Quick Heal IPO is set to hit to capital market on 8th February with a price band of Rs.311 to Rs.321 per share totaled to issue size of Rs.450 crore. Quick Heal Technologies known for Antiviruses software and will be the first one of its kind to get listed on Bourses. Let’s analyses and see whether Quick Heal IPO is worth investing or not.
Business Overview of Quick Heal Technologies
Incorporated in 1995 and having its registered office at Pune, Quick Heal Technologies is one of the leading providers of security software products and solutions in India under Brand Name of “Seqrite” (enterprise) and “Quick Heal” (home).
Quick Heal Antivirus Technology creates software for computer, mobiles and tablets and support vast platforms such as Windows, MAC, Android, iOS and Linux. The end users of company’s products are home users, small offices and home offices (SOHO), SMBs, enterprises, educational institutions as well as Government Agencies and Departments.
At present, Indian Antivirus market values at Rs.5,000 crore which is expected to grow at CAGR of 12% to reach Rs.6,600 crore by 2017. Due to increase in usage of internet, virus and malwares attacks have also increased and this results into huge demand for IT security. According to the Zinnov Industry Report, Quick Heal enjoys market share of 30% which is growing consistently.
Further, India is fastest growing economy and currently only about 20% of Indian Population uses the internet compared to 87% in Unites States and 46% in China. Thus this under usage opens a big passage of growth opportunity to antivirus market in India.
Features of Quick Heal IPO
- Issue Opens On: Monday February 8th, 2016
- Issue Closes On: Wednesday February 10th, 2016
- Issue Type: 100% Book Building
- Issue Price Band: Rs.311–Rs.321 per share
- Face Value Per Share: Rs.10
- Minimum Bid Lot: 15 Equity Shares and in multiples of 15 equity shares thereafter
- Minimum Order Value: Rs.13,995 to Rs.14,445
- Issue Size: Rs.445 crore to Rs.460 crore
- Proposed Listing: Bombay Stock Exchange and National Stock Exchange
- Lead Managers: Jefferies India Private Limited, J. P. Morgan India Private Limited and ICICI Securities Limited
- Registrar: Link Intime India Private Limited
- Company Promoters: Mr. Kailash Sahebrao Katkar, Mr. Sanjay Sahebrao Katkar, Mrs. Anupama Katkar and Dr. Chhaya Katkar
- Download Quick Heal IPO Prospectus HERE
Objectives of Quick Heal IPO
Quick Heal is planning to raise Rs.250 by issuing 80 lakh equity shares in the IPO and remaining 63 lakh shares worth Rs.200 crore (at cap price of Rs.321) are being offloaded by promoters, including Kailash Katkar.
However, out of the total net proceed of Rs.450 crore, Rs.200 crore will go directly to the promoters offloading the shares and remaining net proceeds of Rs.200 crore will be utilized in a manner as follows:
- Advertising and Sales Promotions.
- Capital Expenditure on Research and Development.
- Purchase, development and renovation of office premises in Chennai, Kolkata, Pune and New Delhi.
- General corporate purposes including brand building etc.
Financial Performance of Quick Heal Technologies
- Company has reported Revenues from Sales figures at Rs.286 crore for the year ended 31st March, 2015. For the past 4 years, company has provided growth at CAGR of 12.43%.
- EBIDTA margins of the company have been tremendously high. Last year sales to EBIDTA margin was 31.82% which is however, half from the earlier than previous year but still is pretty handsome margins.
- PAT on sales margin has been on declining trend from 38% in FY 2011 to 19% in 2015. However, 19% is still considered good but company has to maintain double digit PAT on sales margins.
- RoNW is also on declining trend from 27% in FY 2012 to 16.37% in FY 2015. However, RoNW above 15% considered good.
- EPS of the company for last year was Rs.8.81 per share which is down from the earlier two years i.e. Rs.9.56 for FY 2014 and Rs.12.59 for FY 2013.
Turn-On Points of Quick Heal IPO
- Company is consistently showing good figures of sales and profits. However, a thing to note is that profits figures and RoNW are in declining trend which company needs to worry about.
- Government Digital India Campaign will boost penetration of IT in India and because Company’s brand recognition is the highest one amongst peer groups companies in antivirus sector, it may become the major beneficiary of Digital India as well as 100 Smart City Plan Campaign of Indian Government.
- As of June 30, 2015, company has over 15,000 retail channel partners, 230 enterprise channel partners, 279 government partners and 577 mobile channel partners, who act as the distributors and resellers of company’s solutions.
- Quick Heal Technologies was awarded the “Make in India Excellence 2015” award for its contribution towards the economic growth of the country. Further, company’s solutions have also been certified by AV-Test and AV Comparatives.
Turn-Off Points of Quick Heal IPO
- Despite healthy CAGR of 12.43%, profit figures, RoNW and EPS figures have been falling continuously from last 4 financial years. EBIDTA Margin and PAT on Sales ratio have also seen heading downwards for the last 4 years.
- Company hold 30% market share of Antivirus Software Sector of India however, it is not even counted in Global market. Microfsoft, Avast, AVG, Symantec, McAfee etc. are few major players rule Global Market. These companies have also started seeing Indian market as emerging market for their products, thus in coming years Quick Heal may face a tough competition with Global Players.
- Company enjoys tax incentives on manufacturing CDs and DVDs and any loss of these benefits may adversely impacts company’s financial performance and cash flows. Further, Company is heavily investing in advertising and brand promotion and thus due to heavy competition profits margins may be in pressure in coming years.
- Company promoters and directors have been named respondents in a criminal proceeding.
Should you Invest in Quick Heal IPO?
- Company has fixed price band of Rs.311 to Rs.321 and at upper price of Rs.321, company’s PE on EPS of Rs.8.81 comes to 36.43X and at lower price of Rs.311, PE comes to 35.30X which seems bit high in comparison with the global players.
- Quick Heal majorly provides antivirus solutions for computers and we are witnessing replacement of computers with smart phones, thus company needs to cope up with the current scenario.
- However, Seeing the IT penetration and internet usage in coming years, I would advise to subscribe to Quick Heal IPO for medium to long-term as company would cherish the fruits of first listed company in Antivirus Company sector in India.