Quick Heal seeks financial healing through its upcoming IPO

Quick Heal one of the fastest growing IT security and solutions company in India is set to go public in the coming month, in what could be the first listing of an Indian software product company in more than a decade.

Issue Snapshot

Anti-virus software maker Quick Heal Technologies Ltd, which is backed by Sequoia Capital is planning to raise funds through fresh issue of shares, besides an offer for sale of up to 6.8 million equity shares by promoters and Sequoia Capital. Company will not receive any proceeds from the Offer for Sale. The offer is expected to hit the markets by the end of January. The price band for the offer is yet to be fixed. Since the new issue size is less than Rs 500 crore, the company is not subject to monitoring by any independent agency under SEBI regulations. The lead manager to this offer are ICICI Securities, Jefferies and JP Morgan.

Company Profile

Founded by brothers Kailash Katkar and Sanjay Katkar, the company was incorporated as CAT Computer Services in 1995. The computer repair outfit became Quick Heal in 2007. The company is engaged in providing IT security management across the length and depth of devices and on multiple platforms. Quick Heal provides digital security solutions that include antivirus software, firewalls, anti-spyware and data protection to name a few. The Company also offers cloud-based security solutions ranging from mobile to desktop, and from gateway to servers. All the security solutions are indigenously developed in India. Quick Heal's antivirus range of products include: Quick Heal Internet Security, Quick Heal Total Security, Quick Heal Total Security for Mac, Quick Heal Mobile Security for Android etc. In the enterprise products category, it includes Quick Heal Endpoint Security that provides management and control of virus protection on networks and caters to both SME and Corporate markets. Quick Heal conducts sales and marketing activities out of 65 offices across 37 cities in India, the UAE, Japan, Kenya and the US.

Utilization of IPO Funds

According to the management, Quick Heal intends to use the IPO proceeds primarily for advertisement and sales promotion activities, renovation of office premises in Chennai and other cities. Company also plans to increase their spending on research and development of new products and services, as the success of the organization mainly depends upon innovative products and solutions. Going further, part of the proceeds would also be used for general corporate purpose.

Financials

For the five year ending FY15, total revenue of the company has grown at CAGR of 22 per cent and was Rs 294.33 crore at the end of FY15. Quick Heal derived more than 97 per cent of its revenues from the domestic markets and less than 3 per cent from overseas operations. For the fiscal year ending FY15, EBITDA was Rs 91.8 crore showing a CAGR of 13.07 per cent for a five-year period. For the five-year period ending FY15, profits augmented by CAGR are of the order of 9 per cent. Quick Heal remains a debt free firm, however over the period of one year the company has witnessed pressure on its margins, mainly owing to higher employee related expenses.

Quick Heal is a leading provider of security software products and solutions in India with a market share of over 30 per cent in the retail segment according to an industry report. The company faces intense competition from both global and domestic players like McAfee, Symantec, Norton, Kaspersky etc. Currently the enterprise business contributes a little towards Quick Heal revenues. Nevertheless, the company has been pushing aggressively towards the lucrative Small & Medium Business (SMBs) segment by offering security solutions. According to the management, SMBs would contribute majorly towards the revenues in the coming five years.

Investments

Company has invested in few startups namely Smartalyse Technologies & Wegilant Net Solutions which offers computer related services and security solutions for websites, mobile devices etc. According to Quick Heal CEO Mr. Kailash Katkar they see synergies emerging out from these startups and at some stage in the future Quick Heal would acquire them to widen their product offerings.