Zicom Electronic Security Systems - Security For Your Portfolio

I had written this piece in June, 2012 , reproducing here after correcting CMP , Equity etc :

** Zicom Electronic Security Systems - Security For Your Portfolio**

Zicom Electronic Security Systems Ltd (ZICOM) , incorporated in 1995, is a pioneer in the field of Electronic Security in India. Today the brand “Zicom” is synonymous with Security Systems in India.

The company currently operates in 2 businesses :

(a) Providing Electronic Security Systems & Services , and

(b) Fire Prevention & Protection .

Electronic Security Systems & Services (ESSS)

Under ESSS, ZICOM offers a wide array of products and solutions which are state-of-the-art, reliable and high quality - CCTV Surveillance System, Access Control System, Fire Alarm System, Multi-Apartment Video Door Phones, Alarm System, Fingerprint Locks, Video Door Phones and Telecom Tower Security.

ZICOM, through its 100% subsidiary Zicom SaaS Private Ltd (Zicom SaaS) has recently pioneered a new managed security services offering called “SaaS” (Security As A Service), wherein the company provides full monitoring & security services to offices, factories & residential premises for a monthly/annual fee, saving the customer from investing capital upfront in installing the desired security solutions. The “SaaS” offering is primarily targeted towards Retail, Banking, Financial Services and Insurance (BFSI), and also customers having remote assets such as mobile towers, windmills, etc.

**Zicom SaaS **has also forged an initiative “Make Mumbai Safe” (Website : _http://makemumbaisafe.com _) to sensitize Mumbaikars on creating safer housing societies & to instill good security practices with the larger goal of making the metropolis a safer place to live in.

ZICOM has also ventured into the niche of Security Training & Education, wherein through it’s partly owned subsidiary Institute Of Advanced Security Training & Management Pvt Ltd (ASTM), it provides the entire gamut of training in Security, Safety & Loss Prevention. ASTM aims to build large scale education infrastructure, curriculum and delivery module, to redefine careers in the security industry. Currently ASTM is training 200,000 security guards across 5 states in India, and has got funds from the prime ministeras National Skills Development Council (NSDC) for this purpose. ASTM also provides Security & Safety Audits as part of it’s offerings.

Fire Prevention & Protection (FPP)

In the FPP space, the company through its subsidiaries Unisafe & Phoenix International provides complete Fire Protection Services which includes design, installation, testing, commissioning, service and maintenance of all kinds of Fire Protection Systems. The company already has a major presence in Gulf states, and is now entering the huge Indian market, which is growing at a fast clip (20-30% per annum) .

The company has a state of the art manufacturing facility at Parwanoo in Himachal Pradesh. The facility, started in 2009, has multiple assembly lines for both assembling & manufacturing various products. Currently this facility is largely used to assemble high-tech security products.

**Subsidiaries & JV’s **

The company has several wholly/partly owned subsidiaries as well as JV’s carrying out the above businesses in various countries The following is the list of subsidiaries / JV’s with Zicom’s holdings in brackets :


Unisafe Fire Protection Specialists LLC , Dubai (49% stake, 80% Economic Interest (EI))

(Website : http://www.unisafedxb.com)

Unisafe Fire Protection Specialists India Private Ltd, India (100%)

(Website : http://www.unisafeindia.com)

Unisafe Fire Protection Specialists Singapore Pte Ltd, Singapore (100%)

Phoenix International WLL, Qatar (49% - 5% directly & through subsidiary, 95% EI)

(Website : www.phoenixinternational.com.qa)


Ciao Zicom Security Systems, Brazil (38%) - JV with Ciao Telecom Inc., USA

(Website : http://ciaozicom.com) & IDL Global LLC, USA

Zicom Security Projects Pte, Singapore (100%)

Zicom SaaS Private Ltd, India (100%)

(Website : http://www.zicomsaas.com)

Institute Of Advanced Security Training & Management Pvt Ltd, India (17%)

(Website : http://www.electronicsecurityfiretraininginstitute.com)

Zicom CNA Automation Ltd , India (100%)

Zicom Electronic Security Systems )- Brief Stats

Company Website : _http://www.zicom.com_

BSE Scrip Id, NSE Symbol : **ZICOM **

BSE Scrip Code : 531404

CMP : Rs 82.40 (closing price, BSE 19th Nov, 2012)

