Zicom is India's leading security services company. In an exclusive interview to Moneycontrol.com, the company's managing director Pramoud Rao describes how a change in the Indian consumer mindset helped transform his business into a household name.
Zicom is India's leading security services company. In an exclusive interview to Moneycontrol.com, the company's managing director Pramoud Rao describes how a change in the Indian consumer mindset helped transform his business into a household name. He also speaks about his global expansion plans.
Excerpts of the interview with Pramoud Rao:
Q: Transforming essentially means strategizing to manage costs while growing your business. Please elaborate on the strategy adopted by you?
A: Pramoud Rao (PR): Cost management is always perennial to the business. At all times you need to be managing your costs well. My style of business has always looked at how much of sales growth can we get rather than cost management. Any business has four solid pillars 1st the pillar of strategy, the 2nd pillar of execution, 3rd pillar of structure and the 4th pillar of pillar of culture. For us these are the four pillars of our business. So we try to be ambidextrous as far as possible so that we see to that they are all aligned with each other. Cost management will definitely be a focus but for us the real focus will always be the “customer” and “customer” only.
Q: Do you have access to information needed to make crucial decisions?
A: PR: So far in my personal experience some times this has been by “design” or by “default”. Our business decision is either by design or by default. So the Schneider decision (the division which was sold to Schneider) was by “design” that was very informed decision we took. We saw that the security market in India will be very big and we are first generation entrepreneurs and there’s only so much of money we have (limited funds / money). Then we saw the entry of large Indian I.T companies like Infosys, HCL, WIPRO etc with huge balance sheets, so as the project sizes became bigger and bigger a lot of money is required to stay in the business, so we decided to sell this business and thought that we should focus on the smaller part of the business. We thought that better to exit this market, so we took informed decision that we would rather leave this market and do something smaller. Now we come to our entry into the Brazilan (Latin American) market, Brazil happened by default. We went to the Brazil purely by chance, I had a close friend of mine who was at a party in America he met a merchant banker or some banker who was appointed to look for a security company he recommended that why don’t you work with ZICOM. So it was very easy and we did not have to do a lot of effort for that. We keep doing research both on the market and companies in that space. Before we went into Brazil we also did a lot of due diligence on many companies in Brazil and for that we found that information from some newspapers (recent Corporate Dossier / ToI article on Latin American Opportunities with large focus on the Brazilian market) helped us a lot.
Q: Often, technology investments do not deliver the business returns that enterprises expect. Your comments.
PR: It’s a very good question. In the past many a times we have also experienced that we put money where the mouth is there but many a time we find that the mouth does not work much. So the thing is we do not invest a too much of cash in that we the reverse side of it, we go the customer and ask what are your needs, the customer tells us their requirements which varies so we go and find out manufacturers who make that kind of technology and product and then we OEM brand that technology and sell back to the customer. So we don’t have to invest a lot money in R& D or put up a factory, have lots of people etc. The customers tell us that what he wants, if that manufacturer has the product we say give it to us we take it and brand it as “Zicom” So when we go to the customer he does not know who is the original manufacturer of that product, it’s a brand in this case ZICOM. We sell the product on the Brand Strength of Zicom.
Q:What would be the chief agents of change that has transformed the way one does business today?
PR: The biggest change is one in consumer mindset. Earlier India was considered to be the “Land of gods” all kind of gods, elephant god, monkey God, this god that god to protect us then we have karma to protect us, the poorly paid Watchman or security guard, neighbours and last but not the least the good old security Dog, besides we have so many gods. So I have all those things are there in our minds. But now all those are disappearing slowly and the great wall of China is breaking down and every incident (like Mumbai 26/11 attacks) that has happened in this country sorry to say this but they help us. Besides there are serials like “crime patrol” definitely help us. (points out his secretary that they should be the sponsors of that serial).
Q: Is there a one-size-fits-all kind of a solution?
PR: There’s a challenge and Opportunity there. The challenge is that we cannot keep pleasing everybody and the opportunity is that even if we are able to achieve 80% requirements of a customer the rest 20% we can leave so if a customer requires this and this we do it for you and over the time the product becomes so robust and good that it itself becomes a product and we are human beings after all our needs and requirements change over time.
Q: Besides technology, human resources remain the key to success of any business transformation exercise. How do you retain talent?
PR: We run several programmes in the company. We have a programme called as “Auspicious” under which the second tier and the third tier of leadership does various kinds of foundation work like CSR activities like cancer society. Basically team building exercises which are important in an organization.
Q: How crucial is employee skill upgradation and what is the kind of resources that you commit towards it?
PR: We have some programmes where every employee has to do some training programme at a particular time of the year and spend a couple of hours undergoing that training. Typical corporate stuff.
Q: Transforming business is actually the means to an end—end being leadership in a competitive market. What’s your competitive edge?
PR: It is the world of the Internet so whatever happens in one corner of the world we come to know what is going on. If you want to know you will come to know through some channel on the internet. We also have to look at adaption. Like in India we were competing against the peephole so we did some innovations our door phone cameras by having it vernacular languages like tamil, telugu etc.
Q: In these extremely challenging times how are you trying to create long term value for all your stakeholders?
PR: So right now it is a challenging time. The market is down, business is down, realty market is down and that is why we decided to go into the services business where we feel that Rs10 or Rs.20 per day wont’ matter to the customer. We have been paying dividends to all the shareholders despite challenging times.
Q: How do you deal with Risk Management in the present situation when the economy is showing signs of slowing down and the management maybe tempted to take extra risks to gain market share?
PR: Going to Brazil is one such thing, going to Qatar was another. Getting into the services is another.
Q: What lessons have you learnt in managing growth specially during downturns?
PR: The first lesson that we learnt was in 2008 ( after the Lehman brothers crises)that in good times and bad times always be frugal, second is not to be flamboyant in running a business and third is to very good cost management. There are so many leakages that can happen in an organization. So see the forest and the tree at the same time.
Q: What was the vision behind setting up “Advanced Security Training and Management Pvt Ltd.” considering that there many bigger competitors in the market who have the domain expertise and can have a first mover advantage over you?
PR: You see if you look at any security guard today, he does not evoke any trust from you, on the face of it you trust him but sub-consciously you know that he can your biggest threat, also he gets paid a pathetic salary of Rs. 6,000 in a city like Mumbai which is so expensive it’s impossible to live within this salary. So the poor watchman goes back to his village in UP/ Bihar. These watchmen have absolutely no training at all. So we decided to set up this training institute to train these watchmen, in-fact we are training 200,000 security guards right now across 5 states in India.. This is also like up-scaling the training skills of the security guard so that he gets a better salary. We have also got funds from the prime minister’s National Skills Development Council (NSDC) for training these people. We are not replacing the security guard; we are completing and supplementing him.
Zicom stock price
On August 28, 2015, Zicom Electronic Security Systems closed at Rs 134.90, down Rs 1.3, or 0.95 percent. The 52-week high of the share was Rs 196.50 and the 52-week low was Rs 98.00.
The company's trailing 12-month (TTM) EPS was at Rs 5.00 per share as per the quarter ended June 2015. The stock's price-to-earnings (P/E) ratio was 26.98. The latest book value of the company is Rs 72.87 per share. At current value, the price-to-book value of the company is 1.85.
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