Introduction

Due to changing needs, there has been constant innovation in the industry and security service providers are becoming highly mechanised and are offering numerous technological solutions to their clientele. In the recent past, India has seen the growth of private security agencies in double digits owing to a number of factors, such as growth in infrastructure (including the retail boom), high sensitivity to security concerns in urban areas and the Government’s focus on development of ‘smart cities’.

The Indian security services industry is expected to grow exponentially, at a rate of 20% over the next few years and is expected to reach INR 800 billion by 2020. It has the potential to be the second-largest employment generator in the country and a major source of revenue for the exchequer by way of taxes.

Due to changing needs, there has been constant innovation in the industry and security service providers are becoming highly mechanised and are offering numerous technological solutions to their clientele. The industry, therefore, not only requires capital but also know-how from established global players. Until recently, foreign investment in ‘private security agencies’ was restricted to 49% of the equity share capital with a requirement to obtain prior approvals from the Foreign Investment Promotion Board (FIPB) and the Ministry of Home Affairs (MHA).

Pursuant to recent liberalisations in the foreign direct investment (FDI) policy with respect to ‘private security agencies’: (a) FDI up to 49% is permitted under the automatic route; and (b) FDI beyond 49% and up to 74% is permitted under the government approval route, subject to compliance with the Private Security Agencies (Regulation) Act, 2005 (PSARA), as amended from time to time.