FY11-12 EPS : Rs 4.32 * (Standalone) ; Rs 14.79 * (Consolidated)

FY11-12 Dividend : 10% (Rs 1/- )

*** - on equity of 12.7 Cr, current equity is 17 Cr after recent preferential issue, which will rise to 17.62 Cr post conversion of remaining warrants**

Investment Rationale & Considerations

Crime is an unfortunate reality of life . Outrages such as terror attacks like the one in Mumbai now infamous as “26/11”, or at the opposite end of the spectrum, something as mundane as a robbery in our neighborhood, serve solely to bring this reality in to focus. Where there is crime, crime prevention must surely be on hand, and security systems & services will always be an integral part of the same.

Similarly fire - fire again is an ever present risk humans are exposed to, and need to safeguard against. Unfortunately it takes incidents like the recent fire at Mantralaya, Mumbai, where sadly lives were lost (besides considerable property & important documents), to remind us that we are hopelessly lax in this respect, and need to take fire prevention & protection measures much more seriously to make our environment safer. Needless to say, this incident has shaken the city’s Municipal Corporation & Fire Department out of their stupor & hopefully fire prevention measures already stipulated will now be enforced seriously. Likewise, it is expected that their counterparts in other urban areas in India have also taken note, and are doing the same.

ZICOM is already an established player in security systems & services in India. It recently bagged the "_Brand Excellence Award_a in Best Surveillance Brand Category, by VarIndia, at the Infotech Forum, 2012. Again, the expertise of **UNISAFE **in fire prevention & protection is unquestionable.

Having expertise in both these domains allows ZICOM to offer innovative & comprehensive solutions to clients which cover security, fire protection etc. Just one random example of the same is their offering “8 Ka Dum”, a 24 x 7 Intrusion Detection and Monitoring Service with 8 security benefits to safeguard Shops/Offices from a variety of mishaps like - theft, fire, misuse, forced intrusion, etc.

Increasingly, the realty sector in India is getting more innovative & tech-savvy, and installing the latest security gadgets & solutions is fast becoming the norm in premium properties, with realtors touting these features as a value add to quality consious buyers. ZICOM appears to have the necessary pedigree to grab it’s fair share of a pie that is sure to grow for decades to come.

No doubt there are some red flags too that need to be considered and discussed, such as :

(a) Low promoter shareholding,

(b) Attitude towards minority shareholders, and

© Recent Equity Dilution

Let us look at these 3 issues .

Low Promoter Holding : Whereas the promoter holding as per the latest declaration is just 21.39% (which will rise to 24% post conversion of warrants outstanding), if the shareholding of a PAC, V Raman Kumar & his wholly owned company Aark Singapore Pte Ltd (together almost 20%) are considered as quasi-promoter holding, this would rise to a more respectable 41%. Nevertheless, a larger promoter shareholding would have inspired more confidence.

A brief about V Raman Kumar is available here :

Attitude Towards Minority Shareholders : In 2010 the company sold 2 of it’s divisions to Schneider Electric, but paid out only a very small “one time special dividend” to shareholders, thus leaving investors (particularly those who might have entered the stock on expectations of a handsome payout) an unhappy lot, and raising questions about the promoter’s shareholder friendliness.

The sale of the two divisions at the time was explained by the company as being required to achieve the twin purposes of (i) reducing the huge debt , while (ii) leaving sufficient cash for future acquisitions & expansions, and also to take on newer deep pocketed players entering the security market .

Let’s see as to what has actually transpired subsequent to the sale : Interest outgo was halved in the year subsequent to the sale. The company has robustly scaled up the retained businesses, and is now almost back to the revenues achieved prior to the sale of the 2 divisions. Their recent acquisition “Phoenix International WLL” will also start contributing to the consolidated numbers from the current or next quarter. Besides, the author also feels that the company’s Managed Security Services offering SaaS , launched last year, is an offering with immense potential, and once sufficient scale & coverage is achieved, will contribute significantly to the top & bottomline.

Taking the above into consideration, it does appear that substantial value has been added to the company in the last 2 years post the sale, and the promoters have indeed delivered results, though it is undeniable that if the choice was left to them, shareholders would have certainly opted to have had a quick return by way of a huge dividend cheque.

