Netweb Technologies India Limited IPO
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i. Netweb Technologies is one of India’s leading high-end computing solutions (HCS) provider, with fully integrated design and manufacturing capabilities. (Source: F&S Report).
ii. Their HCS offerings comprises
(i) high performance computing (Supercomputing / HPC) systems;
(ii) private cloud and hyperconverged infrastructure (HCI);
(iii) AI systems and enterprise workstations;
(iv) high performance storage (HPS / Enterprise Storage System) solutions;
(v) data centre servers; and
(vi) software and services for our HCS offerings.
iii. We are one of India’s leading Indian origin, owned and controlled OEM in the space of HCS providing Supercomputing systems, private cloud and HCI, data centre servers, AI systems and enterprise workstations, and HPS solutions.
iv. The company cater to marquee Customers across various end-user industries such as information technology, information technology enabled services, entertainment and media, banking, financial services and insurance (BFSI), national data centres and government entities including in the defence sector, education and research development institutions (Application Industries) such as Indian Institute of Technology (IIT) Jammu, IIT Kanpur, NMDC Data Centre Private Limited (NMDC Data Centre), Airamatrix Private Limited (Airamatrix), Graviton Research Capital LLP (Graviton), Institute of Nano Science and Technology (INST), HL Mando Softtech India Private Limited (HL Mando) and many more.
Competitive Strengths
i. Long standing relationship with a marquee and diverse customer base
ii. Significant product development and innovation through R&D
iii. We are one of India’s leading HCS provider and we operate in a rapidly evolving and technologically advanced industry with high entry barriers
Objects of the Netweb Technologies India Limited IPO:
1) The company intends to utilize the net proceeds from the issue towards the funding of the following objects (206 Cr)
i. Funding capital expenditure requirements for civil construction of the building for the surface mount technology (SMT) line and interior development, and purchase of equipment/machinery for the new SMT production line (SMT Line),
ii. Funding of long-term working capital requirements,
iii. Repayment or pre-payment, in full or in part, of certain outstanding borrowings, and
iv. General corporate purposes.
2) OFS (425 Cr)
Lodha Family and Ashoka Bajaj Automobiles LLP are selling some stakes in the IPO.
Netweb Technologies India Limited IPO Details:
| Open Date: | Jul 17 2023 |
| Close Date: | Jul 19 2023 |
| Total Shares: | 12,620,000 |
| Face Value: | ₹ 2 Per Equity Share |
| Issue Type: | Book Built Issue IPO |
| Issue Size: | 631 Cr. |
| Lot Size: | 30 Shares |
| Issue Price: | ₹ 475 - 500 Per Equity Share |
| Listing At: | NSE,BSE |
| Listing Date: | Jul 27 2023 |
Promoters And Management:
i. Sanjay Lodha is the Promoter and the Chairman and Managing Director of the Company. He has been associated with the Company as a director since September 22, 1999. He holds a bachelors’ of arts (honours degree) in economics from the University of Delhi and a post-graduate diploma in business management from Apeejay School of Marketing, New Delhi. He has been leading the Strategy and Business Development department of the Company from the year 2016. He was the sole proprietor of the proprietorship, M/s Netweb Technologies since 1996 which was acquired by the Company in August 2016. He has been a part of the Governing Council of Manufacturers Association of Information Technology from 2016 to 2022 and currently serves as a Vice President with effect from June 30, 2022. He has also served on the Board of Advisors for Intel for the year 2020 and 2022.
ii. Navin Lodha is the Promoter and the Whole Time Director of the Company. He has been associated with the Company as a director since September 22, 1999. He holds a bachelors’ degree in commerce from Shaheed Bhagat Singh College, University of Delhi. He leads the west zone of the Company’s sales and marketing department and has over 15 years of experience in sales and marketing. Prior to joining the Company, he was associated with the erstwhile proprietorship of the Chairman and Managing Director, M/s Netweb Technologies since 2008 until its acquisition by the Company in August 2016.
iii. Vivek Lodha is the Promoter and the Whole Time Director of the Company. He has been associated with the Company as a director since April 13, 2015. He holds a bachelors’ degree in commerce from Shaheed Bhagat Singh College, University of Delhi. He leads the east zone of the Company’s sales and marketing department and has over 15 years of experience in sales and marketing. Prior to joining the Company, he was associated with the erstwhile proprietorship of the Chairman and Managing Director, M/s Netweb Technologies since 2008 until its acquisition by the Company in August 2016.
