Over the last three decades, the Katkar family battled formidable odds to build the company. Now, the next-gen is busy loading enterprising plans for the company
(From left) Sanjay Katkar, Anupama Katkar, Kailash Katkar, and Sneha Katkar of Quick Heal Technologies Limited
Image: Mexy Xavier
February 18, 2016, Mumbai. Kailash Katkar was getting jittery. His palms were sweating, his tight grip around the handle of the hammer started to loosen, and his eyes stared blankly at the gong. Signs of nerves for the first-generation entrepreneur? Well, it seemed so. What started as a calculator and computer repair business in Pune in 1993 morphed into India’s biggest consumer antivirus software company over the next decade. In March 2015, Quick Heal posted an operating revenue of ₹286.11 crore, a PAT (profit after tax) of ₹56.2 crore, and boasted 6.9 million active licenses across 80 countries. A year later, in 2016, a school dropout, who once worked for a stingy salary of ₹400 per month, was about to ring the bell at the stock exchange for a ₹250-crore IPO (initial public offering).
On the D-Day, though, Katkar appeared lost. On February 18, 2016, Quick Heal was getting listed and the founder looked anxious. “Dost kaisey problem create karenge (how can friends create problem),” he wondered. A son of the soil from Rahimatpur, an obscure village near Satara in Maharashtra, diligently built his life, and business, around trust. Katkar started CAT Computer, a computer repair and service company, in 1993. Two years later, his younger brother Sanjay Katkar joined the business and started giving the hardware venture a software makeover.
From repairing computers, the brothers started hunting for viruses inside computers. The soaring level of trust and bonding between the siblings was mirrored in the camaraderie and trust with thousands of channel partners—offline retailers and distributors—of Quick Heal. In FY15, around 86.67 percent of the business was generated via partners. “I trusted them for decades. How could they do so?” muttered Katkar, as he was about to hit the gong. “They can’t betray me,” he rambled.
Interestingly, the warning signs, and symptoms of betrayal, were identified and flagged by Sequoia in the run-up to the IPO. “You are putting all your eggs in one basket,” was the warning from the venture capital (VC) firm, alluding to the practice of offering high periods of credit to the channel partners: 60 to 90 days. “It’s too risky,” reckoned the VC firm, which reportedly bought a 10 percent stake in Quick Heal for $12.8 million (around ₹60 crore) in August 2010. A few years later, when Quick Heal filed its DRHP (draft red herring prospectus), the risks were outlined in black and white. In FY14, the company made a one-time charge to its profit and loss account of ₹17.32 crore as an exceptional item for the provision created due to default by one of its distributors and fraud by an employee. “It negatively impacted our financial condition,” the company mentioned in the draft IPO note, which also highlighted another red herring: Higher service tax liability, and tax proceedings.
Meanwhile, at the IPO listing ceremony, the ‘risk’ came back to haunt Katkar. One of the former partners filed a legal suit against the company, alleging that Quick Heal didn’t disclose the share allotment made to his family and him. Though Katar was quick to rubbish the allegations, the upbeat IPO euphoria was sullied. Unfortunately, the bad omen coincided with a weak debut for the new kid on the listing block. Quick Heal plunged 20 percent over the issue price and the stock ended at ₹254 against the listing price of ₹321. A few days later, the stock tanked to ₹209, the lowest since its listing on the National Stock Exchange (NSE). The investor sentiments were subdued, and the company faced its first crisis post-listing.
(This story appears in the 06 September, 2024 issue of Forbes India. To visit our Archives, click here.)