One more pertinent point to note in this context is that the company has maintained an unbroken dividend record for more than a decade , even though it has kept payouts on the lower side, to conserve capital for growth of the business. So perhaps the investor unfriendly tag may not be wholly justified.

**Recent Equity Dilution : **The equity has gone up from 12.7 Cr to 17 Cr post the recent preferential issue, and will rise to 17.62 Cr after pending warrants are converted. However the author feels that the growth momentum, both in the Security Systems & Services business, and in the Fire Prevention & Protection business - post the launch of Unisafe in India & acquisition of the stake in Phoenix International WLL - will propel earnings growth in the years to come.

Conclusion & Recommendation

All things considered, in the author’s personal opinion, the investment rationale for this particular company does look compelling.

The author therefore recommends readers of this blog to closely study & track this company going forward, and take an appropriate call based on their own conviction in this idea, after proper research.

(Note : Directors Report , and Management Discussion & Analysis in the latest Annual Report are required reading)__

Author : Bosco Menezes

Recommendation Date : 30.07.2012 (updated 20.11.12) - readers should note that the scrip is up quite a bit in the last few months, so margin of safety is correspondingly less

Disclaimer/Disclosure :

At the time of writing this article the author has a position in the stock covered by this report. The author or any of his dependent family members may make purchases or sales of the securities mentioned in the report while the report is in circulation. Readers/recipients of this report are strongly advised to do their strict due diligence, and should be aware that the value of investments can go down as well as up. The author shall not be liable for any direct or indirect losses arising from the use of the contents of this report, and readers are therefore cautioned to use the information contained herein at their own risk. In fact, readers would do well to seek the advice of a qualified independent advisor. The author certifies that all of the views expressed in this report accurately reflect his personal views about the subject company at the time of writing this report. Feedback / brickbats may be hurled at the author at boscom@gmail.com

Q&A from a recent interview : http://www.businessworld.in/en/storypage/-/bw/we-don-t-sell-products-we-sell-safety/588790.0/page/0

Founded in 1994, Zicom was the first to offer home security systems in India. With operations in over five countries, 400 cities in India and over one million customers and with Rs 450 crore in annual sales, Zicom Electronic Security Systems can be seen in the popular reality show Bigg Boss season six, where it acts as the CCTV surveillance partner. Pramoud Rao, the promoter managing director of Zicom Electronic Security Systems, oversees strategic planning, local and international partnerships, acquisitions, marketing, sales, technical and branding of the security company. In an email interview with BW Online’s Poonam Kumar, he explained the advantage of installing security gadgets at home.

**Who is the target customer for your security products? **

Zicom provides security as a holistic solution across all verticals, B2B, B2C and B2G (business to government). We offer services as a strategic differentiator using hardware and software only as an enabler. It’s our belief that consumers, don’t buy products, they buy safety. With our holistic services approach, we are able to offer consumers end-to-end solutions aimed at delivering peace of mind, at a nominal rate.

**Who are your clients? **

We have clients across various verticals. In retail, we service Bharati Walmart, Gitanjali, D’ dmas, Kimaya Fashion, McDonald, William Pens. In banking we serve HSBC, Kotak Mahindra, ICICI, Saraswat Cooperative, Indus Sind, Federal, etc. Among NBFCs, we service IIFL, Mini Muthood, HDFC Ergo to name a few.

**Who are your competitors? **

When it comes to pure product sales, we compete with all the multinational companies, like Honeywell, Schneider, Bosch, Tyco etc. Since we have just started pioneering the Make Cities Safe (MCS) and e-SaaS (electronic security as a service) projects, we expect competition in the next few months.

You have tied up with Tulip Infratech. Can you tell us more about the project?

The Tulip Housing project located at Sohna Road, Gurgaon, is one of the biggest projects with more than 5,000 flats. We will provide security to the project via state-of-the-art technological innovations and services, including video door phones, access control cards and radio frequency identification (RFID) sensors.

The apartments will have video door phones (VDP) with two-tier security that will include installation of a lobby station that will have RFID-based access card system as well. Any visitor will be required to dial the respective destination flat. The resident will be able to see the visitor in their lobby from inside their house before opening the door. The entire project will require 5,000 VDP and seven lobby camera stations with integrated card reader. A resident will simply have to show the card at the lobby panel and the main glass door will open automatically with the help of electromagnetic locks.

What is the Cities Safe concept?

