Introduction
2019-20 was a difficult year for India and it was no different for Zicom Group. We are
working closely with potential investor(s) to settle Group debts by divestment of
business, closing down loss-making businesses and focus on core strength of the Company.
This process may likely be delayed due to on-going Covid-19 disturbances which has
paralysed economic and investment activities badly. With the introduction of new vaccines,
the revival will commence only in 2021-22.
Macro Economic Review
After years of growth, the Indian Economy started slowing down since 2018 recording GDP
growth below 6.5%. Despite this slowdown, the economy continued to remain one of the
fastest growing amongst major global economies. From a global perspective there are
certain concerns. There is growing tendency amongst the leading countries to protect its
domestic market. The US is following stringent policies to restrict movement of man and
materials. India too is implementing its Aatmanirbhar Bharat policy. The other leading
countries are following same path which indicates that growth of world economy due to
globalisation is now slowing down.
India is also going through a difficult phase after demonetisation and GST
implementation. The Non-Performing Assets (NPA) of the banking industry mainly public
sector banks have grown phenomenally and is increasing day-by-day. The resolution platform
created through Insolvency and Bankruptcy Code, 2016 is getting crowded and the
resolutions are getting held-up beyond its mandatory deadline. The lending institutions
are mainly focusing on recovery of its bad assets and new lending is growing at minimal
rate. There is an atmosphere of no confidence amongst lending institutions and promoter
community. Such uncertainties is not conducive for growth of the business in India.
In summary, though Indian Economy is witnessing slowdown as compared to earlier years,
it is still fairly in good state. Growth in public investments for infrastructure is
driving GDP while private investment is still waiting. There are concerns regarding bad
assets of financial institutions and current account deficit. With stability in
operationalizing GST regime in India, Government investment in infrastructure and
continued commitment to fiscal prudence augur well for Indian Economy.
Business Overview
Zicom Electronic Security Systems Ltd. is engaged in the business of distribution of
e-Surveillance Equipments; such as CCTV cameras, monitors, DVRs / NVRs and other
accessories. Fire Equipments; such as sensors, fire extinguishers, Access Control
Equipments; such as proximity / biometric based locks and other accessories and Home
Safety Equipments; such as Video Door Phones and Home Intrusion Alarm.
Our primary objective is to drive the market with innovative products, latest
technology under brand of Zicom. Due to impact of “Make in India” initiative and
to remain cost effective, Zicom is negotiating with several overseas manufacturers to
set-up joint manufacturing facility to regain the market share.
The market for security and surveillance product is estimated around Rs. 6,000 crore
and is expected to grow CAGR of 20% in next 3-5 years. The key growth drivers for the
distribution market include customer industry growth, increasing threat perception and
reducing product prices. Monitoring of premises by CCTV equipment is getting regulated by
the Government. “Make in India” initiative of the Government is driving the
product price downwards which in turn is driving economic growth.
There are numerous competitors in the security and surveillance distribution market
ranging from small assemblers to MNCs such as UTC, Honeywell, HID. Zicom distributes the
products through numerous channel partners across the country; however loyalty for
specific brand is not of much relevance to the channel partner.
Zicoms Distribution business today is going through difficult time due to
non-availability of working capital. Resources crunch has impacted stocking strength of
various products by Zicom for making it available to channel partners on time. As
availability of variety of the products is a key factor for driving the business of the
distribution, Zicom is moving slowly on the business path for the time being. Also, Zicom
is not investing enough resources to increase the Brand recall which has also affected its
performance.
Zicom pioneered the concept of providing Security as a Service (SaaS) in India. Zicom
SaaS provides wide range of services from simple surveillance equipment monitoring to
advanced video analytics. The services offered by Zicom SaaS can be classified in
following broad categories based on complexity of services.
Uptime surveillance systems
This includes daily health check-up of equipment, replacement of faulty equipment and
regular preventive maintenance.
Alarm Monitoring
This service is being offered mainly to BFSI segment which include installation of
various sensors such as vibration sensors, motion sensors, heat / temperature sensors,
unidentified object sensors, shutter up / down sensors, etc. These services are mainly
offered for monitoring ATMs.
Live Feed Monitoring
This includes live monitoring of sites based on trigger generated by various sensors.
Trend based analytical services
This includes employee behaviour monitoring, customer behaviour monitoring, footfall
counting, etc.
The overall size of the Zicom SaaS market is estimated around Rs. 300 crores with
potential to grow above Rs. 5,000 crores in next 5 years. The demand for SaaS services
will arrive mainly from BFSI, Retail & Hospitality, Educational Institutions,
Hospitals, Distribution Centres, etc. The key growth driver for SaaS market includes
functionality assurance, cost benefits and enhanced flexibility and analytics. By
outsourcing security through SaaS model, customers get assurance of working conditions of
all sensors and transfer risk of obsolescence and AMC to Service Provider. Also, customer
need not pay up-front Capex and can benefit from reduction in Opex cost incurred on
security guard. These services are mainly suited for organisation having multi-site
operations.
Zicom SaaS e-SaaS services are mainly driven through two business divisions i.e.
Enterprise Division which focus on Retail Chains, Banks, Financial Services and Insurance
(BFSI) companies, Gold Loan Sector companies, Food Chains, Entertainments, Health Care,
Education, Logistics, Warehouse, Commercial Establishments, SMEs, etc. and Make Your City
Safe (MYCS) Division which focus on housing societies in Mumbai, Pune, Ahmedabad and
Hyderabad.
