Netweb Technologies started off first day first trade with a whopping 88 percent premium on July 27, which was largely on expected lines given the strong IPO subscription numbers and the prevailing optimism in equity markets.
The stock opened at Rs 947 on the NSE against the issue price of Rs 500 per share, while the opening price on the BSE was Rs 942.
The public issue of Netweb Technologies had seen overwhelming response from investors, subscribing 90.36 times during July 17-19. Qualified institutional buyers showed the highest ever support to the IPO, buying 228.91 times the reserved portion. High networth individuals bought 81.81 times the allotted quota, and retail investors 19.15 times, while the portion set aside for employees was subscribed 53.13 times.
The equity market conditions are also positive with the benchmark indices gaining more than 17 percent from March lows, backed by foreign inflow, encouraging global cues, and positive corporate earnings.
The high-end computing solutions provider has raised Rs 631 crore via public issue that was 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.
We had seen a subscribe rating by most of brokerages, given the reasonable valuations, strong financial performance, marquee customer base and long term relationship with customers and healthy growth prospects.
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"We compare Netweb with EMS (electronics manufacturing services) players who are mainly into manufacturing of electronic components and are also supported by strong growth due to favorable industry tailwinds. We believe, Netweb possesses higher growth and return ratios compared to EMS players and is also available at cheaper valuations," said Nirmal Bang which had recommended subscribing to the IPO.
Netweb Technologies intends to leverage its presence in the fast growing HCS (high end computing solutions) industry with focus on developing refined, customised computing systems to address the high-end computational requirements of customers, said the brokerage.
Hence, Netweb was able to generate high EBITDA margins (at 15.7 percent in FY23 against 14 percent) and ROCE (return on capital employed at 52 percent in FY23).
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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 respectively, in the same period. PAT 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 IT market in India is forecasted to be $225 billion in FY23 and is expected to reach $372.7 billion by FY29 with a CAGR of 8.8 percent. The PLI scheme and ‘China Plus One’ strategy will further boost the IT sector which will provide growth opportunities to the company, Reliance Securities said.
Moreover, the brokerage said high-end computing solutions, such as HPC, HCI, AI&EW, data centre servers etc., are expected to witness growth leading to increased adoption of technology in various end-use industries in addition to increased investment by public and private players in these solutions.
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In view of strong in-house capabilities, healthy financials, foray into new product-lines, multiple enduser industries and marquee customers and strong growth prospects, Reliance Securities recommended subscribing to the issue.
Netweb Technologies caters to several marquee customers across various end-user industries such as information technology, information technology-enabled services, entertainment and media, banking, financial services and insurance (BFSI), national data centres and government entities including in the defence sector.
Moreover, the company has forayed into developing new product lines, namely, network switches and 5G ORAN Appliances, in FY23. These are critical to the data centre industry for enterprise IT, and the telecommunication industry for enabling 5G services.
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