The eco system protecting our homes today is unreliable and unsafe. The buildings where we live have practically no security. There is no authentic record of visitors, services staff, food delivery services, etc. Further, housing societies are shy about investing in security due to cost, technologies obsolescence, daily management of security devices, concerns of service and return on investments.

Under Make Cities Safe project, Zicom offers CCTV surveillance systems to housing societies with all the benefits without having to own or manage it. There is neither capital investment nor the headache of what technology to purchase plus the added advantage of not having to maintain or manage the system daily. The housing society pays a monthly nominal service fee to Zicom.

We launched MCS on 26 January, 2012 with a pledge to make our cities safe. Currently our system is installed in over 1,000 residential buildings in Mumbai in just six months, Zicom takes the responsibility of awareness, education and training of residents on various household safety and security aspects.

What are all the products Zicom has to offer?

a) Home Alarm Systems - Door Sensors, Motion Sensor, Glass Break Sensors and Gas Leak Sensor;

b) Finger Print Locks;

c) Video Door Phone ranging from a 4 inch screen to a wide variety of 7 inch screens including Touchpad Technology;

d) CCTV Cameras - IP based DIY kits are also available.

**How beneficial are the security products for household system? **

Nowadays, families are nuclear in nature, with both parents working and children being left to be taken care by others. Our dependence on outsourced resources has increased drastically and so has the crime conducted by these “dependable” outsourced resources. It has therefore become imperative for us to protect what we value the most.

The advantage of installing security gadgets at home is that they make you and your loved ones feel safe. While CCTV is reactive in nature and would only be able to provide circumstantial evidence of any wrongdoing, alarm systems are more of an active measure that detect unauthorised intrusion and deters the criminal from carrying out his intentions. The alarm can be raised locally as well as remotely.

**What is Zicom’s most popular product line in India? **

Our hot selling products are our video range- video door phones, low-end CCTV cameras and digital recorders.

What is your business plan post sale of integration business to Schneider Electric?

Zicom has always been driving the markets with pioneering initiatives. We pioneered the category of Electronic Security in 1994. Currently, we are pioneering a new concept called e-SaaS (Electronic Security as a Service) and another new concept called Make Cities Safe (MCS). Both concepts are pathbreaking and unique in many ways. We have no competition in e-SaaS and MCS.

What are the services offered under e-SaaS?

Under E SaaS, Zicom Command Centre is the focus of attention. The current services we offer are :-

  • Remote monitoring and management of Fire Alarm System
  • Remote monitoring and management of Intruder Alarm System
  • MAaaS - Managed Alert as a Service ( Monitors the health of Digital Recorders )
  • Time and Attendance on Cloud
  • People counting solutions for retail stores


**What is Zicom’s new business strategy? **

Zicom is re-entering the retail security business by offering our products in shop-in-shop formats, large format stores, electronic retail stores, e commerce portals etc.

There is now greater focus on brand building, expanding our services offering with geographical spread and profitable growth.

Hi Bosco,

I had taken a small starter position in Zicom, few month back, mostly because it was hitting 52 weeks high every other day. Got out of it after knowing promoter issue, and low conviction on it.

I think valuepick guy has also a blog post on it.

Godrej group co Ensemble Holdings (Chairperson : Tanya Dubash) has raised stake from 1.48% at Dec 2012 end, to 2.26% inJFM 2013 quarter ended March 31st 2013.

See shareholding pattern on company website :http://www.zicom.com/images/pdf/shareholding-pattern/shareholding-pattern-as-on-31.03.13.pdf

This is probably a purely financial investment.

Nevertheless, since Godrej group is present in one niche within securityspace, they probably understand the space better than the average Joe, sotheir investment is certainly a plus.

Also, other stocks held by Ensemble Holdings are almost all blue chips like HUL,Colgate, Gillette etc.

So i would say this is a good sign.

Other update : Company was in news in last 1 month because of it’s e-SaaSoffering. It got coverage in ET, Business India etc.

Latest news about the company in the Media is generally available fairlyquickly on the company website here:

Disc : I hold

Attended the AGM in August … not active here (as yet at least) and had not updated this thread , but anyway here goes … better late than never :slight_smile:

Shareholder Queries - ZICOM Electronic Security Systems Ltd

**1.**Pledging Of Shares

  • Pledges are all with Banks, as collateral security towards working capital loans.

