Netweb Technologies Unveils IPO: A Favorable Venture for Investors

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Equirus Wealth

27 Jul 2023 5 min read

HNI#Stock Market#HNI#Investment

Equirus has successfully overseen the initial public offering (IPO) of Netweb Technologies India as the lead left book-running manager, marking its triumphant listing on the Stock Exchange today at a notable premium of approximately 89%. Equirus played a pivotal role in helping Netweb Technologies India to harness capital from the market.

The company's stock was introduced at Rs 947 on the NSE, showcasing a substantial premium of 89.4% over the set issue price of Rs 500, while its BSE debut was equally striking, opening at Rs 942.5, reflecting an increase of 88.5%.

Investors demonstrated extraordinary enthusiasm for the public issue, resulting in a remarkable subscription rate of 90.55 times. The demand was strikingly high across various categories, including a staggering 220.10 times in the Qualified Institutional Buyers (QIB) category (excluding Anchor), a robust 84.21 times in the Non-Institutional Investors (NII) category as of July 19, 2023, and a healthy 19.59 times in the retail segment.

  • Day 1: Subscribed 2.33 times
  • Day 2: Subscribed 9.14 times
  • Day 3: Subscribed 90.36 times

Netweb Technologies, a leading high-end computing solutions (HCS) provider in India, is in the spotlight as its initial public offering (IPO) subscription rates have skyrocketed. With a diverse product range that includes private cloud and HCI solutions, supercomputing systems, enterprise workstations, and more, Netweb's IPO has drawn massive attention from various classes of investors. Here's an in-depth look at the subscription's performance, the objectives of the issue, the company's profile & key points.

About Netweb Technologies India

Incorporated in 1999, Netweb Technologies has become a leader in customized computing systems that address the high-end computational requirements of various clients. The company's wide range of products includes supercomputing systems, private cloud infrastructure, AI systems, enterprise workstations, storage solutions, and data center servers.

Strengths of Netweb Technologies

  1. Full Stack Products: Bening amidst the rare players to provide a full stack of products and solutions in high-performance computing in India, Netweb Technologies has established itself as a go-to provider for cutting-edge solutions.
  2. Customer Loyalty: Their strong customer base has seen repeat business contributing, on average, about 85% to revenue over the last three years.

IPO Details

The Initial Public Offering (IPO) of Netweb Technologies India has garnered significant attention in the financial market. Here are some key details:

  • Total IPO Size: ₹631 crore
  • Offer for Sale: ₹425 crore
  • Fresh Issue: ₹206 crore
  • Price Band: ₹475-500
  • Subscription Dates: July 17-19, 2023
  • Purpose of Issue: Funding capex & working capital, and repaying debt

Post-IPO, the company's market capitalization stands at ₹2803 crore, with the promoter holding 75.4%.

Financial Performance and Ratios

Netweb Technologies has shown growth across key financial metrics:

  • Revenue Growth: From ₹143 crore in FY21 to ₹76.5 crore in FY23.
  • EBIT Growth: From ₹13 crore to ₹126.5 crore in the same period.
  • PAT Growth: Profit after Tax increased from ₹8 crore to ₹138.8 crore.
  • ROE and ROCE: With a three-year average of 60.8% and 50.5% respectively, the company has demonstrated strong returns on equity and capital employed.
  • Debt-to-Equity Ratio: 0.4, 0.8, and 1.4 in the last three years.

IPO Questions and Management Insights

Here are some insights based on questions raised regarding the company and the IPO:

  • Earnings Before Tax: More than ₹50 crore in the last 12 months.
  • Scalability: With increasing demand for high-performance computing systems, AI-enabled workstations, and cloud infrastructure, Netweb Technologies has a clear path to scale.
  • Brand Recognition: The company has fostered an average relationship with the top 10 customers over 5 years, reflecting client stickiness.
  • Competition: Despite having a competitive edge, it faces fierce competition from giants like Hewlett-Packard, IBM, and Nvidia.

Management seems stable and trustworthy, with over 50 years of combined leadership at Netweb Technologies, complying with SEBI guidelines.

Anchor Investors

On Friday, July 14, Netweb collected ₹189.01 crores from anchor investors such as Nomura Funds, Goldman Sachs Funds, Eastspring Investments India Fund, HDFC Mutual Fund, and Axis Mutual Fund.

Listing and Recommendations

Netweb Technologies' IPO was listed on the bourses at a premium, with the NSE price at ₹947 and the BSE at ₹942.50 per share, 89.4% higher than the issue price.

Aggressive investors might consider buying during any subsequent dip.

Conclusion

Netweb Technologies' IPO reflects the optimism and confidence that investors have in the company's future. With a strong track record of growth and a focus on high-end computing solutions, the company is well-positioned to leverage the growing tech market in India. However, careful consideration must be given to its reliance on major customers and the competitive landscape.

With a robust financial performance and transparent management, Netweb Technologies seems to be on a promising path, offering attractive prospects for investors and shareholders alike. The strong listing and the grey market premium of +394 further underscore the interest in this IPO.

The company's contribution to India's technological advancements and its strong position in a niche market makes it an exciting option for those looking to invest in the country's burgeoning tech industry. Whether to hold, sell, or buy, will ultimately depend on individual investment strategies and market trends, but Netweb Technologies India certainly seems poised for growth and success in the years to come.

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