Netweb Tech IPO opens today: Should you subscribe to the supercomputing player?

The initial public offering (IPO) of Netweb Technologies India kicks-off for subscription on Monday as the company sells its shares in the price band of Rs 475-500 apiece in the lot size of 39 equity shares and its multiples thereafter. The three-day stake sale will conclude on Wednesday.

Incorporated in 1999, Netweb Technologies provides high-end computing solutions (HCS), offering high-performance computing (supercomputing/HPC) systems; private cloud and hyper-converged infrastructure (HCI); AI systems and enterprise workstations; high-performance storage solutions; data center servers, softwares and services .

The company is looking to raise Rs 631 crore via IPO route, which includes a fresh equity share sale amounting to Rs 206 crore and an offer-for-sale (OFS) of up to 85 lakh equity shares by promoters, aggregating to Rs 425 crore. Promoters Sanjay Lodha, Navin Lodha, Vivek Lodha, Niraj Lodha and Ashoka Bajaj Automobiles LLP would be participating in the OFS.

The company, in consultation with lead managers of the issue, had undertaken a pre-IPO placement of 10.20 lakh equity shares to LG Family Trust, Anupama Kishor Patil and two funds 360 ONE WAM at an issue price of Rs 500 per share, aggregating to Rs 51 crore. This resulted in reduction of fresh issue size to Rs 206 crore from Rs 257 crore earlier.

Ahead of its IPO, Netweb Technologies collected Rs 189 crore by allocating 37.8 lakh equity shares at Rs 500 per share from 25 anchor investors on Friday, according to a BSE circular. Nomura Funds, Goldman Sachs Funds, ICICI Prudential Mutual Fund (MF), HDFC MF, WhiteOak MF and Nippon MF, among others participated in the anchor round.

Net proceeds from the fresh issue will be utilised towards funding capital expenditure requirements of the building for the surface mount technology (SMT) line and interior development, and purchase of machinery for the new SMT production line; funding of long-term working capital requirements, prepayment of certain borrowings and general corporate purposes.

Netweb Technologies designs, manufactures and deploys HCS comprising proprietary middleware solutions, end-user utilities, and precompiled application stack. It develops homegrown compute and storage technologies, and deploys supercomputing infrastructure to meet demands of businesses, academia, and research organizations.

For the financial year ended on March 31, 2023, the company reported a net profit at Rs 46.94 crore, with a total revenue at Rs 445.65 crore. Its net profit stood at Rs 22.45 crore for the year, with a total revenue at Rs 247.94 crore in the previous financial year (FY22).

The company has reserved 50 per cent of offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the allocations. Remaining 35 per cent of the portion of the offer shall be allocated to the retail bidders.

Equirus Capital and IIFL Securities are to book-running lead managers to the issue, while Link Intime India has been appointed as the registrar to the issue. Shares of Netweb Technologies will be listed at both BSE and NSE with July 27 as the tentative date of listing.

Majority of the brokerage firms tracking the issue continue to remain positive on the issue citing its strong business fundamentals, robust balance sheet, niche business segment and reasonable valuations compared to the peers. Most of them have suggested a bid for the issue.

Choice Stock Broking
Rating: Subscribe
"There are no comparable peers in the listed space having a business model and product offerings similar to Netweb. The issue is richly priced but considering the business potential and earnings growth in the medium term, we believe the demanded valuation is reasonable," said Choice Broking with a 'subscribe' rating.

Geojit Financial Services
Rating: Subscribe
The issue is available at a P/E of 59.7 times, which appears reasonably priced compared to peers. With effective management, consistent growth, an expanding product portfolio, geographic footprints and Digital India initiative by the Government, NTIL is well-positioned to capitalize on the Indian IT industry's growth, said Geojit with a 'subscribe for short-to-medium term' tag.

Stoxbox
Rating: Subscribe
"Netweb presents a unique business model and is the only domestic company offering HCS offerings, which makes it stand out due to the lack of listed domestic and international players in the field. The company is a leading player in the controlled OEM space for HCS offerings. We feel the issue is fairly valued," recommend Stoxbox with a 'subscribe' rating for the issue.

Marwadi Financial Services
Rating: Subscribe
Considering the FY23EPS of Rs 8.37 on a post issue basis, the company is going to list at a P/E of 59.72 times with a market cap of Rs 2,803.2 crore whereas its peers Syrma SGS Technology, Kaynes Technology India Ltd and Dixon Technologies Ltd are trading at a P/E of 72 times,106 times and 101 times, said Marwadi Financial Services in its IPO note.

"We assign 'subscribe' rating to this IPO as the company is one of India's leading HCS providers, operating in a rapidly evolving and technologically advanced industry with high entry barriers. This advantageous position is further reinforced by the company's impressive track record of financial performance and consistent growth," it added.

Arihant Capital Markets
Rating: Subscribe
Netweb  has demonstrated exceptional performance in the FY23 and has positioned itself strongly among its peers. It is one of the few players in India that provides a comprehensive range of high-performance computing products and solutions. Over the past three years, repeat customers have contributed approximately 85 per cent of the company's revenue, said Arihant Capital.
"With its presence in government, defense, higher education, and research sectors, Netweb Technologies is well positioned for future growth. The company also has ambitions to expand its product portfolios and manufacturing facilities in order to establish a global presence. we recommend that investors Subscribe to the issue for the long term," it said.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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