  • No pledges with any finance companies, and no pledges for any other purpose but the above.

  • Banks have faced unprecedented number of defaults in last couple of years & are therefore very cautious while lending, and are demanding additional comfort in the form of pledge of promoter shares

  • If share price falls no additional margins have to be paid, and pledge does not need to be topped up.

  • No pledge of shares by the 2nd major shareholder, V Raman Kumar group.

**2). Low Promoter Shareholding **

  • This is right from the inception, as the co-promoters came from middle-class backgrounds & did not have capital to expand their business. So at the time of the public issue they started off with 25% & have kept it near to that level ever since. Now there is an additional issue that if promoter shareholding crosses 25% an open offer is triggered.

3). Interest of Godrej Group (Which has taken 2.26% stake through Ensemble Holdings)

-> V Raman Kumar enjoys a good equation with the Godrej group, they have had dealings with him earlier, and their buying started after his stake buy … so V Raman Kumar’s entry was the catalyst for Godrej group to enter.

*Apart from these market purchases of shares, no approach of any sort from Godrej group, who in fact are competitors in some segments.

  • So it appears their investment is purely a financial one, and one should not read more to it, though their investment certainly adds credibility .

4**. SaaS & e-SaaS business**

*Company’s SaaS & e-SaaS offerings require tremendous upfront capital because they work on a zero capex spend by the client, who instead pays monthly charges. These offerings have been a big success with retail chains, banks, housing societies etc & company needed to take on additional debt so as to not lose out on the opportunity. Payoff will be seen in 1-2 years.

*SaaS / e-SaaS business has taken off & is expected to give good growth in coming years.

  • Many retail chains, pan-India companies like banks, finance companies are using Zicom’s offerings

5). Non-Compete agreement with Schneider Electric (precludes Government business)

  • No-compete agreement ends on 30.4.2014.

  • Non-compete does not extend to Fire Prevention & Protection.

  • However Zicom does not plan to focus on Govt business (even after non-compete ends) as they find it is a problem to get payments from Govt.

6). Impact of Rupee Slide on the company

  • This is the major area of concern at the moment, as Zicom imports bulk of it’s components/devices & only assembles here.

  • It will be forced to increase prices

  • However many devices are now becoming a “necessity” instead of a luxury, and so it does not expect growth momentum to be impacted significantly

  • Forex loans are taken by overseas subsidiaries, and will be repaid by them, so no impact on debt servicing from Rupee Slide.

7). Stake in the training institute ASTM

  • Currently doing revenue of 6-7 Cr, expected to jump to 30-40 Cr in another 3 years time

  • Small stake at present , will rise when Compulsorily Convertible Preference Shares in ASTM are converted a few years down the line - stake will depend on conversion price at that time

8). Brazil JV (Ciao Zicom)

  • Brazil’s economy has also slumped and there is political turmoil & also a currency crisis. There is now even speculation that the FIFA World Cup of 2014 & 2016 Olympics are in a bit of doubt.

  • So JV has not taken off in any significant way & management is not expecting much in near future.

9). Fire Protection & Prevention (Unisafe & Phoenix International)

  • UAE is seeing a major rebound from the 2008 crisis, and Qatar is one of the fastest growing Gulf states.

  • So fast growth in these 2 regions is expected to continue. Unisafe is a market leader & has recently signed a contract to provide FPP services for another airport in the region.

  • In India, despite much potential, and major fire incidents, company finds that adherence to fire safety norms in India still continues to be taken very casually. Hence it is not making major efforts to increase Unisafe India’s base here, but Unisafe India is giving increased support to the Gulf operations.

10). Dividend

  • Dividend may rise in future if overseas subsidiaries pay dividends to parent. But there are some tax issues they need to sort out first.


Management Perception :

The management seems down to earth, and i felt that they answered every question with quiet confidence. I got the impression that there should be no major issues as far as corporate governance, ethics etc are concerned. (Caveat : I may be completely wrong) . Only issue maybe with whether they are expanding too aggressively.

I feel the negative perception in the market is more a function of their low promoter shareholding + low dividends + non-payment of big Special Dividend that market wanted post the sale of parts of the business to Schneider Electric .This may not be justified.


