Netweb Technologies IPO review
Netweb Technologies IPO Details
Issue Date – 17th July, 2023 to 19th July, 2023
Listing Date – 27th July 2023
Issue price – Rs. 475-500
Lot Size – 30 shares
Total Issue size – Rs. 631 Crore ( out of which Rs. 206 Crore is fresh issue & Rs. 425 Crore is offer for sale ).
No. of shares – 1,26,20,000
About Nextweb Technologies
Nextweb Technologies is Faridabad, Haryana-based company that was incorporated in 1999.
Business Overview
Netweb is one of India’s leading high-end computing solutions (HCS) provider, with fully integrated design and manufacturing capabilities.
Company mainly in this business vertical:-
- High-performance computing (Supercomputing / HPC) systems,
- Private cloud and hyper-converged infrastructure (HCI),
- AI systems and enterprise workstations,
- High-performance storage (HPS / Enterprise Storage System) solutions,
- Data Center servers &
- Software services for their HCS offerings.
Netweb provides IT & IT-enabled services to BFSI (Banking, Financial Services & Insurance) sector, National Data Centers and government organizations such as Space & Defence, higher education and R&D Institutions.
Industry Overview:
The high-end computing solutions industry is a rapidly evolving and technologically advanced industry. High-end computing solutions allow organizations to create more efficient operations, reduce downtime and improve worker productivity.
The Company is operating in an industry with enormous growth potential.
Promoters:
Promoters of Netweb are Sanjay Lodha, Navin Lodha, Vivek Lodha & Niraj Lodha. Promoter & Promoter Group owns a 97.80% stake in Company which will be 75.45% post Issue.
Promoters have been successfully running the Company for the past 24 years, which indicates Promoters are highly experienced.
Objectives of Issue:
The main objective of Netweb Technologies from this Issue are:
- Funding Capita expenditure to set up Surface Mount Technology (SMT) production line,
- Funding company’s long-term Working Capital requirements,
- Repayment or pre-payment, in whole or in part, of certain of the Company’s outstanding borrowings, and
- General Corporate purposes.
Key Performance Indicator:
P/E:- 59.67 (Average Industry P/E = 79.82)
ROE/RoNW:- 68.01%
ROCE:- 64.42%
Debt Equity Ratio:- 0.30
EPS:- 9.22 Rs./Share
Positive aspects of Netweb Technologies:
- High Revenue & PAT growth: Revenue of Company has growth of almost 3x in past 3 years & PAT of company has shown almost 5x growth in past 3 years.
- High ROE & ROCE: Company has given very high ROE of 68.01% & ROCE of 64.42%.
- Fine Valuation: Company has bought this Issue at P/E of 59.67, which looks little high but when compared with Industry’s average P/E it is low. Since Industry average P/E is 79.82
- Increasing Profit Margin: Netweb is consistently increasing its Profit margin from past 3 years.
- Industry Potential: Netweb Technologies is operating in Industry which has huge growth potential in future.
- Experienced promotions: Promoters of Netweb are successfully running company for 24 years, which indicates their high experience.
Risk associated with Netweb Technologies:
- Dependence on Top 10 customer: Netweb is heavily reliant on their top 10 customers, because more than 57% of Company’s revenue is from their top 10 customers.
- Low Capacity Utilisation: Netweb is operating at Capacity Utilisation of 51%-53% in past 3 years which is very low.
- High revenue from Government supplies: More than 50% of Netweb’s revenue is from Government related customers, which increases risk of any major political changes or delay in encash this revenue.
- Valuation: Altough P/E of Netweb is lower compared to average Industry’s P/E, but P/E of 59.67 is too high.
Final Words ( Conclusion)
We will subscribe for Listing gain & Long Term both.
As per sources, GMP is 60-70% high & a valuation lower than Industry’s P/E makes it a suitable candidate for listing gain.
By looking at the company’s high growth potential, experienced promoters & solid financial growth, we can assume it will perform well in the long term.
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