Quick Heal Technologies Limited (QUICKHEAL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Quick Heal Technologies Limited Q4 and FY '24 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good evening, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Quick Heal Technologies Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the fourth quarter of the financial year 2024. Before we begin, a quick cautionary statement. Some of the statements made in today's earnings conference call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Vishal Salvi, Chief Executive Officer; and Mr. Ankit Maheshwari, Chief Financial Officer. Without any delay, I request Mr. Vishal Salvi to give his opening remarks. Thank you, and over to you, sir.

Thank you so much, Purvangi, and good evening, ladies and gentlemen. I am Vishal Salvi here, CEO of Quick Heal Technologies. Welcome to our year-end FY '24 earnings call, where we will cover an update on industry landscape, our performance, key milestones and the road ahead. I'm excited to host you on my first annual earnings call and eager to share the progress that we have made in this year FY '24. We have posted a good result of 5% growth in revenue and a remarkable increase in EBITDA to 9x as compared to our last year's financial year. I'm pleased with the consistent progress we have made in the past 3 quarters in the areas of defining our business strategy, firming up our road map, strengthening our leadership team, brand building and repositioning our brand and onboarding of key partners towards our alliance strategy. Talking about our consumer business, we are the market leaders in the country by very strong footprint of distribution channel across the country, our digital marketing activities and strong product. We're also looking at developing innovative adjacent offerings to cater to evolving cybersecurity risk for the consumers. Finally, on the enterprise side of our business, we have solidified our sales machinery through onboarding of our enterprise sales leader and key channel alliance like M Tech to capture the market at scale. We are gradually moving up the value chain of our customers to capture the mid and the large enterprise market. We are looking at expanding our current serviceable operatable market from INR 1,800 crores to INR 4,000 crores in the next 3 years by virtue of organic growth, our expansion into new and mid- and large customer segments, our new products launched and the government and regulatory enforcement like the Data Protection Act. We started investing in our Horizon 2 solutions, which included EDR, XDR, zero trust, data privacy solutions, et cetera, more than 3 years ago, and these products have started to gain market traction starting from this year. We are happy to state that our Board has approved further investment in new solutions and products to further strengthen our portfolio. Our major focus within Horizon 3 solutions would be towards monetizing our rich [ threat detection ], GenAI adoption, adjacent offerings in consumer segments and expanding the use cases and solutions under data privacy and zero trust family. We are deeply committed [Technical Difficulty].

Sorry to interrupt, sir, but there is some static disturbance from your end.

Is it okay now?

Yes, it's better, sir.

Okay. We are deeply committed for collaborative research and strategic partnerships in the field of cybersecurity innovation and hence, we are pleased to announce partnerships with IIM Nagpur and National Forensic Science University for joint cybersecurity research and projects. We are happy to announce collaboration with U.S. government on their NIST Cybersecurity Center for Excellence for data classification project and recently joined the Artificial Intelligence Safety Consortium focusing India's cybersecurity maturity at the global scale. With 3 decades of domain expertise and our Make in India success story, unparalleled threat intelligence from Seqrite Labs, strong team, a robust partner and distribution network and local presence, we are trying to seize market opportunities and deliver maximum value to our stakeholders. We are proud to be a leading cybersecurity product company for India, contributing towards the goal of Atmanirbhar Bharat, which is so critical for the sovereignty of the country, especially in the cybersecurity domain. We are well-poised to harness this market opportunity with a clear vision and strategy, a solid team and the right culture and strategic partnership and relentless focus on execution. With this, I would like to invite Ankit, our CFO, to walk you through the financial performance.

Thank you, Vishal, and good evening, everyone. FY '24 is a key year in the journey of the company. While building a strong foundation for years to come, we also delivered profitable growth. [Technical Difficulty].

Sorry to interrupt, sir. There is a lot of static disturbance from your end.

Is it better now?

No, sir. Still the static sound is coming.

[Technical Difficulty]

Sir, I'll be just disconnecting your line and reconnecting you, okay?

Yes. Thank you.

We have the management line reconnected with us.