Some Video material for further study :



Annual Report : http://www.bseindia.com/bseplus/AnnualReport/531404/5314040313.pdf

HDFC Securities released a report on ZICOM few days ago, available here :http://www.hdfcsec.com/Share-Market-Research/Research-Details/StockReports/3005707

PS : The report projects FY15 EPS of Rs 35 & FY16 EPS of Rs 44 … CMP 115

Here is some more dope about Mr Venu Raman Kumar, who is the strategic investor in Zicom Electronic Security Systems , holding almost 20% equity.

1). Cbay’s Raman Kumar sets up venture fund a Business Standard

Having sold his first entrepreneurial bet to One Capital for $1.1bn, Kumar has now become an investor


Excerpt :

As an investor he has already made his first investment in India in security solutions provider Zicom. He acquired 20 per cent stake in the company that is listed on the Indian bourses for around Rs 15 crore. aThe total revenue of the company is around Rs 500 crore and I feel it can touch revenue of Rs 5,000 crore in the years to come. I prefer to invest in companies that have intellectual property (IP) and where I can have operational say as well. I am not interested in becoming just a financial advisor to firms,a added Kumar. He would ideally like to have five to six companies in his India portfolio.

2). Founder of CBay Systems sets up investment fund to back firms with IP a VCCircle


3.Frontline Strategy a Advisory Team a Profile : V Raman Kumar , Venture Partner


Excerpt : He was the winner of Ernst and Young’s entrepreneur of the year and Hall of Fame awards for Maryland, USA in 2007

4.Raman Kumar of CBay turns angel investor a Sify.com


**5). **Interview of V Raman Kumar in 2013 wherein he has spoken about Zicom & other investments :-

India Infoline, 2013 :http://www.indiainfoline.com/Research/LeaderSpeak/V-Raman-Kumar-Founder-and-former-CEO-MModalInc/41389194

Excerpts :

How many start-ups have you invested in? Do you have a fund in India?
I do not have a fund in India, I deploy my own proprietary money into companies that I find are interesting - Zicom, Spark Associates, Aeries technology

You had invested in Zicom. How do you see this company and industry shaping up?
Zicom is an interesting story a the only branded security solutions provider in India and one of the top 5 fire safety providers in the Middle East under the brand name Unisafe in UAE and Phoenix in Qatar. The industry is about to explodeaI consider this to be a ten bagger in 3-4 years

Zicom - In Brief

35% -4-year CAGR in revenuesleading to FY 2013-14

43% -4-year CAGR in netprofits leading toFY 2013-14

FY14 EPS : Rs 27/- before exceptional item, RS 24/- post exceptional item

FY15 Expected EPS : Rs 30+

FY16 Expected EPS : Rs 40+

CMP : Rs 100/-

Disclosure : I hold the stock, picked up more recently


Zicom chart pattern looks interesting. from 5 years it has consolidated at support levels of 100 and formed a double rectangular pattern with earlier support at 45.

Seems it may move any time soon andin medium term target price can be around 150.

Discl: Not invested.

I will be attending the AGM on 5th Sept … if there are any queries from members tracking this company, please post here.

Do please check last years AGM Q&A (my post of Dec 23rd earlier on this page) which answered many of the queries such as low promoter shareholding etc …

PS : I will be revisiting the low dividend payout issue, as last year they had explained that there were some tax issues regarding repatriating the profits from their subsidiaries which if satisfactorily resolved would see the dividend being upped. [ Note ; Currently the standalone (local) business requires tremendous working capital because of the SaaS model (Zicom bears the upfront cost & collects a monthly fee), hence they require to deploy their cash for the business & cannot pay a higher dividend at the moment ]. So i will get an update regarding this point.

what is the payback period for the SaaS model. They became debt free a few years ago by selling a part of business … but are back to being neck deep in debt + pledging etc. Looks like this model is just going to keep guzzling cash. They have pretty high Debtor Days… They deal with so many people… how do they ensure everyone pays up on a monthly basis… what if they dont ?

@Bosco… 1] Please see whether Mr. V Raman Kumar has a significant presence in the AGM. He’s taken appr 20% in 2013 & to the best of my knowledge he doesn’t have a Board seat. His holding % is more or less at par with promoters. Are the promoters comfortable with his holding ? Mr. V Raman Kumar has pointed that he would like to have a say in management decisions. 2]What is the opportunity in the Fire Protection Business in India ?

