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Zicom Electronic Security Systems has entered into operating lease agreements with Reliance Capital and two other firms for financing its forthcoming cloud-based projects, a top company official said.
The move will also help the BSE-listed company in ensuring that its debt, which stands at around ₹500 crore (for the group), does not increase further.
New biz model“From April 1, our security-as-a-service model (SECaaS) will be funded through leasing companies. The new orders that we will pick up on the distribution side of the business will routed through these firms,” Pramoud Rao, Managing Director of the company, told BusinessLine .
SECaaS is a business model in which service providers integrate their security services into a corporate infrastructure on a subscription basis. The Mumbai-headquartered Zicom specialises in CCTV surveillance system, access control, fire alarm system, video door phones, intruder alarm system, fingerprint locks and remote managed services.
Generally in security equipment projects, the vendor has to invest upfront in manufacturing/procuring the equipment. The revenue kick in happens after several quarters, thereby putting a lot of pressure on cash flows. Thus, companies end up with a lot of debt on their books, a scenario that makes them less attractive to investors.
The new leasing arrangement means that Zicom will not have to raise additional debt. “The move ensures that assets such as CCTVs and fire alarm systems are not on our books but with the leasing company. Money paid by customers will come to an escrow account in which the leasing company and Zicom will have rights,” Rao said. He did not name the other two leasing firms.
After selling off its project business (government and institutional clients) to Schneider Electric India for ₹225 crore in 2010, Zicom has re-entered the business after completing a four year non-compete agreement with Schneider in May 2014.
The company is now bidding for government initiatives related to smart cities, city surveillance and public infrastructure.
Recently, the Reserve Bank of India allowed the company to raise the limit of investment by non-resident Indians and persons of Indian origins to up to 24 per cent of its paid-up capital.
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