This report is published by Research Dynamics, an independent research boutique


Expanding vertical cybersecurity IoT platform in India

Partnership with Indian Potash Limited (IPL)
WISeKey last week, on occasion of the India Economic Summit, announced a partnership with Indian Potash Limited (IPL), to create a cybersecurity IoT ecosystem based on the WISeKey Root of Trust and Semiconductors IoT technology. The cooperation between the two companies will enable IPL's end-user base of 140 million farmers (WISeFarmer) to be a part of the 'Digital India' initiative launched by the government of India and use various advantages of the Internet of Things (IoT) through the WISeKey platform that WISeKey is localizing in India. Management expects this deal to enable over 200 companies part of IPL distribution channels to be securely connected into a trusted cybersecurity platform, thereby creating an inclusive ecosystem for farmers. With the recently acquired French semiconductor company VaultIC, WISeKey will be in the position to provide the required encrypted chips for the 140 million farmers via a personalized NFC smartcard synchronizing to a mobile app and as well as IPS' fertilizer bags, which will have a substantial impact on WISeKey sales in FY 2017. We understand from management that the projection is to certify over 400 million bags with this technology. Ramp-up of production at the current chip facility in France should not be a problem as the VaultIC in the past produced over 1 million chips a day for Blackberry and thus has enough capacities to ramp-up to this size.

The farmers and distributors using this technology would be able to authenticate themselves through a trusted web platform exchange between IPL, farmer's communities, government entities and private enterprise members of this ecosystem. This would be done by providing each WISeFarmer with a digital identity stored on the cryptographic smart card that, once connected to their mobile phone, will give them access to secure services provided by IPL, adding digital certificates on their chips at the hardware level to encrypt the communication and authenticate the devices. The project will also allow farmers to access to financial services and conduct secure transactions with their mobiles. Digital certificates embedded in the chips will authenticate all products provided by IPL and will also enable IPL to track, especially, fertilizer bags from the factory/port to farmers. This would, therefore, benefit the government to directly transfer the benefits of subsidies to farmers.
IPL is India's largest potash firm with FY2015 (March ended) revenues of USD2.3bn. The company is owned mainly by cooperatives and has a banking relationship with some of the major banks operating in India.

Intention to create a partnership with Bajaj Electricals

WISeKey also announced its intention to enter into a partnership with Bajaj Electricals Limited (BEL), one of India's leading consumer durable and lighting companies. In the first phase, WISeLight, an IoT trusted platform will be developed to connect approximately 100 million consumer & industrial products to a secure cloud. WISeKey will create approximately 100 million digital identities of the stock keeping units (SKUs). WISeLight will enable each Bajaj electrical appliance to be hardened by a digitally certified eco-system for the connected objects. WISeKey also asserted that WISeLight would make possible the delivery of lighting solutions using IoT wherein sensors and embedded microchips will detect and interact with the environment in real-time, leading to 80% savings in energy consumption. We believe such innovations and their implementation by major players in India's electrical industry should bode well for demand, given India's huge energy demand-supply gap.

Conclusion

We believe that these novel partnerships will lay the foundation for implementation of WISeKey technology to other sectors such as telecom, manufacturing and retail including e-commerce. WISeKey will benefit due to the fact that the Indian Internet of Things (IoT) market is set to grow to USD15 billion by 2020 from the current USD5.6 billion, according to a report by Nasscom released on Wednesday in Bengaluru. The IoT sector is set to get a major boost from industrial IoT, which currently accounts for 60% for the total market and includes integration of physical machinery with networked sensors and using the data for faster and more efficient operations.

We also think that such partnerships will boost the company's efforts in expanding through similar deals in other countries and clearly shows the benefits of WISeKey's neutral cryptographic rootkey domiciled outside the US.

Valuation

While we see tremendous potential in the announced cooperations, adding to sales and profitability (we understand from management that WISeKey International Holding holds a 51% majority in the JV to be set up, thus revenues will be consolidated and sales and profits should fully go into the P&L), we are leaving our estimates unchanged for now. Firstly, we do not expect any major impact of the IPL and BEL deals in 2016 while the projects get established; secondly, final details are still to be provided on how exactly the WISeFarmer and WISeLight deals will be monetized. Thus, we await more tangibles on the cooperations before adjusting our estimates. Our current approach values the company at CHF14.8 per share, with upside potential once we have more visibility on the execution of the Indian joint ventures. Moreover, successful implementation of the deals should enable WISeKey to generate cross-selling opportunities, given its ongoing geographic expansion in countries such as India and possibly other regions.