Electronic
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BACKGROUND NOTE ON THE ELECTRONIC SECURITY SYSTEMS MARKET IN INDIA
(MARCH 2004) This note contains summary data based on research conducted by ValueNotes Database Pvt. Ltd. (ValueNotes). Care has been taken to ensure that the information and views contained in this report are reliable, but no responsibility is accepted for errors of fact or opinion. Reproduction in whole or in part without written permission is prohibited.
A. Market Size
The security systems market in India is very fragmented, comprising of a large number of players from the unorganized sector. Traditionally, security systems meant simply hiring manpower and physical security. It is only in the recent years that electronic security systems have started to gain popularity. ValueNotes estimates the total size of the market to be between Rs 5460 – 6380 million (approx. US $120 – 140 million). The global market, for electronic security systems, on the other hand, is estimated to be US$ 60-70 billion. Exhibit 1: Share of types of security systems Segment CCTV, Surveillance Access Control Alarm Fire Others (intercom, Total Rs. million, FY 04 1480-1680 1080-1260 605-750 1820-2025 520-660 5460-6380 Expected Growth 35-40% 35-40% 10-15% 35-40% 15-20% 27-33%
intruder warning, perimeter protection, video door phones etc.)
As can be seen from Exhibit 1, fire alarms and CCTV systems form the largest chunk of the market, accounting for approximately 42% of the total segment revenues. Access control is also another type of security system that has a fairly large presence and is also expected to grow at the same rate as the CCTV and Fire alarm segments. The overall growth of the security systems market is expected to be about 30%. Interestingly, small unorganized players, accounting for 50% of the total market dominate this market. The top 5 companies take up a quarter (25%) of the share in this market, while other players comprise of another quarter. Exhibit 2: Share by end-users of security systems
Share of market
Retail 15% Residential 5%
Offices/ Commercial 20% Public Sector/Govt. 40%
Industrial 20%
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 1 of 5
The major consumers of this market are the government and public sector undertakings. The other larger segments are the industrial and commercial segments. The residential segment is very small, accounting for only 5% of the total market. A.1 Market Analysis
The unorganized sector takes up a large chunk (50%) of the security systems market. Some of the reasons for this are: • Very little differentiation between branded and unbranded products • The relatively simple nature of a majority of the systems used in India. • The presence of a huge gray market, which imports low-cost systems from South East Asian countries. There are a lot of variations in the cost of the different components used (cameras, monitors, cables etc.) in various security systems. Also, the brands and configurations used by different types of end-users vary and therefore, the extent of system integration and installation is also different. Most of the times, components already available with the customer are used, e.g. in case of CCTV systems, monitors or VCRs, especially in case of small retailers.
Unorganized Sector:
ValueNotes has categorized those corporates (limited companies) with alliances with international manufacturers of security equipment as the organized sector. Most of the importers, dealers and small integrators, have therefore been categorized as the unorganized sector. They essentially sell cheaper products imported from South East Asian countries like China, Taiwan, Malaysia and South Korea. These dealers sell products that are unbranded or of unknown brands and give no guarantees or warranties. Also because of the high tax and duty structure for these products, the gray market is thriving. A.2 Market Demand & Growth
As seen in Exhibit 1, the market for electronic security systems is between Rs. 5.4 to 6.5 billion in FY 04. Thought this is a small market as compared to the global market, the growth rates are substantially high. Therefore, based on these growth rates the market is expected to be about Rs. 11 to 14 billion in FY 07. The main reason for this is the increased awareness about security products, due to incidents like the attack on 9/11 and the Gujarat riots. In the corporate sector, companies working for international clients, BPOs, software firms are particularly interested in elaborate security measures. Therefore, this segment is growing. Another large segment is the retail segment, especially jewellery shops and department stores.
Growth Drivers
The main growth drivers for this industry are: • Increased awareness about security products. However, the availability of cheaper products through the gray market makes it easier for smaller establishments to try out very basic systems. Knowledge about sophisticates systems is lacking and users are unaware about brands and type s of products available. Growth in Services Outsourcing resulting in close monitoring being required by the customer or parent company. Page 2 of 5
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Copyright, ValueNotes Database Pvt. Ltd, 2004.
