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 :
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 minister’s National Skills Development Council (NSDC) for this purpose. ASTM also provides Security & Safety Audits as part of it's offerings.
Fire Prevention & Protection (FPP)
The company has a state of the art manufacturing facility at Parwanoo in Himachal Pradesh. The facility started commercial production in 2009, and now boasts multiple assembly lines for manufacturing various products.
Zicom Electronic Security Systems - Brief Stats
Company Website : http://www.zicom.com
BSE Scrip Id, NSE Symbol : ZICOM
BSE Scrip Code : 531404
CMP : Rs 51.95 (closing price, BSE 27th June, 2012)
FY11-12 EPS : Rs 4.32 * (Standalone) ; Rs 14.79 * (Consolidated)
FY11-12 Dividend : 10% (Rs 1/- )
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 :
Low Promoter Holding : Whereas the promoter holding as per the latest declaration is just 16.48% (which will rise to 24% post conversion of warrants outstanding), if the shareholding of a PAC, Venu Raman Kumar & his wholly owned company Aark Singapore Pte Ltd (together 20.63%) are considered as quasi-promoter holding, this would rise to a more respectable 37% (and go beyond 40% post the warrants conversion). [ Note : Mr V. Raman Kumar is the Founder & ex-CEO of MModal Inc (formerly CBay Systems) and one can read some coverage about his investment in Zicom here & 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 .
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, thoughit 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.
Author : Bosco Menezes
Recommendation Date : 30.07.2012
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