Quick Heal Technologies IPO Review (Apply)

Quick Heal Technologies Ltd (QHT) is one of the leading providers of security software products and solutions in India with a market share of over 30% in the retail segment according to the Zinnov Industry Report. Its customers include home users, small offices and home offices (SOHO), SMBs, enterprises, educational institutions, as well as government agencies and departments. QHT's proprietary antivirus technology, which is based on an innovative behavior and threat detection system, works to detect security threats including virus and malware attacks in real time to protect users' IT assets across platforms, including Windows, Mac, Android, iOS and Linux, and across devices, including desktops, laptops, mobile/ smart phones and tablets, while aiming to ensure resource availability, business continuity and an uninterrupted digital experience. Company's product portfolio includes solutions under the widely recognized brand names “Quick Heal” and “Seqrite” for desktop and laptop security, mobile / smartphone security, endpoint security, gateway security, network security, cloud-based mobile device management (MDM) systems, data loss prevention (DLP) systems and family safety software. Since incorporation of QHT, more than 24.5 million licenses of its products have been installed and as of December 31, 2015, it had over 7.13 million active licenses spread across more than 80 countries. The company also invests in advertising and sales promotion activities across various media channels that further increase our brand recognition among existing and potential users. First generation promoters have done remarkable job in this field.

As of December 31, 2015, QHT's conduct its sales and marketing activities out of 64 offices and warehouses across 36 cities in India and, through   Subsidiaries, that are present in Japan, Dubai, the United States and Kenya.

To part finance its advertising and sales promotion, capex for R&D, purchase, develop and renovate proposed offices at Kolkata, Pune and New Delhi along with general corpus funds, the company is coming out with a book building process IPO consisting of fresh equity issue worth Rs. 250 cr. and offer for sale of 6269558 equity shares of Rs. 10 each from existing stakeholders. Price band for this IPO is Rs. 311-321. Thus the company plans to raise between Rs. 444.98 cr to Rs. 451.25 cr. based on the lower and upper price bands. It opens for subscription on 08.02.16 and will close on 10.02.16. Minimum application is to be made for 45 shares and in multiples thereon, thereafter. BRLMs to this issue are ICICI Securities Ltd, Jefferies India Pvt Ltd and JP Morgan India Pvt Ltd. Registrar to the issue is Link Intime India Pvt. Ltd.

On performance front, the company has posted an average EPs of Rs. 9.60 (on consolidated basis) for last three fiscals with declining trends in bottom line. During 2010-11 it issued preferential equity at Rs. 768.67 per share. In December 2015 it issued equity shares in the price range of Rs. 37.50 to Rs. 110.. So far it made five bonus issues 2 for 1 (March 2005), 3 for 1 (March 2006), 3 for 1 (March 2007), 3 for 4 (March 2008) and 7 for 1 (February 2014). Its current equity capital of Rs.62.24 cr. will stand enhanced approx. to Rs. 70 cr.  post IPO. . For first half ended 30.09.15 it has clocked in net profit of Rs. 24.22 on a turnover of RS. 152.27. If we attribute these earnings on annualized basis, then asking price is at a P/E of 45 plus and at a P/BV of 5 plus based on its consolidated NAV of Rs. 58 on the said date. Its RoNW has shown declining trends for last four fiscals. For this management clarified that in last three years, it has spent more on new products for enterprise module and mobile securities which has been charged to P & L. Rewards on these will be generated in coming years. Its revenue consists of 87% retail market and rest from other segments. 97% of its revenue is from domestic market and the rest from exports. It hopes to increase it substantially as its products have been receiving approval from world renowned agencies. Company enjoys preferred anti-virus solution provider company status with a market share of 30% in the domestic market.

Here again like recent few issues, there are no listed peers to compare with and thus this issue is also from the first mover of the segment and may create fancy. However, pricing of the issue appears to be on the higher side. On merchant banker's front, their past mandates have shown mixed trends post listing. Average cost of acquisition of the Equity Shares for Promoters who are also Selling Shareholders in IPO is Rs. 0.03144, average cost of acquisition of equity shares for other Selling Shareholders is Rs. 96.08 and the Public Offer at the upper end of the Price Band is as high as Rs. 321.