@Bosco…sorry…V Raman Kumar is already on the Board

ZICOM Electronic Security Systems Ltd a AGM Notes a Sept 2014

Business : Security Systems (SS) & FPP (Fire Prevention & Protection)


Performance - FY1314 a Consolidated :

Revenues : 926 Cr (Up 35%)

PAT 42 Cr (Up 38%)

FY14 EPS (b/f exceptionals) : Rs 27.06

CMP : 110-115 range

PE : 4

Local Operations


(A) Direct Sales , Distribution Through Channel Partners, Builders Business

*Competition from Godrej, Eureka Forbes, Aditya Infotech & smaller players

*Margins on the lower side due to competition

Steady20-25% growth expected*,**as per management

(B) Security As A Service ( SaaS)

1). SaaS Model

Basically the SaaS model requires the company to install the surveillance equipment at companyas cost & charge a monthly fee thereafter (RMR a Recurring Monthly Revenue).

*Contract period is generally 48 months with 24-months lock-in period

*Defaults (customer not paying after signing a contract) are very rare a less than 1% at the moment

*At the moment1200 installations under SaaS with RMR(Recurring Monthly Revenue) (Includes housing societies+atms+others)

*Revenue expected to rise to Rs 40 Cr in current year from Rs 17 Cr last year,says management

*SaaS model is a relatively new model, so management may tweak / recalibrate it as required.

2). ATMs - Surveillance under the SaaS offering

*Zicom has4000 ATMs under security coverageas of today under their SaaS model. Main customer is PNB with HDFC, Kotak & Federal Bank also their clients

*Revenue is 4-5k per month per ATM

*Currently tenders for providing security services for 25,000-30,000 ATMs are in process, with the biggest tender from SBI.

*Zicomaims to have 30,000 a 40,000 ATMS under coverage in 3-4 years time, according to management

3). Housing Societies - Surveillance under the SaaS offering (Make Your City Safe)

*In Mumbai & Pune there are 3 lakh societies of which 2.25 lakh or so are the addressable market for Zicom.

*Currently3000 housing societies under coverageat the moment, so quite under-penetrated.

*Amount charged averages Rs 3500/- per month.

©. Re-entry into the Projects business / Completion Of Non-Compete Agreement with Schneider

There has been a noticeable change in the working of Govt, according to Zicom management. This has prompted them to re-enter the projects business which has a focus on Govt contracts.

Thenon-compete with Schneider has ended few months ago, which allows Zicom to re-enter the projects business. Not only can Zicom targetGovt business, but also other big business opportunities likeMallsetc which till April 2014 they could not enter because of the non-compete agreement.

*No targets for revenue from this segment given by management.

*But they say they havealready bid in 4 large tendersunder this business.__

Other points :

1). Maharashtra Govtas 1200 Cr tender for CCTV surveillance network a Not participated a Why ?

Zicom did not bid for the same because thetender conditions were unfavourablea_for 1stthree years there would be no payments forthcoming_)- which they felt made the contract unviable for them.

2). Many tenders for CCTV surveillance network by municipalities / cities / townships / railways all over India

Zicom participates in those tenders where it meets the qualifying conditions & which it feels are winnable.

(D) Individual Security Mobile Application a aZIMANa

This is a smart phone application that will be launched later this month. Zicom has entered into an exclusive tie-up with Samsung, whereby new launches of Samsung smart phones will come with this security app (basic version) installed. There is a paid version with additional features.

In short, when ZIMAN is activated, the useras emergency contacts will be alerted of the useras whereabouts & the nearest police station contact numbers. At the same time the app will start transmitting conversation/photos to the Zicom command centre so that they can analyse what trouble the user is in (not sure how much is in the free version & how much in the paid version).

Whereas the basic app is a free application (a worthy social cause) the paid app (which will cost Rs 999/- per annumor Rs 99 per month) will have many additional features including Geo-fencing / Geo-tracking.

For example one can geo-track ones children by setting up a agrid/fencea (say for example from school to house to play-ground)beyond which if the kid departs the grid the parent gets immediately alerted with the details. Similarly one can track a parent/patient suffering from Alzheimers who may wander off & not be in a position to get back home.

Commercial projections & revenue sharing not revealed at the AGM. But if successful, it will be an additional revenue stream.

