What do antivirus software provider Quick Heal Technologies and public internet services in India have in common? The year 1995. It’s when public internet services first began in India, and also when Quick Heal released its first antivirus product for Windows 3.1.
Soon after its birth alongside the retail internet, Quick Heal went on to become the market leader of India’s consumer antivirus space. According to its Draft Red Herring Prospectus (DRHP) filing in 2016, Quick Heal had a 30% share in the retail segment according to a report by global management & strategy consulting firm Zinnov. It achieved this on the back of a robust physical distribution model. As of 30 June 2015, it had over 15,000 retail channel partners, 230 enterprise channel partners, 279 government partners and 577 mobile channel partners, who acted as the distributors and resellers of their product. This has provided it with an economic moat in a crowded marketplace, as global cybersecurity giants like Avast, Kaspersky and McAfee haven’t managed to replicate Quick Heal’s physical distribution model.
With the market cornered and distribution sorted, Quick Heal made a big decision in 2016—it went public. Quick Heal listed on the Indian bourses, becoming the first Indian IT software security products company to do so. As the first of its kind to list in the public space, and with the market position it had, Quick Heal’s initial public offering (IPO) received a subscription call from more than a few brokerage firms. Angel Broking, Aditya Birla Money and India Infoline (IIFL) were among the firms that showed an interest.
All of them saw opportunity. Internet penetration in India is increasing, cybersecurity threats are rising globally, mobile phone security has huge potential. Poised to benefit from all of these factors, Quick Heal was an attractive prospect. But that’s not how things played out.
Quick Heal was supposed to grow with the internet in India. It hasn’t. Internet penetration in India has grown from 8.5% in 2010 to 36.5% by the end of 2017. With over 460 million users, India is now the second largest online market in the world. In comparison, Quick Heal’s growth rate, meanwhile, has been reduced to single digits since its listing.
While other players in the segment have increasingly moved towards newer business models, like Czech cybersecurity firm Avast did when it pioneered the freemium play in the antivirus space, Quick Heal has stuck to its guns. This resistance to change, though, is looking increasingly untenable. Sure, 23 years since its inception, Quick Heal continues to have the biggest chunk of the market in this segment. A 34% share. Its distribution network is larger than ever— 21,401 retail channel partners, 527 enterprise channel partners, 164 government partners and 12 mobile distributors, as per their FY18 annual report.