scorecardresearchShould you subscribe to Netweb Technologies IPO? Check subscription status,
Most analysts advise subscribing to the Netweb Technologies IPO.

Should you subscribe to Netweb Technologies IPO? Check subscription status, GMP and other key details

Updated: 17 Jul 2023, 02:44 PM IST
TL;DR.

Most analysts advise subscribing to the Netweb Technologies IPO considering its attractive valuations, strong growth opportunities, robust fundamentals and rich product portfolio.

The 631-crore initial public offering (IPO) of Netweb Technologies opened for subscription today, July 17, 2023. The price band for the IPO of this high-end computing solutions (HCS) provider, which closes for subscription on July 19, is set at 475-500. This would be the third offering in the current month after Senco Gold and Utkarsh Small Finance Bank.

About the IPO: The issue comprises a fresh issuance of shares worth 206 crore by the company and an offer for sale of 85 lakh shares worth 425 crore at an upper price band by the promoters. Sanjay Lodha, Navin Lodha, Vivek Lodha, Niraj Lodha and Ashoka Bajaj Automobiles LLP are the promoter-selling shareholders.

Subscription status: At 12:45 pm on the first day of bidding, the issue was subscribed to 80 percent. It received bids for 72 lakh shares against 88.58 shares on offer. The portion reserved for employees was subscribed the most, 3.59 times, followed by the retail quota, 1.23 times. Meanwhile, the non-institutional investors (NII) saw 91 percent bids while the qualified institutional buyers' (QIB) portion received no bids till now.

GMP: Ahead of the IPO, the company's shares in the grey market are trading at a healthy premium of 325, indicating a strong response for the issue.

However, one must note that grey market premium is only an indicator of how the company's shares are performing in the unlisted market and can change quickly.

Anchor investors: The company already raised 189 crore via anchor investors on July 14, ahead of its public issue opening. The company finalised the allocation of 37.80 lakh equity shares to 25 anchor investors at 500 per share, the upper price band. Nomura Funds, Goldman Sachs Funds, Eastspring Investments India Fund, Motilal Oswal MF, Franklin Templeton, Nippon Life India Trusteee, HDFC Mutual Fund, ICICI Prudential, Aditya Birla Sun Life Trustee, Axis Mutual Fund, and Whiteoak Capital are amongst investors invested in the company via anchor book.

Pre-IPO placement: Netweb also mopped up 51 crore via private placement (pre-IPO placement) of 10.2 lakh shares at 500 per share from marquee institutional investors, including LG Family Trust, and Anupama Kishore Patil, among others. As a result, the fresh issue size has been reduced from 257 crore earlier to 206 crore.

Reservation: About 50 percent of the net offer is allocated to qualified institutional buyers (QIBs), 15 percent is reserved for non-institutional investors (NIIs) and 35 percent for retail investors. The offer also includes a reservation of up to 20,000 equity shares for eligible employees, who will get those shares at a discount of 25 per share to the final issue price.

Lot size: Investors can bid for 30 shares in one lot and in multiples thereafter. That means the minimum investment by retail investors would be 15,000 per lot.

About the firm: Netweb Technologies India (NTIL) is a Delhi-based company that specializes in High-end Computing Solutions (HCS). They serve various sectors, including IT, IT-enabled services, entertainment, media, BFSI, national data centers, and government entities. The company operates a manufacturing facility in Faridabad, Haryana, and has 16 offices across India. NTIL’s 3 supercomputers have been listed among the world's top 500 supercomputers 11 times. NTIL has both design and manufacturing capabilities in-house and has undertaken the installation of over 300 supercomputing systems and over 4,000 accelerator/GPU-based AI systems and enterprise workstations as of May 2023. Intel, AMD, Samsung India, and Nvidia are some of the technology partners Netweb collaborates with to design and innovate product offerings.

Financials: In FY23, NTIL’s revenue rose 80 percent YoY to 445 crore, compared to 247 crore in the previous year. PAT also doubled from 22.5 crore to 47 crore during the same period. NTIL’s profitability has improved significantly, with EBITDA margins expanding to 15.7 percent in FY23 from 10.1 percent in FY21. Similarly, PAT margins improved to 10.5 percent in FY23 compared to 5.8 percent in FY21.

Objective: Of the total fresh issue proceeds (excluding issue expenses), 32.28 crore will be utilised for capital expenditure towards surface mount technology (SMT) line development, 128.02 crore for long-term working capital requirements, and 22.50 crore for repaying debts, and remaining for general corporate purposes. The offer for sale money will go to promoters selling shareholders in the IPO and the company will not receive any money from the OFS portion.

Dates: The basis of the allotment of IPO shares will be finalised by July 24 and the equity shares will be credited to the demat accounts of eligible investors by July 26. The refunds will be transferred to the bank accounts of unsuccessful investors by July 25. The trading in equity shares of Netweb Technologies will start on July 27, as per the IPO schedule.

Book Running Managers: Equirus Capital and IIFL Securities are the merchant bankers to the issue. Link Intime India is the registrar for the offer.

Brokerage views

Most analysts advise subscribing to the IPO considering its attractive valuations, strong growth opportunities, robust fundamentals and rich product portfolio.

Geojit Financial Services: Subscribe

"Netweb is one of the few OEMs that has qualified for the production-linked incentives scheme for IT hardware and networking products manufacturing in India. At the upper price band of 500, NTIL is available at a P/E of 59.7x (FY23), which appears reasonably priced compared to peers. With effective management, consistent growth, an expanding product portfolio, geographic footprints and the Digital India initiative by the government, NTIL is well-positioned to capitalize on the Indian IT industry's growth. Therefore, we assign a "Subscribe" rating for the issue on a short to medium-term basis," it said.

Choice Broking: Subscribe

“There are no comparable peers in the listed space having a business model and product offerings similar to Netweb Technologies. At the higher price band, it is demanding a P/E multiple of 59.7x (to its FY23 earning), which seems to be on the higher side. However, considering the business potential and earning growth in the medium term, we believe the demanded valuation is reasonable," said Choice Broking. Thus, it has assigned a “Subscribe" rating to the issue.

The brokerage expects the company’s top line over FY23-25 is likely to grow by 37 percent CAGR to 835.4 crore in FY25. Economies of scale operation would expand the EBITDA and PAT margin by 132 bps and 162 bps, respectively, to 17.1 percent and 12.2 percent in FY25E, it forecasted.

Anand Rathi: Subscribe

The company is one of the leading Indian-origin owned and controlled-for HCSs with integrated design and manufacturing capabilities. They have a long-lasting relationship with the marquee and a diverse customer base. At the upper price band, the company is valuing at a P/E of 60x FY23 earnings with a market cap of 2,801 crore post-issue of equity shares and a return on net worth of 68 percent. The issue is fairly priced, it said, recommending a ‘subscribe - long term’ rating to the IPO.

Ventura Research: Subscribe

The company's strong fundamentals, robust product portfolio, and further growth opportunities ascribe it to a 'subscribe' at the upper price band. However, since the company had low-capacity utilisation in the fiscal years 2023, 2022, and 2021, the inability to achieve higher production could affect its installed capacity utilisation, it said.

Reliance Securities: Subscribe

The company caters to marquee customers across end-user industries such as IT, IT-enabled services, entertainment, media, banking, financial services and insurance, and government entities. At a compounded annual growth rate (CAGR) of 8.8 percent, the overall IT market in India is expected to reach $373 billion by FY29. This, therefore, would drive demand for high-end computing solutions, proving to be beneficial for the firm, it said, assigning a ‘subscribe’ rating to the issue.

 

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First Published: 17 Jul 2023, 02:44 PM IST