Good evening, everyone. FY '24 is a key year in the journey of the company. While building a strong foundation for years to come, we also delivered profitable growth. The consolidated revenues for the year stood at INR 292 crores, which grew by 5% on a year-on-year basis. While the headwinds in the consumer business still persists, we have taken significant steps to bring it back on track. We are happy to report that we have onboarded over 200 enterprise clients for our new products in FY '24. With our strategic focus on innovation, we are continuing to spend on our R&D and also parallelly strengthen our sales and marketing team. With our efforts on cost control and management, I'm pleased to report that our total expenditure for the year remained flattish and stood at INR 266 crores. As a result, our EBITDA stood at INR 18 crores, and the FY '24 margin expanded to 6% as against less than 1% in the previous year. Speaking about the quarter 4 FY '24. Revenues stood at INR 80 crores and EBITDA at INR 10 crores. The Q4 revenue is flattish due to some of the government deals getting deferred to quarter 2 of FY '25 because of general elections code of conduct. We have proposed a dividend of INR 3 per share in line with our dividend distribution policy, subject to approval by the shareholders. We are a 0-debt company and our balance sheet is strong with a cash and cash equivalent of INR 226 crores, which has increased by INR 45 crores after paying a dividend of INR 13 crores in August last year. As a socially responsible company, we continue to give back to the society and did impact our over 13 lakh lives in FY '24 through our CSR initiatives, focusing on youth development cybersecurity awareness throughout the year. With this, I would like to open the call for a question-and-answer session.

[Operator Instructions] The first question is from the line of Vimal Gohil from Alchemy Capital Management.

Congratulations on a very successful FY '24. Sir, my first question was on the enterprise business where, while you alluded that this was a bit slow, what gives us the confidence that a couple of government deals that we spoke about will come in the next 2 quarters? What -- if you could just help us with some of the -- what is the degree of confidence there? And what's the traction that we are getting in the private SMEs? That's question number one. The second question is on the higher operating expenses that we have experienced in this particular quarter. If I observe, the OpEx has gone up from about INR 12-odd crores to INR 14 crores quarter-on-quarter. What rate would you -- do you see this sustaining at going forward?

Thank you, Vimal, for that question. See, basically, the way the deal cycles are, and when you look at government deals specifically on your question, you would be working on such deals anything between 6 months to a 9-month cycle. And of course, we had some of those deals in that process. And that's when -- when we had the general elections, we -- the decision can swing and once it gets into the zone of code of conduct, they get deferred. So we feel very confident that all the things which have got deferred are still in the play as far as that deal cycle is concerned, and they will get resurrected the moment the code of conduct is over. So to answer your question, I think we feel confident that we'll be able to get those deals in our favor as we would do for any other deals without a code of conduct. As far as the question on SMB traction is concerned, look, we are already a market leader as far as SMB market is concerned for cybersecurity. And that is our sweet spot, right, because we have a very strong network of partners, which we'll leverage for that, and it is well established for many decades of partnership that we have, and we've been leveraging that. So we just want to make sure that we continue to consolidate and continue to grow in that space. So that is really where we are as far as SMB business is concerned. Now on the question of the operating expenditure. I will hand it over to Ankit, and he will give you some color on that.

Thank you, Vishal. So overall expenses are in line. If you see, it is in the range of INR 68 crores for both the quarters, quarter 3 and quarter 4. However, there is general administration expenses, which has gone up by about INR 1.5 crores. This is primarily due to accounting standard provisions, we have to make a provision for bad debts of about INR 1.5 crores in this quarter. So you are seeing that increase on account of that. There are no bad debts in the current year as such. However, since the accounting says that we have to make provisions as per the ECL methodology, we had made some provisions. Hope this helps, Vimal.

Right. And sir, just one more question on margins. How do you -- given the fact that you are experiencing very good growth across the government -- the government deals will come back, SMBs are seeing good traction. Where do you see your margins for FY '25? What's the sweet spot that you're considering here?

We are in an investment phase. So it will be difficult to give a particular number at this point of time. But of course, as the revenue will grow, the expenses will not grow in the same proportion. So you will see significant improvement here, but difficult to give a particular number.

The next question is from the line of Mihir Manohar from Carnelian Asset Management.

Thanks for giving the opportunity. [Technical Difficulty]

Sir, sorry to interrupt. There is a lot of echo from your end.

Okay. I'll come back in the queue.

The current participant line has been disconnected. The next question is from [ Jatinder Agarwal ] from Relax Capital.

So I have 2 questions. So when I look at one of your presentations wherein you exactly mentioned that we are increasing the addressable market from INR 1,800-odd crores to INR 4,000-odd crores, and this is happening over FY '27. Is this what the Board approval is for in terms of the new expenses, to build those products?

So [ Jatinder ], basically, one of the levers for us to go into the new SOM -- or create -- extend our SOM is that approval from the Board, okay? But that is not the only reason why our SOM will grow, there were other levers as well.

Okay. So from the existing product basket, right, that is the INR 1,800-crore market that you are addressing, correct, if I'm not wrong?

