Security software-maker Quick Heal Technologies, in which venture capital fund Sequoia Capital is an investor, is preparing for an initial public offering in India to aid its expansion into new markets and product lines.
Quick Heal, which expects to file its draft Red Herring prospectus and begin the formal listing process next year, will be the first Indian anti-virus software company to go public. And, if no other technology product firm beats it to the bourses, the first software product company to list in India after iFlex — now Oracle Financial Services — went public in 2002.
“We’re looking at appointing independent board members as we prepare to list, within the next 18 months,” Sanjay Katkar, co-founder and chief technology officer of Quick Heal, told ET. The company is also beginning a process of identifying industry benchmarks to determine its market valuation.
Given the limited number of product companies that have listed in India, determining a market valuation will be more complicated as there are no precedents, especially in the security software space.
“Valuations and multiples depend on what similar companies have received at their listing, but we do not have any similar company that has gone public in India,” said Sharad Sharma, former head of research and development arm of Yahoo in India, and part of iSpirt, the industry thinktank for Indian software product companies.
In 2010, the Pune-based company was valued at Rs 600 crore, when Sequoia invested Rs 60 crore for a 10% stake. Sales have grown from Rs 10 crore a decade ago, to over Rs 200 crore this year. The company, which is expanding in Japan and the United States, hopes to boost its revenue to . 500 crore in three years.
QuickHeal, which claims a 35% market share in India’s consumer anti-virus market, was founded by Pune-based brothers Kailash Katkar and Sanjay Katkar. Started as CAT Computer Services in 1993 with seed capital of Rs 15,000, the computer repair outfit became Quick Heal 2007.
The company was formed by two Pune-based brothers Kailash Katkar and Sanjay Katkar. It focuses on providing security solutions for personal computing and for SME’s. The company will start listing its shares on the stock market during the next year and if things go according to the plan, Quick Heal Technologies will be the first anti-virus software company from India to go public.
Kailash Katkar, 47, dropped out of formal schooling in his teens and began his career as a computer repairman. But seeing the rising relevance of computers, he pushed his brother Sanjay into graduating with a degree in computer science. Sanjay Katkar, 42, focussed on developing anti-virus software during his course, which eventually resulted in the birth of Quick Heal.
Quick Heal, which has 6 million users, is striking new ground by choosing to list in India. The biggest players in the space, which include Symantec and AVG, are listed in the United States. McAfee was also listed in the US before it was acquired by Intel in 2010 for over $7 billion (Rs 42,000 crore).
Indian technology and internet companies prefer to list in the United States as it is far easier to get a higher valuation. Travel portal Makemytrip.com and Sify-.com both took the US listing route, but Quick Heal intends to stick to its home market due it greater brand recognition here.
“There is a dearth of software product companies in India and your typical valuation is also a function of demand and supply. So if there is a demand for their product then their thesis could be that they are uniquely positioned as an asset in this market. This is going to be a welcome change,” said Amit Singh, head of technology and co-head of outsourcing at investment bank Avendus Capital.
Quick Heal also expects to benefit from the Indian government’s push to promote Indian anti-virus and security software solutions. “When Quick Heal lists, it will be a powerful boost to the technology startup space,” iSpirt’s Sharma said.