Expect Rs 70-85 cr revenues from SaaS in FY17: Zicom

Rao is also hopeful of paring their debt which is currently to the tune of Rs 550-575 crore.Below is the verbatim transcript of Pramod Rao’s interview with Nigel D’Souza and Reema Tendulkar on CNBC-TV18.Nigel: Could you give us an update on your order book, what it has been? We have been hearing a lot of positive sound waves that have been coming in so what is your current order book, could you break that up as well for us in terms of domestic as well as international? A: On the domestic front, we are basically in the services mode. Right now we are focusing more on the services market which comes under a subsidy called Zicom Software as a Service (SaaS). It is a new concept that we have started and it is doing very well. Here we engage with the customer for very long-term contracts so there are many banks that we are engaged with, there are many retailers we are engaged with. There is nothing like an order book out there because these are typical contracts which are spread over a period for a longer time. As far as the Middle East is concerned, we are sitting on order book of around Rs 400-500 crore, around that number. However, as you know, Middle East there are challenges because of the oil prices coming down and we have some headwinds out there. However, coming to India, that is the place we are focusing on our services right now. Reema: Could you tell us what percentage of your revenues currently come from Zicom SaaS?A: It is a business that we started just two to two and half years ago. Last year we did Rs 33 crore of services. This year we will do Rs 50 crore. In terms of overall India market, we are about 20 percent odd out there but this is a business where the EBITDA is at a very good level and here there is a cost advantage for the customer and that is the business we are very bullish about. We will be focusing very highly on the SaaS business because that is where we think is the future for the security industry lies. Interestingly it is an Internet of Things (IoT) business so wherever there is internet, we can provide services out there. Reema: You say that the margins are significantly higher; could you tell us what they would be for the SaaS business? A: Currently at the EBITDA level, we are almost close to 65-69 percent. However, going forward, we see a drop around 45-50 percent out there because the volumes will go up; we will see competition and all that. Right now there is not much of competition but having said that this business in my opinion is going to transform the way security is done in this country because so far when we used to go and install security system, it was a dummy thing we put but thanks to internet and thanks to 4G, 3G networks we are very bullish that we will be adding substantial value to our customer when he invests in security. Nigel: In the next year, what will your financials look like, the topline what will it look like, margins as well you said expected to improve and we have been hearing a lot of positive sound waves coming in from the government in terms of smart cities, surveillance systems as well as surveillance cameras at tatkal counters as well as we heard in the Railway Budget. So, have you got any incremental orders from there and also what will your revenues look like in the next financial year?A: I think the bigger significant change that this Budget has made for the security industry is that the government for the first time supported the industry by waiving off custom duty on Semi Knocked Down (SKD) and completely knocked down (CKD) on the CCTV. So, my guess is that this is going to transform a lot of businesses, for all the companies that are in the securities business, we are so far paying 30 percent duty and if that is waived off by custom duty, so, we are going to see Make in India being a reality in our market, in our segment. How much do you see the services business growing? The first year we did a very modest Rs 17 crore, last year we did Rs 33 crore, this year we are going to be exceeding Rs 50 crore and next year we will do around almost between Rs 70-85 crore next year. So, we are going to see a very good growth and the margins are very good in this business and I remain bullish on it. Reema: While we take your point that SaaS will do very well, it is on very high margins as well, on the Middle East side which still contributes a chunk of your revenues, you spoke about headwinds. So, what negative impact will that have on the company’s revenues in FY17? A: We will definitely see a slowdown out there. We never expected the oil to be at this price. We are seeing projects going slow there, we are seeing projects not going at the speed at which we want it to happen but we still have a very healthy order book position out there. We don’t expect a huge growth but if we can maintain what we did last year, we will be very happy with it. Reema: And that would be?A: Last year almost about 60 percent of our revenues came from Middle East. We hope to maintain that 60 percent even this year. Nigel: Could you tell us what is your debt in your books currently because your finance cost has moved up in the first nine months of this year, what is the debt in your books and are you looking to bring it down? A: The debt is mainly on account of our Middle East business. Debt in Middle East and India put together is, if I take both of them put together, it is around Rs 550-575 crore. Right now in the Middle East we are looking for a strategic investor, we are in talks there, so, we will see what happens there.In India, we are doing quite well. Whatever debt is there is in account of the SaaS business because they are deploying our assets out there. However, that is something which the management of the company is very sensitive about and we promise that we will bring it down very soon. (Interview transcribed by Priyanka Deshpande)