Yes, you're right.

And from the new products that you will go -- so you will develop going forward, but on which it seems like a horizon of 3 years, that will increase your addressable market, right?

You're right, [ Jatinder ]. And if I will just give you some additional color to that. So you're right. One is, of course, the fact that we will continue to invest and add adjacency in terms of our product mix. And that's the reason why we are going to additionally invest and build new solutions that we talked about. But apart from that, we are also looking at our market segmentation and our adjusting our go-to-market to target the new segments like mid-market and maybe some large enterprises. So that is another way of looking at it. The third is the organic growth. The fact that the threat landscape is growing, the challenges are out there. So there are -- there is a demand -- general demand for cybersecurity, there is an organic growth. And the fourth lever is basically the push coming from regulations, from government on expectations and making corporate more accountable to cybersecurity and previously, right? So all of this -- and therefore, when we are looking at investments and new products, we are also looking at trying to build solutions, which will address that new requirements, which will come up.

Okay. That is helpful. And my second question is related to the DPDP Act, whatever, for data privacy. What is the TAM? So is that TAM already included in INR 1,800 crores or that is additional over and above INR 1,800 crores?

So see, DPDP is not including in INR 1,800 crores because it is yet to be really enforceable, right? So it is something which is going to create a new TAM for us, okay? And so when you look at FY '25, [ Jatinder ], you can expect that we would start -- India specifically will start looking at the new TAM because the DPDP will be enforceable. And so corporates will start looking at strengthening their privacy and therefore, the underlying layer of cybersecurity, okay? So that's the way you should look at it.

And any idea on how big this TAM is?

Yes. So it's very difficult to give you exact number. We have a rough estimate, but it's not something that we will make public. But I think what I can tell you is that it is going to be applicable for every organization in the country. And there are severe penalties if people have -- do not comply or have cybersecurity or privacy breaches against that law.

So just to continue this. One is that we have enterprise revenues of INR 120 crores. So as of date, there are no revenues from this product in the INR 120 crores, correct? Is it correct understanding?

Yes, that's correct.

And could you give some broad idea in terms of who are the competitors in this space?

Yes. So that's a great question. See, basically, this is a completely new segment. And so if you look at all our other products, we would have a standard competition which is there, but for this is a completely niche area. And so you typically have a competition, which is a single product kind of a vendor. But in India, we have very -- 1 or 2 very small players, if at all. There are global competition, which is like a OneTrust, which is a global company. But yes, I mean, as far as Make in India is concerned, we have very less number of people who are operating in this space, yes.

The next question is from the line of Aditya Sen from RoboCapital.

About the research and development expenses, do we have a broad outline or broad plan as to how much are we going to expense in the coming 4 quarters and for FY '26?

Yes. So Aditya, we have a plan. But as you can see, we have been investing on R&D in the last couple of years and every year, we have seen an increase. However -- and yesterday only we have taken approval from the Board to invest on new products. So with all that, this number will go up dramatically, however, we will not be able to give you a particular number here. The only confidence we can give is that in the proportion in which the revenue will go up, it's going to be in the lesser to that percentage.

So the other way also to say that, Aditya, is that we will be -- I think we have said this in the past, and we want to say it again, that we are continuously going to be in the investment space because cybersecurity opportunities are many. And we want to make sure that we start investing and adding more adjacency to our product portfolio, okay? And with the fact that given the way we are looking at it and given the confidence of our Board as well, we feel more confident that we will now be able to continue to invest. If you look at it, for example, if you take back our investments in the last 6, 7 years horizon on the enterprise products has yielded us to get to a 37% market revenue mix as far as our overall portfolio is concerned. So that is giving confidence to us to the Board that we want to continue to invest and grow that because we have to -- as we are working on Horizon 2, we also work on Horizon 3. So while we do that, based on what Ankit is saying is that we will still continue to make sure that we continue to have a balance between our revenue and margins, and we will not lose focus on the margins. But definitely, we will skew more towards growth and investments.

The next question is from the line of Mihir Manohar from Carnelian Asset Management.

Sir, largely, I wanted to understand, we have onboarded M Tech as one of our national distributor. And you also mentioned that you're looking to address the market at scale here. Can you throw some light on what kind of customers, what kind of user base -- number of users a customer could M Tech be targeting? What scale are we looking at with M Tech, that will be helpful? Second thing was on this, we have got our first and only Indian cybersecurity company working with U.S. Artificial Intelligence Safety Consortium. So how to understand the importance of this and how to understand the commercial relevance? And third question was on these investments that you're talking about. I mean is there any threshold EBITDA that we have kept in mind, a certain threshold EBITDA that we want to target despite those investments? That will be helpful.

