Things to know about Netweb Technologies India IPO

Netweb Technologies India Ltd is a 24 year old company formed at the turn of the millennium and provides high-end computing solutions (HCS). This includes computing and supercomputing systems to cater to the varying needs of customers. In addition, it also makes available shared infrastructure facilities like private cloud and hyper-converged infrastructure (HCI), AI systems, high performance storage and data centre servers.

Netweb Technologies India Ltd designs, manufactures and deploys HCS which also comprises of proprietary middleware solutions, end-user utilities, and precompiled application stack. It deploys its supercomputing infrastructure to meet the rising computational demands of businesses and research organizations. Netweb Technologies India Ltd has already undertaken installations of over 300 Supercomputing systems, 50 private cloud and HCI installations, as well as over 4,000 accelerator-based AI systems.

Netweb Technologies India Ltd has a wide array of customer across the sectoral mix. It includes end-user industries like IT, ITES, entertainment, BFSI as well as the government owned defence sector and the education and R&D segment. Some of its institutional and academic clients are IIT Jammu, IIT Kanpur, NMDC Data Centre, Graviton Research Capital, Institute of Nano Science and Technology, Jawaharlal Nehru University (JNU) etc. it is also closely involved in offering its services to the Indian space research program.

Highlights of Netweb Technologies India IPO issue

Currently, the broad contours of the issue are only available since the IPO price band is yet to be announced. The IPO will be a mix of a fresh issue and an offer for sale. For instance, we know is that the fresh issue of shares will be worth Rs206 crore, although the price of the IPO is not known. Also, the OFS entails the sale of 85 lakh shares by the existing promoters and early investors but the value of the sale will only be known once the price is determined. The issue will be managed by Equirus Capital Private Ltd and IIFL Securities Ltd. The registrar to the issue is Link Intime India Private Ltd.

The company was promoted by Sanjay Lodha, Navin Lodha, Vivek Lodha, and Niraj Lodha as the main promoters of the company. Prior to the IPO, the promoters held 94.89% of the capital of the company and post the issue it will result in dilution of the promoter equity. The actual extent of dilution will be predicated on the pricing of the IPO and the actual number of shares issued via OFS and via fresh issue. The fresh portion of the IPO will be used for capex for civil construction of the building for the surface mount technology (SMT), repayment / prepayment of loans taken by Netweb Technologies India Ltd and to bankroll some of its long term working capital needs.

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The company has a par value of Rs2 per share and post the IPO, the stock of Netweb Technologies India Ltd will be listed on the NSE and on the BSE. Being a fresh issue of equity, combined with offer for sale, the IPO will result in dilution of equity and EPS, apart from transfer of ownership internally due to the OFS.

Key dates for Netweb Technologies India IPO and how to apply?

Netweb Technologies India IPO opens for subscription on 17th July 2023 and closes for subscription on 19th July 2023 (both days inclusive). The basis of allotment will be finalized on 24th July 2023 and the refunds will be initiated on 25th July 2023. In addition, the demat credits are expected to happen on 26th July 2023 and the stock will list on 27th July 2023 on the NSE and the BSE. While the SME IPO market has picked up steam in recent months, the mainboard IPOs have been rather quiet. Successful IPOs on the mainboard will be the key to the revival of these markets.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to Rs2 lakh per application) or in the HNI / NII quota (above Rs2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Netweb Technologies India Ltd

The table below captures the key financials of Netweb Technologies India Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

There are few key takeaways from the financials of Netweb Technologies India Ltd which can be enumerated as under

1. In the last 2 years, the revenues have grown at a very robust rate with CAGR of over 70%. As the demand for shared IT infrastructure and big data picks up in India, this company could see demand growing exponentially.
    
2. Profits have shown consistent growth while the net margins have shown a consistent uptrend. The profit potential is also evident if one looks at the return on assets, where the double digit ratio has been maintained in the last two years.
    
3. The company has maintained an impressive rate of sweating assets as is evident from the asset turnover ratio. A consistent average asset turnover of above 1.5 is impressive.

While pricing of the IPO will matter here, what is more critical is the eventual PAT margins that will sustain. If the company can hold the current rate of profit margins and the asset turnover ratios, it could be a very good bet on the future of digital India. Of course, we still need to wait for the pricing to take a view on valuations.