Indian Facility Management Services Market

Published: Nov’ 2014

All rights reserved. This publication is protected by copyright. No part of it may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.

Overview

• TheconceptoffacilitymanagementservicesgainedprominenceinIndiaaftertheliberalization,privatizationandglobalizationpolicies.

• TherearemainlytwotypesofFacilityManagementServices:

• MostoftheFMservicesofferedinIndiaareintheIT/ITES,BPO/KPO,andBanking&Financesectorsandtosomeextentinothersectorsalso.

• Theindustryhasalargenumberofsmallunorganizedplayersofferingtheservices.

• Asperourresearch,morethan60%servicesareperformedin-house.Thistrendis,however,changing.

• India’sservicesectoristhefastestgrowingpartofitseconomy-itheld33.3%ofGDP(atcurrentprices)in1950-51increasingto64.8%in2012-131.

• TheswiftlygrowingservicesectoriscreatinghugepotentialforFMservices,whichisanticipatedtogrowataCAGRofaround20%,fiveyearsdowntheline.

• AsperourinteractionwithFMServiceproviders,HousekeepingandSecuritywillremainthemajorrevenuegeneratorsforthem.

• Theshareofspecializedservicessuchasenergy,watermanage-ment,etcisanticipatedtoincreasebundledwithsoftservices.

Atpresent,FMservicesarenon-regulated.Thereisnoregulatorybodytocontroltheindustry.

However,duetoitsmanpowerdrivennature,theLabourLawssuchasminimumwagesact,EPFetc.areapplicabletotheseservices.

Themajorityofsmall,locallyspread,unorganizedplayersdonotcom-plywithlabourlawsproperly.Theirservicesarecomparativelycheaperthantheorganizedones.

Thebigorganizedplayers,however,complywithlawsrelatedtolabour,quality,man-powertrainingetc.

Theorganizedplayersaredemandingaregulatorybodytogoverntheindustry.

Indian Facility Management (FM) Services Industry

Market Update

Source:RNCOS

Source:RNCOSNote:Othersincludecatering,horticulture,watermanagement,energymanagement,transportationandothers

1UNNationalAccountsStatistics

Source:RNCOS

India - FM Services Market (Billion US$), 2014 & 2019

7.5

16.5

2014e 2019f

India - Share of Soft vs Hard Services (2014)

35%

65%

Soft Hard

India - Segmentation of FM Services by Type (2014)

35%

25%

15%

25%

Housekeeping Security

Electro-mechanical Others

• SoftServices:InvolvementofHumanskill• HardServices:Involvementofelectricalandmechanicalequip-

mentswithhumanskill

Source:RNCOS

India - Segmentation of Security Services in FM Industry (2014)

85%

5%

10%

Manned Guarding Cash Services

Elec. Security

• Mannedguardingisthelargestsegmentinsecurityserviceswhichincludesprotectionofindustrial,commercialandinfrastructuralfacilities.

• Increasingcrimesandlessavailabilityofgovernment-em-ployedsecuritypersonnelhasledtoincreaseinthissegment.

• CashservicesandelectronicsecurityareslowlyevolvingasmajorandfastgrowingserviceofferingswithinsecurityservicesofFacilityManagement.

Future Outlook of Security Services in FM Industry in India:

Key Points of Security Services in FM Industry in India:

Key Highlights: Facility Management Companies

Indian

International

• AsperourresearchwithSecurityserviceprovidersandFMserviceproviders,mannedguardingisexpectedtocaterhigherrevenueinfuturewithincreaseinshoppingmalls,ITparks,andotherprivateinfrastructuralfacilities.

• ThecashservicessegmentisexpectedtoshowcaseaninclineinitscurrentsharegivenhighernumbersofATMinstallationsalongwithwhite-labelATMs,openingupofbankbranchesandincreasingpenetrationofdebitcards.

• Accordingtomostofthesecurityagencies,widersecuritycoverageascomparedtomannedguarding;andone-timeinvestmentwillleadtorisingdemandforsecurityandsurveil-lancesystemssuchasCCTVsinIndia.

• TheminimumqualificationforasecurityguardinIndiaismatriculation.Theorganizedplayers,however,prefera10+2(intermediate)degree.

• Besidesqualification,securityservicecompaniesgivedueimportancetoIQlevelandphysicalfitness(includingheight,weight,andeye-sight).

• Thepayscaleforasecurityguardvariesfromlocationtoloca-tionandclienttoclient.However,mostcompaniespayaspertheminimumwagesactunderlabourlawplusincentives.