Yes. Thank you, Mihir. So look, I think the M Tech partnership is extremely strategic for us. And as you know, M Tech is a leading national distributor in the country for technology and more specifically for cybersecurity and has got multiple cybersecurity products under that portfolio. And for them to choose Quick Heal and Seqrite as their partner is giving us confidence about how we can actually position ourselves in the mid-market and to enterprises. So that's number one. Number two, we -- when we have looked at this strategic partnership, we have agreed on a joint go-to-market where we will be enabling and training the M Tech team and their services arm to empower them to use Seqrite solutions for their customers and make sure that they are able to go and penetrate their customers through our products. Number three, they already have access to a lot of customers. And they see a definite fit in terms of the value proposition that we bring to their services and portfolio through our product portfolio. So I think this 3-pronged approach is going to help us in terms of driving the deployment of Seqrite solutions to their customers and their connects. So that's the thinking as far as the strategy is concerned. And we are deeply thankful to this partnership for M Tech leadership and also look forward to a good partnership together with them from this year on. On the question related to AI consortium, see, basically, apart from running the business, we are deeply committed to being innovative. Innovation is in the heart of our strategy. And innovation can only happen with working with partners, academics, government bodies, standards and participate with them on deep research and exchange of thoughts and ideas. So this AI consortium is one more example of that where we will participate and share our experience of working on large, massive-scale signals coming from different devices that we manage on threats, our understanding of high -- some of the AI ML models work around that and then how we can work closely with these different government international bodies so that we can share our thought leadership, and we can learn from them to make our products more robust and successful. So that's the whole idea of this partnership. And as far as the threshold for EBITDA is concerned, like I said, I think what we are really focused on is to create a very strong Make in India cybersecurity product portfolio and really make a very strong foothold into Indian and global enterprises as far as our products are concerned. So that is our aim. And if it means investing more in R&D to deliver that, we would do that. And so we would not really -- we don't really set some thresholds on EBITDA, but then we want to make sure that we don't take it for granted. So that's really how we look at our strategy as far as managing EBITDA is concerned.

Sure, sir. Is there a separate amount that -- for these particularly new investments that we are looking at?

Yes. So there was a proposal that we have made in terms of what we wanted to achieve. And that proposal had a specific objective. And we had an intensive approval. And now it's all about how we want to execute on what we want to achieve.

Sure. And just one last exchange to the M Tech part. I mean we expect that M Tech will take us to Fortune 100 companies of India?

See, it's again something which we cannot define in terms of time lines, and we take it year -- 1 year at a time. So we have defined our goals -- joint goals together in terms of what we want to achieve for FY '25. And our immediate aim is to make sure that we are able to deliver that. And once we kind of come close to delivering that, then of course, we will define the ambition of what we want to do in subsequent years. [Technical Difficulty]. Purvangi, are you there?

[Operator Instructions] The next question is from the line of [ Jatinder Agarwal ] from Relax Capital.

Sorry to come back. Just a follow-up on this M Tech, sir. Obviously, my understanding is at 0 level. So could you explain what is the type of corporate clients that M Tech would target for you? So like we are already in SMBs, right? So is it to enhance the SMB coverage or is it actually to a different set of clients, which will probably be larger in mid and large corporate?

Thank you for that question, [ Jatinder ]. So think of M Tech as our national distributor. So basically, we will use them for all our business when it comes to mid-market and large enterprises. And M Tech is a large national distributor but has their own clients and services arm through which they support multiple OEMs like us. And now, we are part of their portfolio. So they will, for the problems that customers have related to the solutions that we have, they would be actually taking our solutions to them. So that's really how it is. So it is going to be a new segment of customers that we have not targeted so far. And they will help us to get access to that segment of customers, which is beyond SMB right now, [ Jatinder ].

Okay. And most of their existing tie-ups would be with the international cybersecurity companies, is it?

That's right. Because if you look at it, most of the cybersecurity product companies in the world are anyway mostly from Silicon Valley. So I would say that we would be the really first Indian cybersecurity player who will be part of their portfolio.

[Operator Instructions] The next question is from the line of Sampath Nayak from Tiger Assets.

This is Sampath Nayak. Sir, my question is on regarding our alliance with JioBook. So like, are we exclusive AV providers for JioBook, or we are one of the AV providers?

We are, Sampath. We are exclusive AV providers for JioBook.