• •
Cost reduction – Many Indian companies are now looking to cut costs by reducing staff. Therefore, this is a driver for the electronic surveillance industry to replace the traditional manpower security. Economic and political factors – The threat of terrorism is very real and the incidents in the last few years are increasingly compelling companies to look for increased security measures. The rising unemployment and wide disparities between economic strata in India also lend to the increased demand in security systems.
Growth Inhibitors
The main demand inhibitors are: • Low cost of labour – Added to the ignorance about the benefits an electronic surveillance system could provide, human surveillance also appears to be the cheaper option. In many cases, inspite of electronic systems, guards are not necessarily replaced. Power shortages – Apart from Mumbai, power cuts are the norm of the day in most parts of India. Although most companies have backups and generators, there is a lot of skepticism of electronic systems in that event. Low level of product knowledge – As mentioned before, adequate knowledge about electronic security systems is lacking and apart from the corporate sector, this acts as a huge inhibitor for this industry.
• •
B. Market Structure
As mentioned earlier, the market for electronic security systems is very fragmented in India. Most of the security equipment is imported from countries like Japan, USA, UK, Taiwan, China, Malaysia and Korea. Domestic manufacturing capabilities are virtually non-existent. Therefore, most of the companies in this market can actually be termed as ‘assemblers’ or ‘integrators’, who buy components of the security system from one or more sources, and assemble them as per customer requirements. The value chain in the electronic security systems market is quite complex, involving numerous entities. The interlinkages between them are shown in Exhibit 3 Exhibit 3: Value Chain in the electronic security market
Foreign manufacturer/Component Supplier
Large Integrator
Corporate/ Institutional Customers
Medium Size Integrator
Small Integrator Small/Retail Customers
Importer/ Distributor
Retailer
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 3 of 5
Independent distributors are absent, and the importers and system integrators double up as distributors. The foreign manufacturers have multiple relationships, either with importers, systems integrators or large dealers. Some of their brands available in India are CBC (HongKong), Watec, Sanyo, Chungai (Japan), Philips (Netherlands), Samsung (South Korea), Molynx (UK), Pelco (USA) etc. There are no large manufacturers in India.
The importers import the products, arrange for customs and other clearances and distribute to various dealers and system integrators. Some of the larger importers are Lookman, Security Vision, Turbo Consultancy, Z Plus etc. Some are also distributors, however, not exclusive to a particular brand. System integrators procure various components of the security systems and then assemble them, according to the requirements and budgets of the clients. In this regard, some of the large integrators like Zicom and Tata Honeywell are trying to create their own brands. The primary focus of the large integrators is on corporate and institutional business and large retail outlets. Then there are the smaller dealers or integrators who cater to the needs of small retail establishments, small offices and residential complexes. Overall, The market for electronic security systems has 2 main characteristics – • It is still in a very nascent stage – Awareness about the products is still growing. The corporate and institutional sector is more informed and therefore, demands better quality and systems. In the unorganized retail sector, very crude systems are used and existing equipment like TVs or VCRs are used, as is the case with CCTV systems. Price sensitivity – The market is driven by price. Other than the large corporates who buy sophisticated systems or better known brands, most others determine the system they buy depending on price.
•
At the same time, the market is very competitive, because of heavy cost-cutting, lack of differentiation and low margins. As a result, significant brand building activity is absent, except for a relatively small number of large integrators.
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 4 of 5
About ValueNotes
ValueNotes Database is a leading provider of business intelligence and research, with expertise across selected domains and types of customer needs. We work with clients across the globe, both within and outside the financial community. • • • • • • • Outsourcing (BPO) IT and IT services Financial services Professional services Telecommunications Media Real Estate • • • • • sector/industry reports • • company profiles equity research
investment appraisals competitive analysis
market segmentation and sizing partner selection and due diligence
ValueNotes also runs the popular web site www.valuenotes.com: • • • • The largest aggregator of information on Indian business and finance One of the few independent research platforms in India, the site offers a variety of research products on India's financial markets and corporate sector A common platform/distribution channel for quality publishers of research, which has made it the preferred vehicle for India's best-known equity analysts, technical analysts and research houses ValueNotes does not offer financial services such as broking, fund management, merchant banking, etc., which allows them to take an "unbiased" stand
For further information, please contact: • Name • Telephone • e-mail Meena Vaidyanathan Arun Jethmalani Jui Narendran 020- 438 9401 / 4388633 Mob: 98-226-51451 020 - 589 9590 020 - 589 9590 [email protected] [email protected] [email protected]
…from data to decisions
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 5 of 5
(MARCH 2004) This note contains summary data based on research conducted by ValueNotes Database Pvt. Ltd. (ValueNotes). Care has been taken to ensure that the information and views contained in this report are reliable, but no responsibility is accepted for errors of fact or opinion. Reproduction in whole or in part without written permission is prohibited.
