Companies and governments worldwide are showing a renewed interest in building cyber resilience following several high-profile attacks. This has translated into high demand for next-gen cybersecurity products (software and hardware), which has led to cybersecurity companies reporting strong numbers in 2021. In the US, cyber security stocks went up 16.8 per cent in H1 2021, outperforming the S&P 500 and Nasdaq. The overall market grew 592 per cent in the last 10 years, reaching a valuation of approximately $425.8 billion in 2021. The story isn’t very different for India.
Why Cybersecurity Firms Will Do Well
In India, spending on enterprise security and risk management is expected to increase 9.5 per cent from 2020 to reach $2.08 billion in 2021. There are several reasons why the demand for cybersecurity products will continue to increase. This will lead to rising share prices for companies that offer such products.
Continuing Remote Work
With remote work arrangements set to continue, organisations are more vulnerable to cyber threats than ever. In remote work arrangements, employees rely on their own devices and home networks. These lack the same security measures as corporate environments. Thus, they become a vulnerable endpoint that can expose an entire corporate network to security breaches.
Need for Privacy Protection
There is now increasing awareness among tech-savvy consumers regarding data vulnerability. This is especially true as our lives become more technologically integrated, with everything from sensors to 5G. Consumers are sceptical about the prying eyes of tech companies and bad actors.
Need for Restricting Ransomware
Ransomware and other sophisticated attacks are causing huge damage to organisations. India was one of the most hit nations by ransomware attacks. A report suggests that India had 213 weekly attacks per organisation in the first few months of 2021, the highest in the world.
4 Popular Cybersecurity Stocks in India
There are only a handful of listed companies in India in this sector. But these companies are some of the biggest names out there, known for their innovations and promising future prospects.
Quick Heal Technologies
One of the leading cyber security products and solutions providers, Quick Heal caters to both industry needs and individual consumers through a portfolio of cloud-based security and machine-learning-based solutions to keep threats and malicious traffic at bay. Currently, it has a market share of 30 per cent in the retail segment and expects further growth through deeper penetration into tier-I and tier-II cities. The enterprise segment contributes to 18 per cent of its revenue. The company reported a strong performance in Q4 FY2021, with revenue increasing 63.9 per cent YoY to reach Rs 105 crore.
A cloud-native company, SecureKloud has several products, services, and frameworks catering to enterprise security. The company has a patented solution in identity and access management services to help companies achieve security, access management, governance, scalability, and full identity life cycle management, among other solutions. Its product, CloudAuth Multi-Factor Authentication, secures a range of enterprise applications by authenticating unique identities in seconds. As on October 21, 2021, the company’s stock price has climbed more than 100 per cent YTD.
Cybertech Systems and Software
The company provides risk intelligence solutions to enterprises, with predictive risk mitigation and damage minimisation strategies. Companies receive real-time incident reporting, threat visualisation for assets, and in-depth insights into global developments that might impact their operations and employees. The company’s net profit rose 382.7 per cent in Q1 2021, reaching Rs 2.80 crore, a big jump from the Rs 0.58-crore net profit recorded in Q1 2020.
RS Software provides custom e-payment solutions to the world’s biggest companies. A key offering of the company is the prevention of fraudulent transactions in digital payments. It can develop predictive fraud models based on client fraud data that offers a shared model for fraud detection. The company also offers advisory services on global regulatory compliance practises in payments models. Its current market capitalisation is Rs 85.74 crore. In Q3 2021, the company reported a total revenue of Rs 375.98 crore and gross sales of Rs 353.8 crore.
India is undoubtedly at a crucial point in its recovery plan. As India Inc proceeds towards rapid digital transformation to build resilience against such pandemic-like events, which will be sustainable only with robust cyber resiliency. Thus, the sector could represent huge opportunities for investors.
(The author is Whole Time Director, HDFC Securities. Views expressed are personal)
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