So sir, what kind of revenue or TAM do you expect with our alliance with JioBook?

Yes. We don't disclose deal-by-deal or partnership by partnership revenues, we don't disclose those figures. But I think this partnership is more strategic in terms of how -- what brands can come together and how we can help safeguard their infrastructure.

Okay. Sir, my second question is on, what would be the future revenue contribution from enterprise segments maybe in 2 to 3 years? Where do we see our contribution from enterprise segment?

So if you have been looking at our presentation and our growth as far as enterprise is concerned, you would see that a couple of years back when we were at 20%, we have now reached a space where we are at 37%, right? So there is a gradual increase as a revenue split between consumer and enterprise. And this is what you can expect it will continue to rise and grow in years to come. So you know that basically, the enterprise cybersecurity segment is growing at a much a faster CAGR as compared to the consumer. So by just looking at that -- those trends, you can expect that this is how it will grow and eventually the enterprise business would become much larger than our consumer business.

Sir, can you give a number on the growth -- like CAGR growth of enterprise versus consumer segment, industry level?

Yes. So see, basically, industry growth as far as enterprise is concerned is between 11% to 12% on a CAGR basis, right? And while obviously, this year, we have grown at a similar rate, but generally, we would expect that we will go a little higher than the industry rate as far as enterprise is concerned. But as far as the consumer is concerned, obviously, there are a lot of headwinds, and so it is something which is -- while the industry is regrowing, through various efforts and interventions, we have either maintained or grown marginally as far as the consumer business. And we believe we will continue to do that marginal growth from our perspective on the consumer business.

The next question is from the line of Rusmik Oza from 9 Rays EquiResearch.

Enterprise now accounts for 37% and as you said that the industry is growing at 11%, does it mean that 37% should grow at, say, double digit between 11% to 15%? And does it again lead to around same 5%, 6% growth for FY '25? Or are you aiming or targeting to reach at least double-digit revenue growth in FY '25? That's my first question, sir.

Yes, I -- we are -- we don't give guidance. And we would not be able to exactly pinpoint and tell you what we think they're going to grow this year. But I've given you an indication that we will definitely grow faster as compared to the industry, and we feel very confident about that. That is something which I can tell you. But I think we don't right now give guidance around what is that rate going to be.

Okay. Okay. That's helpful, sir. And my second question, sir, last 2 quarters, our run rate of EBITDA has been improved. It's now between 12.6% in Q3 and now 14.2%-or-something. Do we see this going up beyond this 13%, 14% in FY '25? Or some goal post around this number could be helpful, sir.

So like Ankit mentioned, right, see, we feel confident that overall, our EBITDA will show a gradual sign of increase. And that's because our -- the way we see it, our rate of growth of our revenue and business is going to be higher than our rate of growth of our expenses, right? And basis that -- we believe that we will continue to have a marginal growth in our EBITDA on a year-on-year basis.

Okay. Okay. Does it imply that it will be better than what we have done in the last 2 quarters, sir, just a broad implication?

So giving our guidance to a particular quarter is difficult, but there is a seasonality also involved in the business. So if you have seen, Q1 was negative 30%. So all that is -- actually, we should refer only to the annualized numbers. And this is what was referred by Vishal earlier.

The next question is from the line of [ Rishabh Shah ] from -- individual investors.

I wanted to ask, is there -- if you are looking for any inorganic opportunities in like next 3 to 5 years. And if yes, like what will be the portfolio that you might be looking for?

Yes. Thank you for the question, [ Rishabh ]. See, we are always open for looking at inorganic opportunities. And internally, we have broadly thought about, if at all, we would look at it, then what are those areas or segments that we will work on. Yes, so something like, for example, something on cloud security, something on building a DLP or a DLP engine into our solutions. So these are some of the areas where it could be a good sort of a complementary addition to our existing portfolio. So we are always open. And in case there is something which comes up the way and it fits into our strategy, then we will be obviously looking at how -- with more interest to see whether it makes sense for us to go ahead for that.

The next question is from the line of Mihir Manohar from Carnelian Asset Management.

Sir, I wanted to understand, the election, this evolution of the overall market. Currently the INR 1,800 crores of market for us and that we are planned to increased it to INR 4,000 crores over the next 3 years, because of which we have approved certain investments. Could you throw light on which are like which of these areas in each of the years '25, '26 and '27? And what will be our right to win? Because making investments is one thing, but just to understand what is your right to win in those areas? Because there would be some other peers who would already be there.

