India's First Cybersecurity IPO: 5 Things to Know About This Vijay Kedia Backed IPO

Despite an air of uncertainty around SME companies, the IPOs in the segment seem not to be affected.

Of the 7 debuts that took place, 6 were positive, and 4 of them listed with over 40% gains. The highest return went as high as 100% (Signoria Creation) on the debut day.

Even though the SME IPO index crashed in the immediate panic aftermath of the regulator's cautious note, the yardstick barometer for newly listed SME companies more or less stabilised.

With such a pace of SME IPOs, the last week of March will have 11 IPO openings, with just one on the mainboard and the remaining 10 in the SME segment.

Among them, Vijay Kedia-backed, Tac Security has also thrown its hat into the ring.

If successful, it will be the first pure-play cyber security company to be listed on Indian stock exchanges.

About Tac Security

TAC Infosec, also known as TAC Security, was founded in 2016 and offers risk-based solutions for vulnerability management and assessment, cyber security quantification and penetration testing in a SaaS model.

The company's clients include banks and financial institutions, government regulators and departments, and large enterprises (including corporate offices) such as HDFC, Bandhan Bank, BSE, National Payments Corporation of India and more.

TAC security is backed by stock market maven Vijay Kedia.

Seasoned investors Vijay Kishanlal Kedia and his son Ankit Vijay Kedia cumulatively own 1.5 m equity shares of the company.

This is about 20% stake on a pre-IPO basis. Post-issue, their stake shall be diluted to 14.6 per cent, but won't change the number of shares held.

Here are the key details of the IPO.

Issue period: 27 March 2024 to 2 April 2024

Type of issue: Book Built Issue

Price band: Rs 100-106 per share

Face value: Rs 10 per equity share

Lot size: 1200 Shares

Application limit: Maximum thirteen lots for retail investors. Retail investors can make an application for a minimum of Rs 127,200 for one lot (1200 shares).

Tentative IPO allotment date: 3 April 2024

Tentative listing date: 5 April 2024

#2 A Look at the Financials

The company has demonstrated robust financial performance, with revenue from operations witnessing a compound annual growth rate (CAGR) of 25.2% between the financial years 2021 and 2023.

The company was able to grow its volumes on the back of its long-term relationship with customers.

Similarly, its net profit surged significantly, from a net profit of Rs 6.1 m to Rs 50.7 m in FY23, at a CAGR growth of 102%, this can be attributed to reduction in interest cost.

TAC Security Financial Snapshot (2021-23)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenues (Rs in m)	51.6	52.4	101.4
Revenue Growth (%)	-	1.9	94.2
Net Profit (Rs in m)	6.1	6.1	50.7
Net Worth (Rs in m)	20	26	76.8

Data Source: Company's Red Herring Prospectus (RHP)

Revenue of TAC Security stood at Rs 50.2 m in the first half of FY24 and a profit (PAT) of Rs 19.4 m.

#3 Peer Comparison

As per the company's red herring prospectus, these are the industry peers of TAC Security.

Peer Comparison

Company	Revenue from Operations (2023) (Rs in m)	EPS (Basic) (in Rs)	Return on Net Worth (%)
TAC Security	100	6.6	10
Dev Information Technology	1,219.70	3.9	19.2
Infobeans Technologies	2,428.30	15.2	98.7
Sigma Solve	177.6	1.9	12.4

Data Source: Company's Red Herring Prospectus (DRHP)

Among the listed peers, TAC Security has the lowest revenue from operations in 2023, at Rs 100 m.

#4 Arguments in Favour of the Business

• TAC Security has established itself as a prominent player in the cybersecurity sector since its inception in 2016. Its focused approach towards offering risk-based solutions for vulnerability management, assessment, cyber security quantification, and penetration testing in a SaaS model has enabled it to carve out a niche for itself in the market.
• The company's commitment to delivering easy-to-use and high-quality solutions sets it apart in cybersecurity landscape. By prioritising user-friendliness and effectiveness, TAC Security ensures that its offerings meet the evolving needs and expectations of its clients.
• Being the first pure-play cyber security company provides an early entry into the market and provides TAC Security with a significant competitive advantage. As one of the pioneers in offering risk-based cybersecurity solutions in a SaaS model, the company has had the opportunity to establish its brand, build a loyal customer base, and solidify its position in the industry.

#5 Risk Factors

• The company is dependent on a few customers for sales. It gets 82.6% of its revenue from just one customer and 91.7% from its top five customers as of September 2023. The loss of any of these large customer may affect our revenues and profitability.
• Failure to anticipate market needs or develop and introduce new solutions promptly poses a threat to the company's competitiveness. In the rapidly evolving technology landscape, staying ahead of market trends and continuously innovating is essential. Falling behind in innovation could lead to loss of market share, revenue decline, and damage to reputation.
• The market for technology services is highly competitive, with numerous players vying for business. Intense competition can lead to pricing pressure, as competitors may undercut prices to gain market share. Reduced pricing could erode the company's margins and diminish profitability.
• As a provider of technology services, the company faces the risk of system failures, disclosure of confidential information, or data security breaches. Such incidents could result in financial liabilities, damage to reputation, and loss of clients' trust. The company may be held liable for damages caused by these events, leading to legal costs and potential settlements.

Conclusion

This IPO marks a significant milestone for TAC Security and India's cybersecurity sector, marking a shift towards growth and innovation.

The funds raised will be dedicated to strategic endeavours to strengthen TAC Security's global presence and capabilities.

These include bolstering human resources, advancing product development, and fostering organic expansion, particularly in the United States.

Moreover, the industry's recovery, coupled with increased budget allocations and shifting macroeconomic conditions, sets a favourable backdrop for TAC Security's growth trajectory.

Further, the surge in global IT spending is acting as a significant catalyst, driving the demand for Indian IT services and contributing to the overall growth of the sector.

As companies in various industries expedite their digital transformation initiatives, with reliance on IT solutions, this trend is anticipated to be a key driver for the continued growth of IT stocks.

This favourable landscape is poised to further fuel TAC Security's growth journey.

Nevertheless, it is always prudent to conduct thorough research before making any investment decisions.

Ensure that the investment aligns with your financial objectives and matches your risk tolerance level.

For more information on IPOs, check out the list of upcoming IPOs.

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