Netweb Technologies to launch IPO today: 10 things to know before you buy it

2) Price Band

The price band for IPO has been fixed at Rs 475-500 per share.

3) IPO Size

The diverse range of computing solutions provider plans to raise Rs 631 crore via an initial public offering, which comprises a fresh issuance of shares worth Rs 206 crore by the company, and an offer for sale of Rs 425 crore by promoters, at an upper price band.

Sanjay Lodha, Navin Lodha, Vivek Lodha, Niraj Lodha and Ashoka Bajaj Automobiles LLP are the promoter-selling shareholders.

The offer includes a reservation of up to 20,000 equity shares for eligible employees, who will get those shares at a discount of Rs 25 per share to the final issue price.

The company already mobilised Rs 189.01 crore via anchor book on July 14, ahead of its public issue opening, while before the filing red herring prospectus with RoC, Netweb mopped up Rs 51 crore via private placement (pre-IPO placement) of 10.2 lakh shares at Rs 500 per share, which as a result the fresh issue size has been reduced from Rs 257 crore earlier to Rs 206 crore.

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4) Objectives Of Issue

Of the total fresh issue proceeds (excluding issue expenses), Rs 32.28 crore will be utilised for capital expenditure towards surface mount technology (SMT) line development, Rs 128.02 crore for long-term working capital requirements, and Rs 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.

5) Lot Size

Investors can bid for a minimum of 30 equity shares and in multiples of 30 shares thereafter. That means the minimum investment by retail investors would be Rs 15,000 per lot (Rs 500 per share x 30 shares) and Rs 1.95 lakh (13 lots) would be the maximum investment they can make as they can not exceed Rs 2 lakh limit for investment in IPO.

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High networth individuals (HNIs) can invest a minimum of Rs 2.1 lakh (for 14 lots) and the maximum would be Rs 9.9 lakh (for 66 lots) as they are allowed to invest from Rs 2 lakh to up to Rs 10 lakh, while the second category of HNIs, who are allowed to invest Rs 10 lakh and above, can make a minimum investment of Rs 10.05 lakh (67 lots).

Half of the offer size is reserved for qualified institutional buyers (including anchor book), 15 percent for non-institutional investors (high net worth individuals) and the remaining 35 percent for retail investors.

6) Company Profile

Netweb Technologies India is one of India’s leading OEMs in the space of HCS (high-end computing solutions) providing supercomputing systems, private cloud and HCI (hyper-converged infrastructure), data centre servers, AI systems and enterprise workstations and HPS solutions with manufacturing facility in Faridabad, Haryana.

The company caters to many Indian and multinational customers based in India and proposes to grow its geographical footprint in Europe, Middle East and Africa (EMEA). It recently forayed into developing new product lines - network switches and 5G ORAN appliances.

Currently, its HCS offerings cater to various application industries such as information technology, information technology-enabled services, entertainment and media, BFSI, and government entities, including the defence, education and research development institutions and national data centres such as NMDC Data Centre.

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A total of 509 customers contributed to the revenue from operations for FY23, increasing from 474 customers in FY22, while the company acquired 192 new customers in the financial year gone by, up from 174 customers addition in FY22. Having long-term relationships, the repeat customers contributed over 90 percent to its revenue in FY23 against 77 percent in the previous year.

Its order book as of May 2023 was Rs 90.2 crore against Rs 71.2 crore in March 2023.

The Indian supercomputing systems market has increased from $378 million in FY19 to $493 million in FY22, at a CAGR of 9.3 percent. Further, the market is expected to grow from $539 million in FY23 to $919 million in FY29, at a CAGR of 9.3 percent.

7) Financials

Netweb Technologies has robust financial performance with profit growing at a CAGR of 138.2 percent during FY21-FY23 to Rs 46.9 crore in the year ended March FY23, and the revenue grew at a CAGR of 76.53 percent to Rs 445 crore in FY23 backed by growth almost across segments.

On the operating front, EBITDA (earnings before interest, tax, depreciation and amortisation) for FY23 increased by 102.4 percent to Rs 70 crore with a margin expansion of 173 bps to 15.73 percent compared to the previous fiscal.

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The return on equity (RoE) climbed to 68.01 percent in FY23, from 67.85 percent in the previous fiscal, and the return on capital employed rose to 64.42 percent from 51.63 percent in the same period, while the net debt to equity ratio was 0.30 times at the end of FY23, improving from 0.73 times in FY22.

8) Promoters and Management

Promoters hold 97.8 percent shares in the company, and the rest is held by public shareholders.

Sanjay Lodha is the Chairman and Managing Director on the board, while Navin Lodha, Vivek Lodha and Niraj Lodha are whole-time directors.

In the senior management group, Prawal Jain is the Chief Financial Officer and Chief Human Resource Officer, Hemant Agarwal is the Chief Operating Officer and Lohit Chhabra is the Company Secretary and Compliance Officer.

9) Risks and Concerns

Here are the key risks and concerns highlighted by SMC Global Securities and BP Equities:

a) The company has not entered into hedging transactions regarding its foreign currency exposure.

b) The company had low-capacity utilisation in fiscals 2023, 2022 and 2021.

c) It derives a majority portion of its revenues from operations from a select few of its HCS offerings.

d) The company has a high working capital requirement and if it is unable to raise sufficient working capital its operations will be adversely affected.

e) The company’s business operations are heavily reliant on its top 10 customers.

f) It depends on a few application industries for the majority of its revenue from operations. Loss of customers in these application industries may result in an adverse effect on its business operations.

10) Allotment and Listing 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.

Its shares traded with a massive 65 percent premium in the grey market over the upper price band, analysts said on anonymity. The grey market is an unofficial platform wherein the shares can be bought and sold till the listing.

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

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