On the Enterprise side, Zicom SaaS is recognised for its Pan India multi segment
presence but faces implementation challenges on account of weakness in investing up-front
capex cost for providing services. Despite this Zicom SaaS has succeeded in renewing its
existing contracts by engaging proactively with the customers. Unlike Enterprise Division,
MYCS Division moves slowly on adding sites as each customer represents one site. BFSI
contributes significantly to e-SaaS revenue.
However, Corporate Insolvency Resolution Process (CIRP) was initiated, on a petition
filed by Punjab National Bank, against Zicom SaaS, which was admitted vide an Order dated
March 18, 2020, received by the Interim Resolution Professional on August 11, 2020
(Insolvency Commencement Date) of the Honble National Company Law Tribunal (NCLT), Mumbai
Bench, under the provisions of the Insolvency and Bankruptcy Code, 2016 (the Code).
Pursuant to the Honble NCLT Order for commencement of the CIRP and in line with the
provisions of the Code, the powers of the Board of Directors stands suspended and same are
being exercised by Resolution Professional in terms of the provisions of Sections 17 and
20 of the Code.
Fire Detection and Protection Business in UAE and Qatar
Zicoms fire detection and protection business is mainly Gulf centric, particularly
focused in the Middle East countries like seven emirates of United Arab Emirates, Qatar,
Oman, Saudi Arabia, and surrounding Gulf Co-operation Council (GCC) countries. Therefore,
any changes and development in business and economic scenario in these regions also affect
our business prospects to a great extent. We carry this business under two step-down
subsidiary companies, Unisafe Fire Protection Specialists LLC, Dubai (“Unisafe
Dubai”) and Phoenix International WLL, Qatar (“Phoenix Qatar”).
The Middle East market received severe setback due to fall in the oil price in the year
2015-16 which resulted in cutback in budgetary spending. The infrastructure growth of
Middle East has been slowed down substantially with many projects being stuck up leading
to EPC and MEP companies facing liquidity challenges due to lack of cash flow. Many small
and medium enterprises which represent over 2nd and 3rd layer
players in the market are facing difficult task of survival and many moved out of the
market.
The geo political situation of the region has received further set back with the
embargo placed by UAE and Kingdom of Saudi Arabia on Qatar. The land route to Qatar has
been blocked resulting in complete stoppage of material movement. The majority of the
projects of Qatar got stalled resulting in loss of value for all companies operating in
the region. Unisafe Dubai and Phoenix Qatar has received major setback due to stoppage of
Projects. The biggest challenge is to recover money from such stuck up Projects. Both
these companies have down sized its operations substantially. Unless Government takes
effective steps to infuse funding in the economy immediately, lot of companies may find
their way out of Middle East market.
Corporate Overview
All the business models of the Company, except Zicom SaaS, are undergoing challenging
times. To resolve debt situation of Zicoms Group business, the Company is working with
various potential investor(s) to resolve the debt situation and to bring the business on
track. However, due to commencement of pandemic this initiative has been temporarily
withheld.
Zicom SaaS business model requires continuous deployment of resources in capital
equipments for remote surveillance. Due to overall constraint of the Group to invest in
this profitable venture, Zicom SaaS could not grow as expected. Currently, Zicom SaaS is
under Corporate Insolvency Resolution Process (CIRP), initiated on a petition filed by
Punjab National Bank, which was admitted vide an Order dated March 18, 2020, received by
the Interim Resolution Professional on August 11, 2020 (Insolvency Commencement Date), of
the Honble National Company Law Tribunal (NCLT), Mumbai Bench, under the provisions of
the Insolvency and Bankruptcy Code, 2016 (the Code). Pursuant to the Honble NCLT Order
for commencement of the CIRP and in line with the provisions of the Code, the powers of
the Board of Directors stands suspended and same are being exercised by Resolution
Professional in terms of the provisions of Sections 17 and 20 of the Code.
During the year under review, the Bankers of the Company continue to monitor operation
of the account under TRA mechanism and the Zicom SaaS is under CIRP. The Management is
hopeful of revival of the business in 2020-21.
Financial Performance vis-a-vis Operational Performance, Internal Control System and
its adequacy and human resources
The financial and operational performance has already been discussed at length in
Directors Report under the heads: Operational Performance; Business Developments and
Prospects, Finance and Subsidiary and Joint Venture Companies. A separate para discussing
on Internal Control Systems and its Adequacy and various aspects of Human Resources of the
Company has also been included in Directors Report.
Cautionary Statement
Certain statements as discussed and mentioned in the Management Discussion and Analysis
and elsewhere constitute forward-looking statements articulated as the Managements
expectations for the future business prospects of the Company. However, there are risks
and uncertainties associated due to the general economic conditions in which the Company
operates. Also, the factors like the nature of the Companys business, foreign currency
fluctuations, regulatory initiatives, tender processes in the Government, Public Sector
and other large undertakings, competition, etc. are not in the control of the Company.
Such uncontrollable factors are crucial for success of the Companys business plans or
predictions, which may cause the actual results to materially differ from the performance
or achievements, discussed or implied by such forward looking statements.
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