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High-end computing solutions provider Netweb Technologies' initial public offering (IPO) opened for subscription on Monday, July 17. On day 1, the public issue was subscribed 2.33 times. The employee portion was booked 6.6 times, NII 3.61 times, retail portion 3 times, and QIB portion 3 per cent.
The company has a fixed price band between Rs 475-Rs 500 per share. The issue will close on Wednesday, July 19.
The IPO is a combination of fresh issue (Rs 206 crore) and offer-for-sale (Rs 403-Rs 425 crore). The company will not receive any proceeds from the OFS portion, while it plans to utilise fresh issue net proceeds towards long-term capital requirement, pre-payment of certain borrowings, and other general corporate purposes.
Issue-wise, around 50 per cent of the public issue is reserved for QIBs, 15 per cent for NIIs, and the rest 35 per cent for retail investors.
According to ipowatch.com, shares of Netweb Tech enjoyed a premium of Rs 325 on the upper price band, implying a likely listing price of Rs 835 per share.
On the financial front, the company reported an 80 per cent rise in net revenue in fiscal year 2022-23 (FY23) to Rs 450 crore from Rs 250 crore in FY22. Net profit, too, zoomed 108 per cent to Rs 46.9 crore in FY23 from Rs 22.5 crore in FY22.
Key risks: Analysts noted that the company's business operations are heavily reliant on its top ten customers. Moreover, the company depends on a few application industries for the majority of its revenue from operations. Therefore, the loss of customers in these application industries may result in adverse effects on its business operations, they added.
Here's what brokerages observe for Netweb Technologies IPO:
BP Equities | Subscribe
The brokerage firm said that Netweb Tech is the only domestic company offering high-end computing solutions, which makes it stand out due to the lack of listed domestic and international players in the field. Over the years, analysts added that the company has exhibited consistent financial performance, with return on capital employed (ROCE) of 64.4 per cent in FY23 and net debt inching down to 0.3 in FY23 from 1.31 in FY21.
Geojit Financial Services | Subscribe
With effective management, consistent growth, an expanding product portfolio, geographic footprints and the government's thrust on digital India initiative, analysts believe that Netweb Tech is well-positioned to capitalise on the Indian IT industry's growth. Netweb Tech is available at P/E of 59.7x at an upper price band of Rs 500, which appears reasonably priced as against peers.
Ventura Research | Subscribe
The brokerage firm asserts that the company's strong fundamentals, robust product portfolio, and further growth opportunities ascribes it to a 'subscribe' at the upper price band. However, since the company had low-capacity utilisation in fiscal year 2023, 2022, and 2021; inability to achieve higher production could affect its installed capacity utilisation, said analysts.
Reliance Securities | Subscribe
Analysts note that the company caters to marquee customers across end-user industries such as IT, IT-enabled services, entertainment, media, banking, financial services and insurance, and government entities. At a compounded annual growth rate (CAGR) of 8.8 per cent, they said, that the overall IT market in India is expected to reach $373 billion by FY29. This, therefore, would drive demand for high-end computing solutions, proving to be beneficial for the firm.
Choice Equity Broking | Subscribe
At a higher price band, the issue is demanding a P/E multiple of 59.7x (to its FY23 earning), which seems to be on the higher side. However, considering the business potential and earning growth in the medium term, analysts believe the demanded valuation is reasonable. Therefore, they assign a 'subscribe' rating to the issue.
