We have been seeing great investor demand for the public offering of Netweb Technologies India. As of the final day, July 19, the issue has been subscribed 90.36 times, with bids received for 80.04 crore equity shares, surpassing the IPO size of 88.58 lakh equity shares.
Apart from its strong fundamentals and reasonable valuations, the robust equity market conditions also played a key role as the benchmark indices BSE Sensex and Nifty50 traded at fresh all-time levels, giving more than 16 percent return from March lows.
Qualified institutional investors, who have 50 percent reservation in the issue, have bought 228.91 times the portion set aside for them, while the part reserved for high networth individuals was subscribed 81.81 times.
The high-end computing solutions (HCS) provider has reserved 15 percent of IPO shares for high networth individuals, and the remaining 35 percent for retail investors, while the employees, who will get up to 20,000 equity shares in the offer at a discount of Rs 25 per share to the final issue price, have bought 53.13 times the reserved portion.
Retail investors also provided strong support to the offer, bidding 19.15 times the quota kept for them.
Delhi-based company Netweb Technologies intends to raise Rs 631 crore via public issue that comprises a fresh issue of Rs 206 crore and an offer for sale of Rs 425 crore by promoters, at the higher end of the price band of Rs 475-500 per share.
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The company already mopped up Rs 189 crore through its anchor book, which is a part of the qualified institutional buyers' portion, at Rs 500 per share. Marquee investors made an investment in the company via anchor book including Goldman Sachs, Nomura Funds, Motilal Oswal MF, HDFC Mutual Fund, Eastspring Investments India Fund, ICICI Prudential, and Whiteoak Capital.
The fresh issue proceeds, after excluding issue expenses, are going to be utilised for capital expenditure towards the development of the surface mount technology (SMT) line, long-term working capital requirements, and repaying debts, besides general corporate purposes.
With a manufacturing facility in Faridabad, Haryana, and 16 offices across India, Netweb offers high-performance computing systems, private cloud and hyper-converged infrastructure, AI systems and enterprise workstations, high-performance storage solutions, data center servers, and softwares and services to various sectors including IT, IT-enabled services, entertainment, media, BFSI, national data centers, and government entities.
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There are no directly comparable peers in the listed space which are present in the HCS industry. Thus, Nirmal Bang compares Netweb with EMS (electronics manufacturing services) players which are mainly into manufacturing electronic components and are also supported by strong growth due to favourable industry tailwinds.
The brokerage believes Netweb possesses higher growth and return ratios compared to EMS players and is also available at cheaper valuations. Thus, it recommended subscribing to the IPO.
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Netweb, which is expanding its geographical footprint by targeting the European, Middle Eastern, and African (EMEA) markets, has recorded 80 percent year-on-year growth in revenue for FY23 year at Rs 445 crore and doubled the profit from Rs 22.5 crore to Rs 47 crore during the same period.
Further, the EBITDA margin expanded to 15.7 percent in FY23 from 10.1 percent in FY21 and similarly, PAT margin improved to 10.5 percent compared to 5.8 percent in the same period.
At the upper price band of Rs 500, Netweb is available at a P/E of 59.7x on the basis of FY23 financials. "This appears reasonably priced compared to peers," Geojit Securities said.
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With effective management, consistent growth, an expanding product portfolio, geographic footprints and Digital India initiative by the Government, Netweb is well-positioned to capitalize on the Indian IT industry's growth. Therefore, the brokerage has assigned a subscribe rating for the issue on a short to medium-term basis.
Netweb also recently forayed into developing new product lines, network switches and 5G ORAN appliances in FY23. Hence, the projected growth in the 5G market in India at a CAGR Of 90 percent during FY24-FY28 is also expected to result in an increased demand for HCI (hyper-converged infrastructure) and private cloud infrastructure in India.
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