation, rising industrial investments and expanding commercial spaces will help the organised domestic security and facility management services sector clock 10-12 per cent revenue growth in the next financial year, according to a Crisil report released on Tuesday.
The double-digit forecast comes on the back of a strong compound annual growth rate of 13 per cent over the four financial years till March 2025, the report stated.
As revenues increase, operating profitability will remain stable at around 5 per cent, driven by cost control and operating efficiencies, despite challenges related to rising labour costs, high attrition rates and workforce shortages. The resultant higher cash flows and moderate dependence on working capital debt will keep credit profiles stable.
The analysis is based on the performance of 35 entities rated by Crisil Ratings, accounting for about a fifth of the organised segment’s Rs 1.15 lakh crore revenue for fiscal 2024.
The report highlighted that a surge in new office buildings, malls, hotels and residential complexes, and the consequent focus on safety and hygiene have accelerated demand for security and facility management services, as has increasing return-to-office mandates.
Similarly, steady industrial capital expenditure (capex), particularly in manufacturing, and growth in warehousing, as well as government spending on railways, airports and metro networks are creating a need for specialised facility management services which will provide tailwinds for the organised security and facility management services sector.
Himank Sharma, Director, Crisil Ratings said, “Growing need for integrated support services and compliance standards will help organised facility management provider’s revenues to grow at 10-12 per cent next fiscal. Also, the rising adoption of technology, such as surveillance systems integrated with artificial intelligence, remote monitoring, and automated cleaning technologies, is providing entities the opportunity to increase service offerings, and cater to a broader customer base.”
While technological adoption is a growth driver, the rise of automation and smart buildings could reduce reliance on traditional manned services. Companies with technology adoption are enhancing operating efficiencies by optimising shifts and scheduling, ensuring efficient resource utilisation, according to the report.
Such operating efficiencies will allow absorption of high recruitment and training expenses with increasing labour costs and high employee attrition. Additionally, labour law reforms and skill development initiatives by the government can address workforce shortages, which remains a major challenge. With focus on workforce retention, better operational efficiency and improving technology adoption, operating margin will remain at around 5 per cent over the medium term, the report added.
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