Continuing its strong run, the initial public offer (IPO) of Netweb Technologies India Limited, one of the country's leading high-end computing solutions (HCS) provider, was subscribed 3.12 times on the second day of the bidding process. The issue opened for public subscription on Monday (July 17) and the three-day share sale will conclude tomorrow (July 19).

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The robust demand was driven by employees, whose portion was subscribed 8.36 times, while the non-institutional investor (NII) category was subscribed 5.09 times. The retail investors portion received 3.92 times subscription, while the qualified institutional buyers' (QIB) portion was subscribed 0.03 times.

On Tuesday, Netweb Tech's IPO received 2,76,28,530 bids compared to the issue size of 88,58,630 shares, according to NSE data.

The Rs 631-crore initial share sale is being sold in the range of Rs 475-500 apiece with a lot size of 30 equity shares and in multiples thereafter.

GMP

The current GMP (grey market premium) is nearly 74 percent higher compared with the upper end of the offer price at Rs 500.

However, it is important to note that grey market premiums are just an indicator as to how the company's shares are stacked up in the unlisted market and are subject to change rapidly.

What should investors do?

Several analysts have advised investors to subscribe to the offer given the company's strong order book, stable financial performance and consistent growth.

Swastika Investmart: Subscribe

"The company has a strong order book, and it is working on significant product development and innovation. The company has a diverse customer base and is operating in a high-barrier industry. It has also witnessed stable financial performance and consistent growth over the past year," said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

There are a few concerns, as per Mishra, which includes dependency on technology partners and a high working capital requirement. "However, these risks could be managed. The issue is priced at a P/E (price-earnings) valuation of 54.22, which is lesser than industry average but there is no apple to apple comparision with listed peers," the analyst said.

Overall, Netweb is a well-managed company with a strong track record of growth, Mishra said, adding a 'Subscribe' rating to the issue.

Ventura: Subscribe

Considering the growth opportunities in the company, strong fundamentals, and robust product portfolio, Ventura has recommend investors to 'Subscribe' to the issue.

Nirmal Bang: Subscribe

The brokerage believes, Netweb possesses higher growth and return ratios compared to EMS players and is also available at cheaper valuations. Thus, it has a 'Subscribe' recommendation on the issue.

IndSec: Subscribe

At the upper price band of Rs 500, the IPO is valued at P/E times of 59.7 times on FY23 earnings, the brokerage said. The company has no like to like peers listed in India. Its future prospects looks promising given the space its operates.

Assigning a 'Subscribe' rating to the IPO, IndSec said it believes the issue is priced effectively given its unique proposition.

Mehta Equities: Subscribe for listing gains

Yash Kukreja, Research Analyst at Mehta Equities, said, "On a valuation basis, Netweb Tech's higher price band demands a P/E multiple of 59.7 times (on its FY23 earnings), which appears to be on the higher side due to the company's niche product segment of private cloud services and its advantageous position as a first mover in the listed space, which commands a premium. We believe such businesses would get strong demand in the IPO offer. Hence, we recommend investors to 'Subscribe for listing gains' only."

The IPO consists of a fresh issue of Rs 206 crore and offer for sale (OFS) of 8,500,000 equity shares, amounting to Rs 425 crore. The objects of the offer are: (i) Funding capital expenditure (Rs 32.3 cr); (ii) Funding long term working capital (Rs 128 cr); (iii) Repayment or pre-payment of the outstanding borrowings (Rs 22.5 cr); (iv) General corporate purposes.

Ahead of its IPO, Netweb raised Rs 189 crore from anchor investors by allocating 37.8 lakh equity shares at Rs 500 per share. Nomura Funds, Goldman Sachs Funds, ICICI Prudential Mutual Fund (MF), HDFC MF, WhiteOak MF and Nippon MF were among those participated in the anchor round.

Equirus Capital and IIFL Securities are to book-running lead managers to the issue, while Link Intime India has been appointed as the registrar. Netweb Tech shares would be listed at both BSE and NSE.

Company background

Netweb Technologies is one of India’s leading Indian origin owned and controlled OEM for high-end computing solutions (HCS) providing end to end solutions with fully integrated design and manufacturing capabilities, now compliant with Make in India policy.

HCS offerings and their revenue mix for FY23

(i) High performance computing (Supercomputing / HPC) systems (39 percent mix)

(ii) Private cloud and hyper converged infrastructure (HCI) (33 percent mix)

(iii) AI systems and enterprise workstations (7 percent mix)

(iv) High performance storage (HPS / Enterprise Storage System) solutions (7 percent mix)

(v) Data centre servers (6 percent mix)

(vi) Software and services (2 percent mix)

(vii) Others (6 percent mix)

First Published:Jul 18, 2023 10:58 AM IST