A. Market Size
The security systems market in India is very fragmented, comprising of a large number of players from the unorganized sector. Traditionally, security systems meant simply hiring manpower and physical security. It is only in the recent years that electronic security systems have started to gain popularity. ValueNotes estimates the total size of the market to be between Rs 5460 – 6380 million (approx. US $120 – 140 million). The global market, for electronic security systems, on the other hand, is estimated to be US$ 60-70 billion. Exhibit 1: Share of types of security systems Segment CCTV, Surveillance Access Control Alarm Fire Others (intercom, Total Rs. million, FY 04 1480-1680 1080-1260 605-750 1820-2025 520-660 5460-6380 Expected Growth 35-40% 35-40% 10-15% 35-40% 15-20% 27-33%
intruder warning, perimeter protection, video door phones etc.)
As can be seen from Exhibit 1, fire alarms and CCTV systems form the largest chunk of the market, accounting for approximately 42% of the total segment revenues. Access control is also another type of security system that has a fairly large presence and is also expected to grow at the same rate as the CCTV and Fire alarm segments. The overall growth of the security systems market is expected to be about 30%. Interestingly, small unorganized players, accounting for 50% of the total market dominate this market. The top 5 companies take up a quarter (25%) of the share in this market, while other players comprise of another quarter. Exhibit 2: Share by end-users of security systems
Share of market
Retail 15% Residential 5%
Offices/ Commercial 20% Public Sector/Govt. 40%
Industrial 20%
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 1 of 5
The major consumers of this market are the government and public sector undertakings. The other larger segments are the industrial and commercial segments. The residential segment is very small, accounting for only 5% of the total market. A.1 Market Analysis
The unorganized sector takes up a large chunk (50%) of the security systems market. Some of the reasons for this are: • Very little differentiation between branded and unbranded products • The relatively simple nature of a majority of the systems used in India. • The presence of a huge gray market, which imports low-cost systems from South East Asian countries. There are a lot of variations in the cost of the different components used (cameras, monitors, cables etc.) in various security systems. Also, the brands and configurations used by different types of end-users vary and therefore, the extent of system integration and installation is also different. Most of the times, components already available with the customer are used, e.g. in case of CCTV systems, monitors or VCRs, especially in case of small retailers.
Unorganized Sector:
ValueNotes has categorized those corporates (limited companies) with alliances with international manufacturers of security equipment as the organized sector. Most of the importers, dealers and small integrators, have therefore been categorized as the unorganized sector. They essentially sell cheaper products imported from South East Asian countries like China, Taiwan, Malaysia and South Korea. These dealers sell products that are unbranded or of unknown brands and give no guarantees or warranties. Also because of the high tax and duty structure for these products, the gray market is thriving. A.2 Market Demand & Growth
As seen in Exhibit 1, the market for electronic security systems is between Rs. 5.4 to 6.5 billion in FY 04. Thought this is a small market as compared to the global market, the growth rates are substantially high. Therefore, based on these growth rates the market is expected to be about Rs. 11 to 14 billion in FY 07. The main reason for this is the increased awareness about security products, due to incidents like the attack on 9/11 and the Gujarat riots. In the corporate sector, companies working for international clients, BPOs, software firms are particularly interested in elaborate security measures. Therefore, this segment is growing. Another large segment is the retail segment, especially jewellery shops and department stores.
Growth Drivers
The main growth drivers for this industry are: • Increased awareness about security products. However, the availability of cheaper products through the gray market makes it easier for smaller establishments to try out very basic systems. Knowledge about sophisticates systems is lacking and users are unaware about brands and type s of products available. Growth in Services Outsourcing resulting in close monitoring being required by the customer or parent company. Page 2 of 5
•
Copyright, ValueNotes Database Pvt. Ltd, 2004.
• •
Cost reduction – Many Indian companies are now looking to cut costs by reducing staff. Therefore, this is a driver for the electronic surveillance industry to replace the traditional manpower security. Economic and political factors – The threat of terrorism is very real and the incidents in the last few years are increasingly compelling companies to look for increased security measures. The rising unemployment and wide disparities between economic strata in India also lend to the increased demand in security systems.
