Schneider Electric India, the Indian arm of French energy major Schneider Electric, today announced it would buy two electronic security system business units of Mumbai-based Zicom Electronic Security Systems, for Rs 224.7 crore.
Zicom’s two units — Building Solutions Group (BSG) and Special Projects Group (SPG), which are mainly focused on government and institutional sales — have a turnover of close to Rs 180 crore. As part of the transaction, Zicom will transfer 185 employees and an order book worth Rs 80 crore to Schneider Electric India.
Zicom and Schneider Electric officials said the deal was at a premium to the market price, which values the company at Rs 140 crore, based on Thursday’s closing share price on the Bombay Stock Exchange (BSE). Zicom’s shares, which rose to a 52-week high of Rs 134 on the news, closed 13.8 per cent higher at Rs 127.80 on the BSE on Friday.
The transaction excludes the Mumbai-based electronic security systems provider’s retail security and fire protection businesses, which together contributed 52 per cent of the group’s revenue of Rs 375 crore for the nine months ended December 31, 2009. “Security and energy management are among India’s top challenges and fastest growing markets. After the transaction, Schneider Electric will be in an even stronger position to capture these opportunities,” said Olivier Blum, country president, Schneider Electric India.
Zicom Chairman Manohar Bidaye said, “It is a good time to exit the business, when the value is attractive, and to focus on building the remaining retained business, as the security industry is undergoing sea change, particularly the integration business where we are a dominant brand.”
The security integration business in the country is getting into the next platform which is information-driven, complex networks and highly capital-intensive, said Pramoud Rao, managing director, Zicom.
This is the third acquisition for Schneider Electric in India in the past few months.
In June last year, the company acquired Bangalore-based Conzerv Systems, a two-decade old energy audits and energy meters firm, with a top line of Rs 70 crore. In August 2009, it acquired Meher Capacitors, another Bangalore-based company specialised in Power Factor Correction (PFC) capacitors and related systems.
“Our acquired facilities in India are doing well and will continue to help in supporting our global requirements for our diverse businesses,” Aaron Davis, executive director and global chief marketing officer of the $20-billion Schneider Electric, told Business Standard.
In August 2007, Schneider Electric bought Pelco Inc, a manufacturer of video security systems in the US, for $1.22 billion.
Schneider Electric employs over 115,000 people worldwide. In India, the energy major employs over 8,000 people and has 12 manufacturing plants and six research and development centres. Its Indian operations generate a turnover of close to Rs 4,000 crore, with exports contributing half of it.
The security market in India is estimated to be at Rs 1,400 crore and is poised to grow at 19-20 per cent in the coming years. The Zicom’s business acquired by Schneider Electric grew at an average of 30 per cent in the last five years, said Olivier Blum.