Zicom: Pramoud Rao's Rs 484 crore security solutions company
Four decades ago, I was floundering in my studies. I would barely pass my exams and needed grace marks to be promoted. It was a constant worry for my parents; while my father worked in the technical department of the Indian Navy, my mother was with the Bhabha Atomic Research Centre. It seemed inconceivable that I would make a success of my life, ride a Harley Davidson to work, or be the managing director of a Rs 484 crore company, Zicom Electronic Security SystemsBSE 1.19 %.
After a BSc degree in chemistry in 1980, I couldn't find a desk job, so I was forced to take up a sales job as a medical representative. In 1982, I moved to the packaging industry and stuck it out for the next six years. Then, one of my neighbours suggested that we get into the business of importing and marketing fax machines. In the late 1980s, these machines were prohibitively expensive at Rs 2 lakh per unit, but the margins for distributors were high.
So, much against my family's wishes, I became an entrepreneur. My business partner and I pooled in around Rs 2,500 each and leased a small space at an office in Dalamal Towers at Mumbai's Nariman Point. We contacted a couple of importers and started our distribution business, Jayanti Business Machines Limited. By 1993, six years into the venture, we had a turnover of nearly Rs 50 crore.
That's when my business partner and I had a difference of opinion. While we both wanted to take the IPO route, he suggested using the money for stock market trading, but I wanted to stick to fax machines. So I agreed to my partner's condition that I exit without taking my share. All I took with me were my outstanding receivables, such as my salary, pension and gratuity amounting to nearly Rs 17 lakh.
Thus, in 1994, I found myself at the crossroads again, debating between a corporate job and starting a fresh venture. This time, my father encouraged me to opt for the latter, but I had no business idea. So, instead of letting the money idle, I decided to invest it in real estate and purchased a 100 sq ft office space at Bandra for Rs 11 lakh.
Before long, I had spotted my next idea: security solutions. Through the 1990s, in the wake of liberalisation, multinational companies were setting up shop in the country and needed security services. Yet, there were few service providers catering to this demand. I conducted research and found out that the best security solutions were provided by only two countries—Israel and USA. So I made my way to the US with the money left over from the realty investment. I met a couple of security company officials and was impressed with the electronic gadgets. I wanted to do something similar in India, but realised it would be a capital-intensive business and did not have the money.
The only option left to me was to make my proposed company public immediately after launch. So, in 1995, I launched Zicom and got listed on the Indian bourses the same year. In fact, we were the first Indian electronic security systems company to do so. The name of my company was inspired by Zee Communications, the first private TV channel in the country. We raised Rs 3.5 crore from the market, and used Rs 1.6 crore to buy land at Bandra. In 1997, we completed the construction of a five-storied office and called it Zicom House.
Despite several grand plans, nothing materialised and, by 2000, we were on the verge of bankruptcy. We decided to sell the business, and even managed to find a foreign buyer, who was looking to set up base in India. However, when we met, I realised that the buyer was not ready to take care of Zicom's shareholders. So, despite all the problems we faced—there was no money even to pay salaries—I refused to sell Zicom and desert the shareholders.
Then providence played its part and an overseas friend suggested bringing the smart card concept to India. We got a couple of firms, including ICICI Prudential, to fund our initiative. We raised nearly Rs 23 crore and became the first to launch the smart card concept in India. This gave Zicom a shot in the arm. Around this time, a series of terror attacks created awareness and increased the demand for security solutions. As a result, our main business vertical prospered. In 2007, we acquired Unisafe, a security solutions company in the Middle East, for around $1.5 million.
However, there were setbacks as well. We invested a lot of money to set up 120 touch-and-feel retail outlets across the country, where customers could know about our products. We soon discovered that there were few takers and the business was soon in the red. By 2010, we had incurred a debt of Rs 80-90 crore and were forced to sell a part of our business, which handled government projects and institutional sales, to Schneider Electric. The learning from this episode was to concentrate on our forte, security solutions.
Today, our 1,000-employee company has a presence in over 400 cities across the world and provides security solutions to most of the top companies in the country. We have a simple business model: we conduct a survey of the clients' requirements and suggest security solutions accordingly. We not only provide hardware, but also maintain it for our customers for a fixed monthly fee—Rs 3,500-4,000 per building and Rs 2,500 for the enterprise business.
In 2012, we picked up another company, Phoenix Industries, for nearly $15 million and acquired a 38% stake in Ciao, a Brazil-based security solutions company, for $2 million. This helped propel Zicom's turnover to Rs 484 crore in the previous fiscal year, and it should go up to Rs 525-550 crore by the end of this financial year.