Netweb Technologies IPO: Issue subscribed 2.3 times on Day 1

The initial public offering (IPO) of Netweb Technologies India, a Delhi-based high-end computing solutions (HCS) provider, has managed to garner a good response on Day 1 of the issue opening for the subscription. The issue, which closes on July 19, was subscribed 2.33 times on Monday. The IPO received bids for 2.06 crore shares against 88.58 lakh shares on offer, the BSE data showed.

The company, one of India's largest manufacturers of supercomputing systems, has fixed the IPO price band at ₹475-₹500 per equity share. The company aims to raise ₹631 crore through the issue that comprises a fresh issue of equity shares worth ₹206 crore and an offer for sale (OFS) by existing shareholders worth ₹425 crore. The lot size is 30 shares and the minimum investment amount required for retail investors is ₹15,000.

As per the BSE data, the IPO received an overwhelming response from employees and retail investors, followed by non-institutional investors (NIIs). However, it failed to attract qualified institutional buyers (QIBs) on the first day of the issue. The quota reserved for employees was booked 6.6 times, while retail and NIIs portions were subscribed 3 times and 3.6 times, respectively. The QIB portion was subscribed merely by 0.03 times.

The employees' quota received bids for 1,32,000 shares against 20,000 scrips on offer, while the non-institutional investors' portion received bids for 69,40,080 shares against 19,22,685 on offer. The retail segment received bids for 1,34,67,090 shares against 44,86,263 on offer, while the QIBs' part received bids for 66,720 shares against 24,29,682 on offer for this segment.

As per the data filed with SEBI, the company has reserved up to 50% of the issue for QIBs, 15% for non-institutional investors, and the balance 35% for retail individual investors.

The company plans to use IPO proceeds for funding capital expenditure (₹32.3cr); funding long-term working capital (₹128cr); repayment or pre-payment of the outstanding borrowings (₹22.5cr) and to meet general corporate purposes.

Ahead of the IPO, Netweb Technologies India raised ₹189 crore from 25 anchor investors by allocating 37.80 lakh equity shares at the upper price band of ₹500 per share.

Equirus Capital Private Ltd and IIFL Securities are book-running lead managers of the public offering, whereas Link Intime India is the registrar of the issue.

Incorporated in 1999, Netweb Technologies is one of India’s largest manufacturers of Supercomputing systems, as per the F&S report. The company has designed, developed, and deployed some of India’s most powerful Supercomputing systems including AIRAWAT, and PARAM Ambar. It has both design and manufacturing capabilities in-house and has undertaken the installation of over 300 supercomputing systems and over 4,000 accelerator/GPU-based AI systems and enterprise workstations as of May 2023.

As per the report, the Indian supercomputing systems market is expected to grow from $539 million in fiscal 2023 to $919 million in fiscal 2029 at a CAGR of 9.3%.

In FY23, the company’s revenue rose by 80% YoY to ₹445 crore, compared to ₹247 crore in the previous year. The profit doubled from ₹22.5 crore to ₹47 crore during the same period, while EBITDA margins expanded to 15.7% in FY23 from 10.1% in FY21.

Analysts at Geojit have recommended ‘Subscribe’ to the IPO, saying that at the upper price band of ₹500, the share is available at a PE ratio of 59.7x (FY23), which appears reasonably priced compared to peers. “With effective management, consistent growth, an expanding product portfolio, geographic footprints, and Digital India initiative by the Government, NTIL is well-positioned to capitalise on the Indian IT industry's growth. Therefore, we assign a "Subscribe" rating for the issue on a short to medium-term basis,” it says in a report.

DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.