• BigplayerslikeG4SabidebythePrivateSecurityRegulationsAct2005wherebystategovernmentshaveplacedguidelinesrelatedtosecurityservicessuchaslicensingnormsandtrain-ingrequirementsforguards.

• Mostofthedomesticplayersareregionallylocatedservingfewgeographicallocations

• Thecompaniesarespecializedinoneorfewservices• Theylacktrainedstaffandtechnicalexpertise• Veryfeworganizedplayershavehighsalesturnover

• Companieshavewell-establishedpresenceandcatertomainlycommercialsectorssuchasIT/ITES,BPO,FinanceandBanking

• Companiesuseinorganicgrowthmodelforexpansionbyacquiringdomesticplayershavingwell-establishednetworks

• Companieshavewell-trainedstaffanddeliverbestserviceswiththeirglobalexpertise,systemsandresources

• Theyprovideintegratedtotalfacilitymanagementsolutionstocustomers

• Theyfurtherutilizetheirglobalandregionalexpertisetocapi-talizeonkeysectorssuchashealthcare,aviation&educationamongstothers

Companies gearing up for Total Facility Management (TFM) Solutions

Strategic Acquisitions: the way to go

Future Prospects

TotalfacilitiesmanagementprovidersinIndiaarescarce.Somecompaniesincludingmultinationals,suchasISSoperateintheregionwithvaryingdegreesofsuccess.

Previously,mostofthecompaniesinthefacilitymanagementindustryinIndiawerehavingeitheroneorfewfacilityservicesintheirportfolioofservices.Butnow-a-days,thescenariohaschangedascompanieslooktoprovideonestopsolutionstotheircustomersmeaningatotalfacilitymanagementsolu-tionincorporatinghardaswellassoftservices.

Forthat,thecompaniesaremakingstrategicacquisitionstoavoidappointmentofmultiplesubcontractorsforvariousservices.Forinstance,lastyear,UK’slargestfamily-ownedfacilitiesserviceprovider,OCSGroupintegrateditsservicestoprovidetotalfacilitiesmanagementservicesandend-to-endsolu-tionstoitsIndianclients.TheGroupnowdirectlydeliverscorefacilitiesmanagementservicessuchasengineering,cleaning,hygiene,securityandotherFMservicestoIndianclientswithoutappointingmultiplesubcontractors.

Overthepastfewyears,thefacilitymanagementindustryinIndiawitnessedrapidchangesaccompaniedwithconsolidation.Someofthebiginterna-tionalplayersfollowedtheinorganicgrowthroutetomarkitspresenceintheIndianmarket.Forthat,thecompaniesstartedacquiringdomesticfacilitymanagementplayers.Forinstance,OCSgroupacquiredfourserviceprovidersinIndiasuchasAbsothermFacilitiesManagement(engineering),RadiantHospitalityServices(housekeeping),CannonHygieneIndia(hygieneandsanitation)andCentralInvestigation&SecurityServicesLimited(securityservices)overthelast2yearsperiod.

Similarly,Sodexoacquiredtwocompaniestoenlargeitsscopeofactivitiesbeyondgiftvouchersandcouponstofoodservicesandfacilitymanagement.

Recently,theIkyaGroup,whichisasubsidiaryofthetouroperatorThomasCook(India)Ltd,signedanagreementtoacquireChennai-basedHofinconsInfotech&IndustrialServicesfromtheAustralianfirmTransfieldServices.

Besidesinternationalfirms,Indianfirmsarealsofollowingthesameroutetoconsolidatetheirmarketoperations.Forinstance,RentokilInitialIndiaacquiredtheGujarat-basedpestcontrolserviceprovidingcompanyPestconePluswhichwouldhelpinculcateanexperiencedlocalmanagementteamintothecompany.

• TheFMServicesindustry’sfutureseemsquitebrightasmorenumberoforganizationarelookingforoutsourcingtheirserviceswhicharenotdirectlyrelatedtotheircorebusinesstocutcostandperformefficientoperations.

• TheupcominginfrastructuralprojectsandsignificanteconomicgrowthwillcreatemoredemandforFMservicesinthecountry.

• FDIinsectorssuchasretail,ITandsecurityserviceswillcreatemoreopportunitiesforFMserviceprovidersinIndia.

• Expansionofbusinessactivitiesintier2and3citiesbyend-usersegmentswillincreaseregionalgrowthofFMservices.