Growth Inhibitors
The main demand inhibitors are: • Low cost of labour – Added to the ignorance about the benefits an electronic surveillance system could provide, human surveillance also appears to be the cheaper option. In many cases, inspite of electronic systems, guards are not necessarily replaced. Power shortages – Apart from Mumbai, power cuts are the norm of the day in most parts of India. Although most companies have backups and generators, there is a lot of skepticism of electronic systems in that event. Low level of product knowledge – As mentioned before, adequate knowledge about electronic security systems is lacking and apart from the corporate sector, this acts as a huge inhibitor for this industry.
• •
B. Market Structure
As mentioned earlier, the market for electronic security systems is very fragmented in India. Most of the security equipment is imported from countries like Japan, USA, UK, Taiwan, China, Malaysia and Korea. Domestic manufacturing capabilities are virtually non-existent. Therefore, most of the companies in this market can actually be termed as ‘assemblers’ or ‘integrators’, who buy components of the security system from one or more sources, and assemble them as per customer requirements. The value chain in the electronic security systems market is quite complex, involving numerous entities. The interlinkages between them are shown in Exhibit 3 Exhibit 3: Value Chain in the electronic security market
Foreign manufacturer/Component Supplier
Large Integrator
Corporate/ Institutional Customers
Medium Size Integrator
Small Integrator Small/Retail Customers
Importer/ Distributor
Retailer
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 3 of 5
Independent distributors are absent, and the importers and system integrators double up as distributors. The foreign manufacturers have multiple relationships, either with importers, systems integrators or large dealers. Some of their brands available in India are CBC (HongKong), Watec, Sanyo, Chungai (Japan), Philips (Netherlands), Samsung (South Korea), Molynx (UK), Pelco (USA) etc. There are no large manufacturers in India.
The importers import the products, arrange for customs and other clearances and distribute to various dealers and system integrators. Some of the larger importers are Lookman, Security Vision, Turbo Consultancy, Z Plus etc. Some are also distributors, however, not exclusive to a particular brand. System integrators procure various components of the security systems and then assemble them, according to the requirements and budgets of the clients. In this regard, some of the large integrators like Zicom and Tata Honeywell are trying to create their own brands. The primary focus of the large integrators is on corporate and institutional business and large retail outlets. Then there are the smaller dealers or integrators who cater to the needs of small retail establishments, small offices and residential complexes. Overall, The market for electronic security systems has 2 main characteristics – • It is still in a very nascent stage – Awareness about the products is still growing. The corporate and institutional sector is more informed and therefore, demands better quality and systems. In the unorganized retail sector, very crude systems are used and existing equipment like TVs or VCRs are used, as is the case with CCTV systems. Price sensitivity – The market is driven by price. Other than the large corporates who buy sophisticated systems or better known brands, most others determine the system they buy depending on price.
•
At the same time, the market is very competitive, because of heavy cost-cutting, lack of differentiation and low margins. As a result, significant brand building activity is absent, except for a relatively small number of large integrators.
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 4 of 5
About ValueNotes
ValueNotes Database is a leading provider of business intelligence and research, with expertise across selected domains and types of customer needs. We work with clients across the globe, both within and outside the financial community. • • • • • • • Outsourcing (BPO) IT and IT services Financial services Professional services Telecommunications Media Real Estate • • • • • sector/industry reports • • company profiles equity research
investment appraisals competitive analysis
market segmentation and sizing partner selection and due diligence
ValueNotes also runs the popular web site www.valuenotes.com: • • • • The largest aggregator of information on Indian business and finance One of the few independent research platforms in India, the site offers a variety of research products on India's financial markets and corporate sector A common platform/distribution channel for quality publishers of research, which has made it the preferred vehicle for India's best-known equity analysts, technical analysts and research houses ValueNotes does not offer financial services such as broking, fund management, merchant banking, etc., which allows them to take an "unbiased" stand
For further information, please contact: • Name • Telephone • e-mail Meena Vaidyanathan Arun Jethmalani Jui Narendran 020- 438 9401 / 4388633 Mob: 98-226-51451 020 - 589 9590 020 - 589 9590 [email protected] [email protected] [email protected]
…from data to decisions
Copyright, ValueNotes Database Pvt. Ltd, 2004.
Page 5 of 5