Some idea regarding ZIMAN can be found on this link :http://prezi.com/6stnv2c4zgxf/the-zicom-web/


Highlights :

*Currently 61% of top line & 64% of bottom line of Zicom are contributed by the 2 Middle East FPP businesses, consisting ofUnisafe Dubai & Phoenix International, Qatar.

*Order book gives visibility of revenues for next 15-18 months.

*Last year Unisafe Dubai did Rs 447 Cr revenues (34% growth) & Phoenix International did Rs 122 Cr revenues (74% growth)

*Unisafe Dubai has order book of 400 Mln Dhirams(Rs 650 Cr) which is approx.18-months of order book.

*Phoenix Qatar has approx. 100 Mln Qatari Riyals(Rs 165 Cr) order book a i.e.15 months order book

*New A380 Terminal in Dubai a FPP executed by Unisafe Dubai

*Unisafe to put up a factory in Jabel Ali, Dubai for manufacturing fire protection products at the cost of approx. 7 Mln USD (Rs 42 Cr)This will strengthen the groupas presence in the middle-east FPP market & contribute to the profits, says management.


**1.**Write-off of 5.17 Cr in Q4 of 2013-14 a ICD non-recoverable

Zicom had invested this money in one company with a view to taking a stake but they changed their minds & the same was converted into an ICD. The company in question went into liquidation & while Zicom has filed a case for recovery, it felt it was prudent to write off this sum.

2). Debt - high

Both businesses are working capital intensive. In the Fire protection business in Gulf large contracts take 12-18 months to complete, thus working capital gets tied up. Locally, SaaS model requires lots of capital up front because of the business model.

So though management is focused on this, the nature of the business requires heavy working capital.

3). Poor Valuation of the company in the stock market

Management is definitely cognizant of this fact.

They havenow started attending Investor Meetsarranged by financial institutions / brokerage houses. They said that (like shareholders) institutions too had concerns about debt & low promoter shareholding, but were positive about the business/corporate governance (their words).

Regarding Debt their views are already covered in my previous point_, however regarding low promoter shareholding, they said that they hoped that by the next AGM, some resolution of this issue might be in store_.

**[**PS :I feel this is a significant point.Letas see if & how they actually go about this.]

4). Low Dividend

Management explained regarding the need for money to be deployed in the business, especially due to its working capital intensive nature, however they did say that had they not done the write-off in Q4 of last fiscal, dividend might have been raised.

So it is likely that dividend may increase in future.

Above is the write-up of the 14thAGM. It is not a call of any sort. Interested members may study the stock on their own & arrive at their own conclusions.

)- ZeeNut

Disc : I hold good qty of the stock, so have a vested interest.

Pls read “14th” AGM as “2014” AGM.


Thanks so much for the effort. I checked with a person who used to work in one of Zicom’s direct competitor and his view was that Zicom was known to stretch itself in the market on receivables although they have become very prudent now.

His view is that there is some baggage from the past that still needs to be cleansed and this could drag down fundamentals.

@Bosco Menezes,

what is your view on zicom’s debt level. Year on year it has been on rise.

from what I know and from my scuttle butt, zicom has a lot of dues from their past customers who have not re-paid in full from 2008-10 vintage - who are paying in bits and pieces.

That’s why their cash cycles are poor and revenues are not translating into cash flows. Plus I have not heard good things about the governance in zicom from bankers who have worked with the company.

Thank you varadharajan…:slight_smile:

I have invested here from 66 level. One positive about this company is its SAAS model. Anybody can provide service. Already there are lot of companies who make and sell security equipments. But SAAS model seems to be unique. Can not be replicated by everyone. If at all anyone has the clear determination, then only it is possible. Security market has huge potential in the form of SAAS. Undoubtedly zicom has good brand value. And one more thing is Market is not positive about promoter quality.But, we cannot expect qualities of asian paints at the early stage of growth companies. My views might be biased…:).

From what i have read in the net, and whatever heard is that promoters seems to be passionate about their business. This i consider to be very positive.

i am new to stock market. I am just 1 and half year old kid here. Anybody’s view/comments are most welcome…:slight_smile:

Zicom has extremely positive tail winds - with ever increasing awareness about security/monitoring. They are in a sweet spot - yes, promoter is passionate - but you could have said all of this about vijay mallya 5 years back - it’s very important to take measured risks in business and I do not have confidence that pramoud rao does that.

Unless someone can give me some scuttle butt to the contrary

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