Quick Heal IPO – Should you Subscribe?
Pune based, Quick Heal IPO would open for subscription on 8th February, 2016. Quick Heal Technologies Ltd is one of the leading providers of security software products and solutions in India. It revenues grown by 22% CAGR in last 5 years. There are no listed peers, making it as unique IPO in the business segment it operates. What are the positive factors of the Quick Heal IPO? What are its hidden factors in Quick Heal IPO?
About Quick Heal Technologies Limited
Quick Heal 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 end customers include home users, small offices and home offices (SOHO), SMBs, enterprises, educational institutions, as well as government agencies and departments. Its 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/ smartphones and tablets.
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Issue details of Quick Heal IPO
- IPO opens: 8-Feb-2016
- IPO closes: 10-Feb-2016
- Face Value: Rs 10 per share
- Issue price band: Rs 311 to Rs 321 per share
- Minimum quantity: 45 shares and in multiple of 45 shares thereof
- Minimum investment: Rs 13,995
- Issue size: Rs 462 Crores
- Lead Managers: ICICI Securities Ltd, Jefferies and JP Morgan
- Listing: BSE / NSE
- Download Quick Heal IPO Prospectus from SEBI Website at this link
Purpose of the IPO:
1. Advertising and sales promotion;
2. Capital expenditure for research and development;
3. Purchase, development and renovation of office premises in Chennai, Kolkata, Pune and New Delhi; and
4. General corporate purposes.
Company Financials (reinstated-unconsolidated)
- Company generated revenue of Rs 133.11 Crores for the year ended Mar-11 and Rs 292.25 Crores for the year ended Mar-15.
- Company posted a profit of Rs 38.57 Crores for the year ended Mar-11 and profit of Rs 56.29 Crores for the year ended Mar-2015.
- Its restated-unconsolidated EPS for FY 2015 is Rs 9.09 and last 3 years average EPS of Rs 9.98
Reasons to invest Quick Heal IPO
- Revenue have grown at 22% CAGR in last 5 years.
- It generates a healthy margin of more than 20%. One should note that profits are in the declining mode in the last 3 years (FY13 at 36% Vs FY15 at 19%). Management indicates that it is due to investments being made which would yield results in coming years.
- It is a unique IPO, which would get listed in this business segment.
Reasons not to invest in a Quick Heal IPO
- If they do not successfully anticipate market needs or develop and introduce new solutions that meet users’ needs on a timely basis, they may not be able to compete effectively and its revenue, reputation, financial conditions, results of operations and cash flows may be adversely affected.
- They face intense competition, and competition may have a negative impact on its business prospects, future performance and financial condition.
- Financial results may vary from time to time, due to fluctuations in demand for its solutions, making it difficult to project future results.
- Depend heavily on sales to home users of its “Quick Heal” branded products and any factor adversely affecting sales of its solutions to home users will negatively impact profitability, results of operations and cash flows.
- They invest in brand building and its business, financial condition, results of operations and cash flows may be negatively affected by any adverse publicity regarding its brand and/or solutions.
- Sales of counterfeit or imitation solutions may impact company reputation and revenue which may in turn affect our financial position.
- The company and its Directors have been named respondents in a criminal proceeding.
- All of its Subsidiaries have incurred losses in their respective preceding fiscal year, which may have an adverse effect on its business, financial position, results of operations and cash flows.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 17 onwards.
Recommendation / Investment strategy:
- On the higher issue price band of Rs 321 and based on FY2015 EPS of Rs 9.09, it P/E Ratio works out to be 35.3. Similarly, based on last 3 years EPS of Rs 9.98, P/E Ratio works out to be 32. Means company is asking the higher issue price of Rs 321 in the P/E ratio of 32 to 35. There are no listed peers in this business segment; hence we cannot say whether the IPO issue price is highly priced or under priced.
- Quick Heal Limited revenues have been growing consistently at a CAGR of 22% in last 5 years. It generates good margins in last 5 years. However, the dip of margins to 19% in FY15 is a concern. Also, I feel issue price is on the higher side as it asks the higher price band of Rs 321 which is 35+ P/E ratio. High risk investors can invest in this IPO for medium to long term.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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