Armour Security IPO

Armour Security (India) claims to offer a range of services covering private security, housekeeping, integrated facility management, and manpower solutions. This service mix allows the company to cater to different operational requirements across security and facility-related functions.

The company claims to use a technological infrastructure that includes an enterprise resource planning (ERP) system to integrate core business functions. It also claims to use email systems and smartphones to enable real-time communication, location sharing, and coordination among its workforce.

Armour Security (India) is ISO certified. The company also claims to hold licenses under the Private Security Agencies Regulation Act (PSARA), indicating compliance with regulatory requirements applicable to private security agencies.

The company claims to focus on maintaining long-term client relationships through structured planning of manpower deployment based on location and skill requirements. It also claims that its service delivery and cost structure support repeat business from existing clients.

The company has witnessed a consistent increase in its revenue from operations and profit after tax (PAT). Revenue from operations increased from Rs 26.81 crore in FY22 to Rs 28.85 crore in FY23 and Rs 32.93 crore in FY24. PAT increased from Rs 0.29 crore in FY22 to Rs 2.26 crore in FY23 to Rs 2.62 crore in FY24.

Integrated facility management accounted for Rs 9.28 crore (53.88 percent) of the company’s revenue for the period ended September 30, 2024; Rs 17.23 crore (52.33 percent) in FY24; Rs 16.06 crore (55.68 percent) in FY23 and Rs 13.09 crore (48.84 percent) in FY22. If the company is unable to anticipate and adapt to changes in client preferences and demand for facility management services or maintain service quality, it may face reduced demand and pricing pressure. Any decrease in demand for integrated facility management services can adversely impact the company’s business, results of operations, financial condition, and cash flows.

The top five customers accounted for Rs 11.39 crore (66.10 percent) of the company’s revenue for the period ended September 30, 2024; Rs 19.52 crore (59.28 percent) in FY24; Rs 18.48 crore (64.06 percent) in FY23 and Rs 17.03 crore (63.52 percent) in FY22. Any failure to retain these key customers, expand the customer base, or a loss of business from these clients can adversely affect the company’s business and financial standing.

Government contracts accounted for 41 percent, 44 percent, 42 percent and 46 percent of the company’s revenue for the period ended September 30, 2024; FY24; FY23 and FY22. Non-renewal of existing government contracts, inability to win new government contracts, or loss of business from one or more government clients can reduce revenues and impact operating performance. Any adverse changes in government spending, tendering policies, or procurement timelines can be detrimental to the company’s business, results of operations, and financial condition.

Delhi accounted for Rs 7.54 crore (43.77 percent) of the company’s total sales for the period ended September 30, 2024; Rs 14.22 crore (43.17 percent) in FY24; Rs 15.14 crore (52.48 percent) in FY23 and Rs 14.30 crore (53.36 percent) in FY22. Any decrease in revenue from Delhi, including due to reduced demand, inability to extend or renew contracts on commercially viable terms, or changes in local policies, may adversely affect the company’s business, cash flows, results of operations, and financial condition.

The company, its promoters, directors and group companies are involved in certain ongoing legal proceedings. The company’s business could be hit in case of adverse judgments in any of these cases.

Armour Security (India) has witnessed a decline in cash generated from operating activities. In September 30, 2024, the company reported negative cash flow from operating activities of Rs 0.31 crore. This indicates that while sales are increasing, cash generation is not keeping pace. This could result in the need to raise additional funds to cover day-to-day operations, which could increase finance costs and reduce profits. Additionally, negative cash flow from investing activities amounted to Rs 0.42 crore for the period ended September 30, 2024; Rs 2.00 crore in FY24; Rs 0.55 crore in FY23 and Rs 1.77 crore in FY22. The company also reported negative cash flow from financing activities amounting to Rs 0.52 crore for the period ended September 30, 2024 and Rs 0.53 crore in FY22. Furthermore, the net decrease in cash and cash equivalents amounted to Rs 1.25 crore for the period ended September 30, 2024 and Rs 0.06 crore in FY22. If cash outflows continue to exceed inflows, the company may have to rely more on external funding to meet operating needs, capital expenditure, or other financial commitments. This could impact the company’s growth, liquidity, and financial condition.

As of September 30, 2024, the company had contingent liabilities of Rs 4.31 crore. If any of these contingent liabilities materialise, it could hurt the company’s financial condition.

Employee-related expenses accounted for Rs 13.05 crore (75.73 percent) of the company’s revenue for the period ended September 30, 2024; Rs 26.49 crore (80.45 percent) in FY24; Rs 24.39 crore (84.54 percent) in FY23 and Rs 25.20 crore (94 percent) in FY22, indicating a cost structure heavily tied to manpower. Any increase in wages/benefits or non-compliance with labour laws could raise costs or result in regulatory actions, which may adversely affect the company’s business, results of operations, financial condition, and cash flows.