Netweb Tech off to a flying start, what should investors do?

Netweb Tech's financial growth has been encouraging as well.

Netweb Tech had a blockbuster market debut on July 27 in keeping with the recent Dalal Street trend of hefty gains on the listing day. As Netweb Tech investors sit pretty, most analysts advise booking partial profits.

Netweb Technologies started off its first trade at Rs 947, an 88 percent premium to the issue price of Rs 500, which was expected given the strong IPO subscription numbers and the prevailing optimism in the market.

At 10.40 am, some profit booking was observed as the stock was trading 5 percent down at Rs 897 on BSE.

“We recommend to book partial profit and hold partial allotment for long term,” said Astha Jain, Senior Research Analyst, Hem Securities.

The public issue of Netweb Technologies was subscribed 90.36 times during July 17-19. Most brokerages were bullish on the issue, advising their clients to subscribe.

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Analysts’ take

Anubhuti Mishra, Equity Research Analyst, Swastika Investmart, said such a premium is justified because Netweb Technologies is a leading provider of high-end computing solutions in India.

“The company has a strong order book and it has also witnessed stable financial performance and consistent growth over the past year. Netweb Technologies is well-positioned to benefit from the growth of the high-end computing market in India,” she said.

She advised investors who have been allotted shares to book profit but added that investors with a long-term view can even hold it in their portfolios.

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The company had raised Rs 631 crore via public issue that comprised a fresh issue of Rs 206 crore and an offer for sale of Rs 425 crore by promoters. The price band for the offer was Rs 475-500 per share.

Netweb Technologies intends to leverage its presence in the fast growing high-end computing solutions (HCS) industry with focus on developing refined, customised computing systems to address the high-end computational requirements of customers, it said.

Its financial growth has been encouraging as well.

The company registered revenue growth at a CAGR of 77 percent during FY21-FY23. Profit and EBITDA grew at a CAGR of 139 percent and 121 percent in the same period.

Profit after tax margin has steadily increased from 5.8 percent in FY21 to 10.5 percent in FY23. Netweb Technologies has maintained a healthy average return on equity of around 46 percent during FY21-23.

“The company has done significant product development and innovation through R&D & it is one of India’s leading HCS providers and operates in a rapidly evolving and technologically advanced industry with high entry barriers,” said Jain.

The company has experienced board and senior management with a track record of financial performance and consistent growth,” she said.

Dhruv Mudaraddi, Research Analyst, StoxBox, said several factors are working for the company including  the its niche business segment, high entry barriers, focus on R&D to augment product portfolio and increased penetration in existing verticals.

“We would advise investors to book profits on the opening day and look for re-entry at lower levels as valuation would be stretched at higher listing day prices,” Mudarabadi said.

Prashanth Tapse, Research Analyst, Senior VP Research at Mehta Equities, too, favoured a re-entry after booking profits on the listing day.

(Sunil Shankar Matkar contributed to the story.)

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