• NewopportunityareasforfacilitymanagementcompaniesinIndianrailwaysareevidentasMinistryofRailwayinitsbudgetannouncedaseparatehousekeepingwingat50majorstations.

Industry Trends

AboutRNCOS

Strategic Consulting

Business Support Services

Identification of Business Opportunities

Business Research Services

• MarketEntryStrategies• GrowthConsultingServices(NewMarkets,

Customers,Geography/Demography)• Pre-testingandpostlaunchevaluation• ConceptandProductTesting

• BusinessSetupSupport/StrategiesandPlan-ningforStart-ups

• PhoneConsultations/ExpertRecruitmentforIndustryInsights

• LeadGeneration• SettingupofDealerDistributorNetwork

• Setuparepresentativeofficeinanyparticulargeography.

• Capturingandincreasingmarketshares• Identifyingpotentialclients• CompetitiveIntelligenceServices• LocationConsultingService

• ReportWritingServices• Region/CountryAnalysis• Sector/IndustryBriefings• TechnologyReports• WhitePapers

BusinessConsultingServicesfirmofferingabroadspectrumofManagementConsultingandBusinessfacilitationservicesincludingbutnotlimitedtoFinancial&BusinessAssessment,MarketEntry/ExpansionStrategies,MarketandIndustryResearch,Identification&SelectionofBusinessPartners,FeasibilityandFacilityLocationStudiesetc.

Sinceourinceptionin2002,wehavebeenofferingresearchsolutionstodistinguishedclientele’acrossmultigeographiesandindustryverti-cals.Wehelpourclientsinachievingsustainableperformanceandbettergrowthprospectsbyweedingouttheirobsoletebusinessprocesswithwelllaidstrategiesbyworkingincloseco-ordinationwiththem.

Allreportspurchaseddirectlythroughusorourauthorizedreseller’saresubjecttothefollowingdisclaimer.Purchaseofanyreportauto-maticallyindicatesapprovalofthisdisclaimer.Beforemakinganypurchase,allintendedrecipientsshouldgothroughthereportsumma-ry/synopsisandbrochurewhichisavailableonourcompany’sofficialwebsite.Recipientscandropane-mailforanyfurtherclarificationoftheirqueriesrelatedtothereportthattheyintendtobuy.

Alltheinformationthatispresentinourreportsiscollectedfrompaiddatabases,publiclyavailabledata(e.g.mediareleases,websitesandannualreports,etc.)aswellasfromtheinterviewsoftheindustryexperts,whichwebelievearereliable,i.e.throughPrimaryandSecondaryResearch.OurAnalystensurestheaccuracyofthereportinformationbyvalidatingittoallpossiblesourcesavailable.However,itissubjecttofluctuation.RNCOStakesnoresponsibilityforanyincorrectinformationsuppliedtousbymanufacturersorusersortheexpertsoftheindustriesinterviewedortheincorrectinformationontheothercompany’swebsiteorGovernmentsites.Theestimates,forecastsandprojectionsincludedinthereportsaresubjecttoanumberofrisks,uncertaintiesandassumptions.Actualresultsmaydiffermateriallyfromthoseprojectedbecauseofthemarketfluctuationsandotheruncontrollablemarketconditions.Theopinionarticulatedinthereportsiscompletelybasedonthecurrentmarkettrends,whicharesubjecttochangewiththechangeinmarketdynamicsfromtime-to-time.

Weassertthatanybusinessorinvestmentdecisionsshouldnotbemadesolelybasedontheinformationpresentedinourreports.Theinformationinourreportsshouldbeinterpretedasindicativeguidanceonly.Westronglysuggesttoallouruserstotakeproperexpertsuggestionfortheirbetterment.We,tothefullestextentpermittedbylaw,makenowarranty(express,impliedorotherwise),orassumeanylegalliabilityorresponsibilityfortheaccuracy,completeness,reliabilityandusefulnessofthisinformation.

Unlessotherwisestated,thecopyright,databaserights,andothersimilarrightsofthispublicationaresolelyownedbyRNCOS.Youarepermittedtoprintordownloadextractsfromthismaterialforpersonaluseonly.NoneofthismaterialmaybeusedforanycommercialorpublicusewithoutthewrittenpermissionofRNCOS.

Disclaimer

For more information on how we can work with you, contact

VartikaSehgalSr.ResearchSpecialist

RNCOSEmail:vartika.sehgal@rncos.com

Website:www.rncos.comPhone:+911204224700/01/02/03