Yes. So the area that we are broadly looking at investments are in the space of ZTNA or zero trust technologies and adding additional features, functionality into our product folio as -- portfolio as well as zero trust solutions are concerned. The second area is about looking at data privacy and all the full life cycle of that. So we did mention to you earlier also that we are -- we have built a solution, but we don't want to stop there, and we want to look at it up the value chain, down the value chain to make sure that the product meets all the requirements that the customers will look for when DPDP Act is applicable. The third area is in the space of any adjacency that we would want to look at as far as our consumer business is concerned. Look, we have actually done multiple amount of innovations in the last few decades as far as our consumer product portfolio is concerned, we believe it's one of the best in the world. And we have got multiple validations of that work that we have done and the product that we have. So what we are looking at is saying that what can we do and what more can we do to address the evolving threats that the consumer is facing beyond just how we look at antivirus. And so those are some of the areas where we will be searching and finding out what needs to be done. And the fourth area is basically we have so much of signals and data that we get into our lab. We have one of the largest labs in the country. And we do a lot of processing of that threat, information, indicators of compromise, attacks and other things. So how do we sort of process it and monetize it through a product, through tech intelligent services, malware reverse engineering solutions and so on and so forth. So there's, again, a lot of research work required to really put together all of these together and bring it as a package solution to customers. So these are the 4 broad areas that we are looking at. And then on top of that, we have to also ensure that everything has been powered by AI and GenAI as an interface. So we have been using ML and AI models and data science for many years now. And our platform is called GoDeep.AI So we want to really now come out with the GoDeep.AI 2.0, which will be powering all our technologies into the future. So those are some of the places where we are looking at doing these investments, Mihir. As far as our right to win is concerned, look, I think one of the biggest advantage that we have is that we are the largest cybersecurity product company in the country by a very large margin, right, as compared to anybody else in India. And so we want to make sure that we double-down -- so Make in India is our one very strong element of right to win. But the fact that the CEO of the product management team is sitting here in India and you can reach out to them and give them deep feedback around what you want in your solutions, and we are here to develop and customize them so that we are actually solving and getting the job done actually is another advantage for us. The largest cybersecurity lab in the India is, again, a big right to win for us. The approach that we are taking in terms of integrated and platformized approach is our right to win. The fact that we have withstood this whole industry of cybersecurity for 30 years is our right to win, to give confidence to our customers that we are here to stay and here to solve your problems. And of course, the fact that we are able to see so many signals, we have so many end points, we have good visibility and data in terms of what's happening around. And so if anything is happening anywhere in the threat phase, we will be the first one to know. And that's really how the cybersecurity product system works. And so all of these, Mihir, are basically things that we have which gives us that right to win.

Sure, sir. Just lastly, I mean what is the amount that we have approved for these new investments? Or is it going to be a part of regular investments?

Yes. So Mihir, we are not disclosing that in terms of the actual line. But what I can -- what -- I answered this question earlier as well in the call that we are going to -- we have a principal approval and now we'll get into execution. And we will do the right things which are required now to make sure that we are able to strengthen our portfolio. So this is the vision that we have. And now we will do -- get into that execution phase. But we don't disclose these amounts, and we don't make it public.

The next question is from the line of [ Jatinder Agarwal ] from Relax Capital.

So just a very stupid question on accounting. So like in consumer business, it is all annuities, right, one year, three year, whatever. But in the enterprise business, is there a -- this thing that you also get lump-sum payouts or something? Or is it only annuity again in the consumer -- sorry, the enterprise business?

So it is same. We have got 1-year, 3-year clients for enterprise as well.

So there are no lump-sum payments that come because -- so let's assume you do a project for the Government of India or any corporate, you don't get paid in lump-sum for the specific task or whatever is it?

So we paid -- we got paid lump-sum, [ Jatinderji ].

Sorry?

So it's a product, and we got paid in lump-sum. If it is an antivirus or EPS, we got paid lump-sum upfront for a 1-year, 3-year contract.

So let me explain to you, [ Jatinder ]. Basically, because we are a product company, that's the way the consumer products work, it works the same way in enterprise also. So nothing different.

So hypothetically, let's assume like the G20 or the Chandrayaan, whatever, it's a project which the government or the government-related entities have executed. So would you have a 3-year contract or just a 1-year, is what I'm trying to understand?

Yes. So [ Jatinder ], basically, your question is on product or service? Because when you talk about contract and 3-year contract, it can be a product contract or it could be services. So when it comes to product, it is upfront, okay? And majority of the work that we do is all on product. We are an OEM company.

