Quick Heal one of the well know “anti-virus” brand from India, is turning into a public limited company. They are among the product based companies which are listed on the exchange. From being radio and calculator repairmen to being the titleholders of the most reputed security software brand, Katkar siblings have come a long way with their company.
Quick Heal Technologies Ltd (QHTL) is now coming out with its IPOon 8th February’16. The company is raising fresh equity shares worth Rs. 2500 million and offering for sale 6,814,736 equity shares held by existing shareholders. The price band is set at Rs. 311 to 321, with face value of Rs.10 each.
Money raised from fresh issue of shares will primarily be used for promotion and marketing of their software.
About the company
Reigning in the security software market, with around 30% of the market share, Quick Heal is among the leading providers of security software products to home users, small offices, educational and government institutions.
Its core anti-virus software is designed to detect security threats from virus and malware attacks in computers, smart phones and tablets. It owns two brands namely “Quick Heal” and “Seqrite”.As on 30th June, 2015, QHTL had more than 6.9 million active licenses of their product, with customers spread across 80 countries.
QHTL was incorporated as CAT Computer Services Private Ltd. on 7th August, 1995, at Pune, Maharashtra. It then altered its name to Quick Heal in 2007. The promoters of the company are:
- Kailash Sahebrao Katkar,
- Sanjay Sahebrao Katkar,
- Anupama Katkar,
- Chhaya Katkar.
Mr. Kailash, who is now the chairman of the company, used to repair radios and calculators of their neighbors. As Mr. Sanjay got his master’s degree in computer science, they set up Quick Heal.
Today, they own 65 offices and warehouses spread across 37 cities in India. Also, they have their presence in the US, Japan, Dubai and Kenya, where they are operating via their subsidiaries:
- Quick Heal Technologies Japan K.K.;
- Quick Heal Technologies Africa Limited;
- Quick Heal Technologies America Inc.; and
- Quick Heal Technologies (MENA) FZE.
QHTL wholly owns all its subsidiary companies.
Strengths and risks in business operations
- User-friendly software.
- Extended clientele;
- Around 6.9 million active users; to name a few, enterprises such Gitanjali Gems, Sardar Patel university, Bombay Hospital, etc. are in its client portfolio.
- Well recognized brand.
- Strong distribution network;
- Distributors and resellers: 15000 retail channel partners, 230 enterprise channel partners, 279 government partners, 577 mobile channel partners.
- 345 employees in the Marketing team.
- Noteworthy R&D: 449 employees in the R&D team. This is 36.47% of all its employees.
- Presence in more than 80 countries.
- Experienced team of management and employees.
- Consistency in growth and profit & cash flow generation.
As it is an IT company, they required to regularly develop new products and update the existing one. Failing to do so may critically affect the business. They need to survive through the stringy competition
In FY2014-15, QHTL made Rs. 2,943.37 million revenue and a gross profit of Rs.2,606.19 million. The EBITDA coming out to be Rs.918.03 million.
97.31% of the company’s revenue was generated from India and 2.69% from abroad.
In FY2015, they spent 9.79% of the revenues on advertising and sales promotions; and 16.06% on R&D.
Expense Breakdown by Segments
About the industry
As technology and use of smart devices is increasing, IP traffic and data is budding rapidly. And with this rises the threat of hacking and losing the data. Cyber-attacks are giving rise to the need of cyber security. Fragile security directly affects the business operations, of the users and the device & software manufacturing companies.
The IT security market in India was worth Rs. 5,100-5,300 in 2013 and is expected to be valued at Rs. 8000-8,500 by 2017.
Overall, the IT market is divided into 3 categories i.e. software, hardware and a majority portion being covered by services.
As the use of mobiles, computers is going to propagate day-by-day, a push to the security software industry will be given.
Quick Heal Technologies Ltd. is coming up with its initial public offering for fresh issue of equity share that come out to be valued up to Rs.2,500 million AND an Offer for sale for 6,814,736 equity shares.
The existing shareholders that are selling their shares are:
- Kailash Katkar- 2,000,000 equity shares.
- Sanjay Katkar–2,000,000 equity shares.
- Sequoia Capital India Investments III- 2,501,984 equity shares.
- Sequoia Capital India Investment Holdings III- 312,752 equity shares.
Capital raised from the IPO will be used for research and development, further promotion and sale of the company’s products. Also, proceeds will be used for purchasing, development and renovation of the company’s office premises (located at Chennai, Kolkata, Pune and New Delhi).
Based on the financial, EPS for FY 2015 is at Rs 9.1. The P/E at the higher price is 321 turns out to be 35.2 while at the lower price band of Rs 311, the P/E turn out to be 34. They multiple seems to be on the higher side. There are no comparable stock trading in Indian markets