Detailed Narrative
Strategic Acquisition of A P Securitas
SIS Limited announced the acquisition of a 51% stake in A P Securitas (APS), a well-established 40-year-old firm with a pan-India presence. APS reported approximately INR 1,000 crore in revenue for FY24 and employs close to 40,000 people. This acquisition marks SIS's first significant inorganic activity in over five years, aiming to strengthen its position in the security and facility management sectors.
Financial Profile of A P Securitas
For FY24, A P Securitas recorded an EBITDA margin of 4.3% and a PAT margin of 2.27%. The company had a net debt of approximately INR 100 crore and a net worth of INR 86 crore. APS's business is predominantly security, with roughly 15% attributed to facility management services, and a significant portion (34%) of its portfolio comes from the BFSI sector.
Market Impact and Strategic Alignment
The acquisition is set to significantly boost SIS's market leadership, increasing its pro rata FY24 security business run rate to INR 6,100 crore, making it twice the size of its nearest competitor. This move aligns with SIS's Vision 2030 objectives to double its market share in Security and FM in India and shift from services towards integrated solutions. APS's focus on solution selling and its strong presence in key segments like banking and logistics were key attractive points.
Transaction Structure and Funding
The initial consideration for the 51% stake is INR 73.4 crore, with the balance to be acquired over a 3 to 4-year period through a tranche-based structure. The first tranche implies an 8.3x EBITDA multiple, with a rachet mechanism allowing the seller up to 9x if performance targets (15% or 20% plus EBITDA CAGR) are met. SIS expects the deal to deliver over 21% IRR in a base case scenario, funded entirely through internal accruals, maintaining SIS's net debt-to-EBITDA ratio below 1x.
Integration and Future Outlook
Consolidation of APS's financials into SIS is anticipated from Q3 FY26 onwards, following the completion of closing formalities and the FY25 audit. Management expects a minor margin overhang of approximately 0.1% at the security business level, which is deemed manageable. The long-term plan is to converge the blended EBITDA margins for both security and FM businesses in India to around 6%. SIS intends to continue operating APS with its current management for at least the next three years.