Right. So -- but there will be a services component -- so like what you're saying is there will be a services component, but that will be specific for that event or that project?

Exactly. So now let me answer your services question. So we obviously are building our capabilities on services because large projects, large deals would require you to also provide services and stitch all of this together. Majority of that will be our products. And as you know, we have hired a head of delivery to build those capabilities, right? So services is basically as we deliver -- so as we execute and deliver the outcome and milestone, so you can have 2 types of service models. One could be a TNM model where as you consume, you -- based on time sheets, you are able to charge; and other is based on milestones. So as you deliver a particular milestone as a part of services, you will charge.

And these are not a material part of your current revenue lines, right?

They are not, they are not.

Okay. And over what time will this build up, 3 to 5 years?

Yes. I mean that is the vision that we have, that over a period of 3 to 5 years we would -- we have a vision to build the services component as well.

So when I look at the industry breakup like when we discussed last time, you said it is broadly split as 50 revenue -- 50 in terms of solutions and 50 in terms of services. So this is like a new business segment that will get added, right, over a period of time?

It will get added. We have -- it's -- like I said, it's a vision for us, right? Right now, we remain -- I mean, a product company, right? Majority of our business is product. And -- but yes, we see a huge opportunity in terms of working on large deals where we could add services element as well, and so we are building the capabilities. Similarly, we had mentioned about we have launched our managed detection and response service. That's also a service. We have had a few customers already onboarded on that. So that's also a service part, right, where as you deliver the service, we charge the customer.

The next question is from the line of [ Tej Patel ] from [indiscernible].

Sir, pardon me, I'm like new to understanding this industry as a whole, so pardon me, if there are some repetitive questions from this call or previous calls. So sir, basic understanding, what I get it, sir, like we are into a space, a problem which is very highly competitive, right? There are international players and as well as some national players into it. So just wanted to get an idea into how do we carve out our space into such a competitive space given this -- various companies are having their own in-build -- you know now, antivirus systems. Like consider Windows Defender, then how do we see growth in the retail segment given the various hardware companies having their own software, right? I mean various operating system, having their own antivirus system plus -- and moreover on the distribution side, and how do we make sure -- because -- correct me if I'm wrong, we do not have an -- like no distributors and exclusive distribution rights for our company, right? They might be selling antivirus for different companies, too. So how do we make sure that our products get pushed vis-a-vis other companies? And a lot of companies, a lot of DPCs companies, typical companies are providing antivirus software for other companies there has a free product, let's say for 1 year or 2. So I just want to make sure -- I just wanted to understand how are we positioning ourselves in this competitive space, especially the retail side. That is the first question.

Yes. I think, [ Tej ], that's a good question. See, if you look at it, we are in the business for the last 3 decades. And there are many antivirus companies which have come and gone. And also, there has been a significant amount of consolidation which has happened, wherein there are very few players, which are left in the market, which are the credibility that we have, right? So you need to understand that in the antivirus business specifically, there is a very significant entry barrier. Because you need the malware research lab and capability to ensure that you are able to look at the avalanche of these threats, which are coming on a daily basis, and you're able to process it and you're able to protect all your customers. So it's not something that anybody can come, start a startup and actually create it. So there's a huge entry barrier. And given the fact that we have the legacy for last so many years, it is something which is making sure that we are well established in that. So that's number one. Number two is that the if you look at the paid antivirus, right, so India right now has a 22% penetration as well as paid antivirus is concerned. But if you look at mature markets, that penetration goes up to 40%, 48%, 50%. So we have an opportunity. We believe that India has a latent opportunity whereas India becomes more aspirational, as India becomes more digital there is going to be an uptake and we hope that, that uptake will happen in terms of people actually buying paid antivirus, right? So that's the other piece which is there. And the third thing which is there is that we have a very strong distribution network of partners. And a lot of the things that we do is basically based on what our partners are actually able to maintain, the relationship with our customers, okay? And distribution channel is something which cannot be built overnight. So if there is anybody who has built the software and is giving it free, but unless there is a distribution network and way to go and sell to the customer, nobody can have -- build that access to that channel overnight. And Quick Heal, obviously can thrive by talking about the partner network that we have through which we deliver our software. So that's the third element, which is there. There are many other examples. But in a way, we -- and that's why I said, right, that while there is a degrowth which is happening, especially when it comes to India, we have been able to maintain a positive momentum, and we are growing in that space. And of course, we have reached a stage where we are at 35% market share. And year-on-year, that market share is growing. So that gives us the confidence that we will be able to address those headwinds by our strategy and our GTM. I hope that answers your question, [ Tej ].

