Cybersecurity stocks: why cybersecurity stocks should be part of your investment portfolio



As organizations around the world navigate the new standard of maintaining business continuity during a pandemic, their data becomes increasingly vulnerable to cyber attacks. India Inc, in the pursuit of rapid digital transformation, is also facing a high threat environment. New exploitation models have created multiple endpoints in data chains, allowing attackers to gain access to basic business data. Over 6.07 lakh of cybersecurity incidents were observed by the Indian Computer Emergency Response Team (CERT-In) in the first half of 2021 alone, including 12,000 cases related to government organizations .

Businesses and governments around the world are showing renewed interest in building cyber resilience following several high-profile attacks. This has translated into a strong demand for next-generation cybersecurity products (software and hardware), which has led cybersecurity companies to report strong numbers in 2021. In the United States, cybersecurity stocks have increased by 16.8% in the first half of 2021, outperforming the S&P 500 and the Nasdaq. The overall market has grown 592% over the past 10 years, reaching a valuation of around $ 425.8 billion in 2021. The story is not much different for India.


Why cybersecurity companies will do well


In India, spending on business security and risk management is expected to increase 9.5% from 2020 to $ 2.08 billion in 2021. There are several reasons why the demand for cybersecurity products will continue. to increase. This will cause stock prices to rise for companies that offer such products.


Continuation of remote work


With remote working arrangements set to continue, organizations are more vulnerable than ever to cyber threats. In remote working arrangements, employees rely on their own home devices and networks. These do not have 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


Tech-savvy consumers are increasingly aware of the vulnerability of data. This is all the more true as our lives become more and more technologically integrated, with everything from sensors to 5G. Consumers are skeptical of the prying eyes of tech companies and bad actors.


Need to restrict ransomware


Ransomware and other sophisticated attacks cause enormous damage to organizations. India has been one of the countries most affected by ransomware attacks. A report suggests India had 213 weekly attacks per organization in the first months of 2021, the highest in the world.


4 popular cybersecurity actions in India


There are only a handful of listed companies in India in this industry. But these companies are among the biggest names in the market, known for their innovations and promising future prospects.


Rapid healing technologies


A leading provider of cybersecurity products and solutions, Quick Heal meets the needs of both industry and individual consumers with a portfolio of cloud-based security solutions and machine learning to keep remote threats and malicious traffic. Currently, it has a 30 percent market share in the retail segment and expects further growth through deeper penetration in Tier I and II cities. The business segment contributes 18 percent of its turnover. The company recorded a strong performance in the fourth quarter of fiscal 2021, with revenue rising 63.9% year-on-year to Rs 105 crore.


SecureKloud Technologies


A cloud-native company, SecureKloud offers several products, services and frameworks for business security. The company has a patented identity and access management services solution to help enterprises achieve security, access management, governance, scalability, and complete identity lifecycle management, among others. solutions. Its product, CloudAuth Multi-Factor Authentication, secures a range of business applications by authenticating unique identities in seconds. As of October 21, 2021, the company’s share price has climbed more than 100% since the start of the year.


Cybertech systems and software


The company provides enterprise risk intelligence solutions with predictive risk mitigation and damage minimization strategies. Businesses receive real-time incident reports, visualization of threats to assets, and detailed information on global developments that could impact their operations and employees. The company’s net profit rose 382.7% in the first quarter of 2021 to reach Rs 2.80 crore, a huge jump from the net profit of Rs 0.58 crore recorded in the first quarter of 2020.


RS software


RS Software provides personalized electronic payment solutions to the world’s largest companies. A key offering of the company is the prevention of fraudulent transactions in digital payments. It can develop predictive fraud models based on customer fraud data that provide a shared model for fraud detection. The company also provides advisory services on global regulatory compliance practices in payment models. Its current market capitalization is Rs 85.74 crore. In the third quarter of 2021, the company reported total revenue of Rs 375.98 crore and gross sales of Rs 353.8 crore.

India is undoubtedly at a crucial point in its stimulus package. As India Inc moves towards a rapid digital transformation to build resilience against such pandemic-like events, which will only be sustainable with robust cyber resilience. Thus, the sector could represent huge opportunities for investors.


(The author is a full-time director, HDFC Securities. The opinions expressed are personal)


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