After terror strikes, companies providing security systems may be one of the few companies to actually witness an upturn in business prospects. And the market certainly senses it faster than others.
Look at the share performance of Zicom Electronic Security Systems. From a low of Rs 12.5 after the September 11 attack, its shares have surged around 220 per cent to the current level of Rs 40.
No doubt, the need for security systems has never been more keenly felt. Little surprise then, that most industry players are pinning hopes on this newly-arisen opportunity to boost profits. And while the story may not have changed too much for the Rs 20 crore
Zicom, the leader in the electronic securities systems market, there are reasons to believe it soon will, as Rajesh Nair discovers in his conversation with Pramod V Rao, managing director.
With no industry body representing the segment Zicom operates in, how significant is the 30 per cent share the company claims to have?
Actually, the size of the market is not very clear. It is basically divided into two categories: the corporate and government market. There is another small segment that is residential and retail. As per studies undertaken in their personal capacity, most companies have their own estimate of the market size.
It's true that there isn't any creditable association that can quantify the amount of work being done and deduce a reliable figure. We had, over a year ago, tried to assess the market. We realised it stood at around Rs 70-75 crore. However, after the September 11 incident, things have changed.
We estimate the market to bloat to atleast Rs 250-300 crore. And in this relatively small market we operate in today, we enjoy the best market share.
How has the September 11 incident changed the scenario for security system companies?
The September 11 and December 13 incidents have thrown up huge opportunities for the entire security market. We have experienced a surge of enquiries. The government had to sit up and take note of the current state of its security systems. And, rightly so, it has initiated the process of increasing spending in this area.
For instance, the RBI is revamping its centres, with a budget of around Rs 7 crore.
Apart from the government, the corporate segment is also waking up to the need for security. Various business establishments including banking and software companies, refineries, etc., are increasing budgeted spending for ensuring security. Put together, we estimate the budget for enhancing or installing security systems to have risen by at least Rs 150 crore after the September 11 incident. What's more, it continues to rise.
What portion of this increased market pie can Zicom expect to grab?
I really don't want to make any estimates here. We know that the government, both central and state, have decided to spend a certain amount of money on security. But we don't know what kind of security they are talking about.
It could be something we don't deal in. We don't deal in everything, after all. So, one has to wait and see. But things have definitely become easier.
What is important is that, in the overall security business, how much will be channelled into electronic security systems. And within this share, how much Zicom qualifies for. It will not be correct to say that just because the government increased expenditure, we will benefit to that extent.
One thing that we are confident of is that there will be healthy growth rates in coming years. It's a good sign that the markets have now become more aware of security. With security being spoken of so often, growth is imminent. And being the leader in the business, we are poised to reap the benefits.
Have the benefits begun to trickle in for Zicom yet?
We have received three government orders in the past two months - we are waiting for the letter of intent. There are many more in the negotiation stage. Moreover, the confidence level of our sales team has also got a boost, because they are now facing real action in the market place. Earlier, it was more about going out and selling a concept. Now it is about addressing a need. That's the difference.
What business we will get from the opportunity that has been created, we will know in the long run.
But there has definitely been a surge in inquiries. While there is the perception that the security market will witness an upsurge, it remains to be seen, how much of this perception actually converts into business for the industry players. And converting this opportunity into sales for the company will depend on our efforts. It is our job to ensure that the potential to grow, which has been created, is capitalised on. Because, if we don't do it, someone else will.
With almost 90 per cent revenues accruing from the corporate segment, how well-equipped are you to exploit the government market?
Earlier, we didn't concentrate on the government market. Our business revolved around the corporate segment with clients in banking, software parks, general business, dotcoms, etc. Now, our focus has shifted. While we continue to cater to the corporate market, we have a new set-up in place to address the government segment. The skills required to satisfy both these markets are different. While the corporate segment requires value-selling, in the government market, we need to be very particular about being a low-cost competitor, etc.
Currently, the government accounts for very little in our total sales. But government orders take a long time to be awarded. Many tenders are in the pipeline, though. While some have already been released, some are being negotiated. In the next six months, we will have a clearer picture. We expect to bag sizeable orders by the first quarter of next year.
So, 2002-03 will see a change in terms of revenue contributors. The government market is expected to contribute around 70 per cent to total sales. The rest will continue to come from the corporate segment.
There is a widespread perception that Zicom is an operator's stock. Are you concerned?
It's a recent perception. Till December 2001, there was not much excitement. Why don't you ask the same question to all the electronic systems companies listed on the Nasdaq and whose scrips have appreciated by around 500 per cent since the September 11 incident? If the market perceives the business to be good, then action is bound to take place. We don't control it. But to answer your question, yes, we are actually concerned.