Yes, sir, greatly answers my questions. And sir, what would be the margin difference between the retail business and the enterprise business?

So I will obviously ask Ankit to get into more details, but let me sort of give you color, okay? So it's basically finally a product, right? And if you look at it, the consumer business, of course, is commoditized -- deeply commoditized business. And the enterprise business is deeply more customized, more bespoke and addressing a particular problem. And so it's -- you go by deal by deal and look at deal-by-deal profitability, okay? So therefore, from that point of view, it is [ stocking cheese ]. Of course, we don't right now disclose these numbers. specifically in terms of what is the margin that we get from a consumer and what is the margin that we get for enterprise. But it is obviously very easy for you to guess that given that our consumer business is more mature, more established, we would obviously be getting more margins from there as compared to the newer business model of enterprise, where we are new entrants and want to -- want to make an entry and so we would more focus on growth rather than margins there.

And just to add, it's a volume gain. So when we do an enterprise deal, it's many customers and many users, many endpoints in one1 go. So you actually get better off in terms of the overall contribution margin. Hope that helps.

Yes. Got it. Got it, sir. Sir, one question was on the distribution side. So I think -- correct me if I'm wrong [Technical Difficulty].

The next question is from the line of [ Nitesh ] from [ Chris ] Capital.

So reading a few news articles, also, there are MNC cybersecurity players have also set up servers in India, right, to comply with the DPDP Act and also tap the growing cybersecurity market in India. So just wanted to understand when there are these MNCs also coming into India focusing on India and also complying with the regulations and the upcoming DPDP Act, how does our product portfolio kind of stand up to these MNCs? I wanted to understand why would a large enterprise choose a Quick Heal over these MNC players like CrowdStrike or any of these, Palo Alto Networks. That's my first question.

Yes. Thanks, [ Nitesh ]. I think the -- if you're specifically talking about DPDP, then whether it's Palo Alto or CrowdStrike, they would not be really our competition because they don't have a data privacy and data protection kind of solution. Over there, like I said, the competition with someone like a OneTrust, right? So that's number one. Number two is, when we look at the data privacy solution, you're right, there are certain customers who may want to not go on to cloud and want to actually maintain and control that personal identifiable information on-prem. When we are building our solutions, our solutions will work on both cloud as well as on-prem. So it will meet the requirements of -- both the requirements which are there. As far as the ability for us to stand and face the competition, look, we have done it, right? We are the market leaders in the consumer segment in Quick Heal, where we are competing with MNCs like Norton or a McAfee and we are beating them big time as far as India is concerned. So we have proven that we have products which are able to compete with global players. And we remain confident that we'll be able to do that for solutions that we're creating for enterprise business as well.

And our products stack up well with One Trust, the example you mentioned?

Yes.

Okay. And also one of our catalysts in enterprise segment is to grow the SME category. So I just wanted to also get a sense from you, are the -- in the SME categories, are these SMEs who are adopting cybersecurity solutions for the first time? Or are we gaining market share from other players like [indiscernible] players in this field?

I think it's a bit of, both because we are able to also go to, in SMB, some customers who are adopting this solution for the first time, especially the newer solutions that we have developed. But as far as other solutions like antivirus is concerned, then it becomes a replacement.

Okay. Okay. And I might have missed this. So when we -- in our strategic partnership with M Tech, you mentioned that we are the only Indian cybersecurity partner, right?

Yes. I think right now, our partnership and our focus is India. But in future, we would want to -- M Tech is obviously a global company, Singapore headquartered. So once we have made some progress and success in India, we could look at global aspirations as well.

So for M Tech, are we the only cybersecurity solutions partner in India? Or do they have others also tied up such as Quick Heal for cybersecurity solutions?

Yes. So our tie-up with M Tech is for the Seqrite brand, the enterprise security brand of Quick Heal. And we are not exclusive, because they have multiple solutions. But then when it comes to our portfolio, we would be unique. There may be 1 or 2 other products that may be similar, but their focus, of course, will be to work on our product portfolio and promote that to their customers.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to management from Quick Heal Technologies Limited for closing comments. Thank you.

Thank you, everyone, for a very engaging session and deep questions from all of you. I hope we have been able to give the right responses to your questions and your requirements have been addressed. And now I'll hand it back to the moderator to do the closing. Thank you.

Thank you, ladies and gentlemen. On behalf of Quick Heal Technologies Limited, that concludes this conference. Thank you, and you may now disconnect your lines. Thank you.