Netweb Tech IPO sails through on day 1; here’s what brokerages recommend
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High-end computing solutions provider Netweb Technologies’ initial public offering (IPO) opened for subscription on Monday, July 17. At 3:30 pm, the public issue was subscribed 1.65 times. The employee portion was booked 5.6 times, the retail portion 2.3 times, NII 2.06 times, and the QIB portion 2 percent. T
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 a fresh issue (Rs 206 crore) and an offer-for-sale (Rs 403-Rs 425 crore). The company will not receive any proceeds from the OFS portion, while it plans to utilize fresh issue net proceeds towards long-term capital requirements, pre-payment of certain borrowings, and other general corporate purposes.
Issue-wise, around 50 percent of the public issue is reserved for QIBs, 15 percent for NIIs, and the rest 35 percent 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 percent 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 percent to Rs 46.9 crore in FY23 from Rs 22.5 crore in FY22.
Here’s what brokerages observe for Netweb Technologies IPO:
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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 a return on capital employed (ROCE) of 64.4 percent in FY23 and net debt inching down to 0.3 in FY23 from 1.31 in FY21.
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With effective management, consistent growth, an expanding product portfolio, geographic footprints, and the government’s thrust on the digital India initiative, analysts believe that Netweb Tech is well-positioned to capitalize on the Indian IT industry’s growth. Netweb Tech is available at a P/E of 59.7x at an upper price band of Rs 500, which appears reasonably priced against peers.
Ventura Research | Subscribe
The brokerage firm asserts that the company’s strong fundamentals, robust product portfolio, and further growth opportunities ascribe it to a ‘subscribe’ at the upper price band. However, analysts said that since the company had low-capacity utilization in fiscal years 2023, 2022, and 2021; the inability to achieve higher production could affect its installed capacity utilization.
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 percent, 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.
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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.
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