Financials of Netweb Technologies India Limited IPO:
(Fig. in Cr)
| Particulars | Fy23 | Fy22 | Fy21 |
| Revenue from operations | 445 | 247 | 143 |
| Other income | 1 | 1 | 2 |
| Total income | 446 | 248 | 144 |
| Cost of materials consumed | 325 | 178 | 119 |
| Change in Inventories | -1 | 8 | -12 |
| Employee benefits expense | 29 | 15 | 13 |
| Finance costs | 4 | 4 | 3 |
| D&A | 4 | 2 | 1 |
| Other expenses | 21 | 11 | 10 |
| Profit before tax | 63 | 30 | 11 |
| Total tax expense | 16 | 8 | 3 |
| Profit for the year | 47 | 22 | 8 |
| EPS | 9.22 | 4.41 | 1.62 |
| Fiscal Year | EBITDA (Cr.) | OPM (%) | NPM (%) |
| FY21 | 16 | 7.64 | 5.72 |
| Fy22 | 34 | 12.23 | 9.07 |
| Fy23 | 71 | 14.15 | 10.56 |
Comparison With Peers:
There is no listed player in the same business as that of Netweb Tech.
Recommendation on Netweb Technologies India Limited IPO:
Review and Recommendation of Netweb Tech IPO by IZ team is 5/10
1.Strengths
a) Fully integrated design and manufacturing capabilities.
b) Diverse product portfolio catering to various industries.
c) Significant number of HPC installations in India.
d) Strong customer base including prestigious institutions.
e) Involvement in India's National Supercomputing Mission.
2. Weaknesses
a) Limited global presence.
b) Reliance on in-house technologies.
3. Overview of Business
Netweb has come up with path-breaking innovations in their data center server capabilities. The company is capable of manufacturing servers suitable for building private cloud solutions, High-Performance Computing Clusters, and modern data centres.
Netweb has consistently focused on developing products that start with made-in-India servers. As a result of this, the company also bagged an award from the Ministry of Electronics & IT (MeitY) in contribution to the manufacturing of servers in India. Netweb delivered a state-of-the-art supercomputing facility at IIT Jammu which is a unique high-performance blend of HPC, Big Data, AI, and Cloud Infrastructure.
4. Risks in the Business
a) The Promoters and Whole Time Directors of the company do not have educational qualifications in the field of information technology, despite possessing qualifications in management and commerce.
b) The Promoters of the company were involved in regulatory proceedings initiated by SEBI (Securities and Exchange Board of India), which have been settled. Additionally, one member of the Promoter Group is currently involved in a regulatory proceeding initiated by SEBI.
c) There are shared business interests between Netweb Tech and a member of the Promoter Group. The member of the Promoter Group offers similar products and solutions as us in specific jurisdictions, governed by a non-compete agreement. Any violation of this agreement may have negative consequences on the business operations of Netweb. The growth potential could be limited as Netweb Tech is unable to operate in designated territories or if the non-compete agreement is not renewed, as it could result in competition from the Promoter Group member.
5.Financials of the Netweb Tech IPO
a) Revenue Growth: The company has shown substantial revenue growth over the three-year period. Revenue from operations increased from 143 crores in FY 2020-21 to 445 crores in FY 2022-23. This robust growth trajectory indicates that the company has been successful in expanding its operations and sales.
b) Profitability: Profitability, as measured by EBITDA, OPM, and NPM, has also improved over the years. EBITDA increased from 16 crores in FY 2020-21 to 71 crores in FY 2022-23, indicating strong operational performance and cost management.
c) Operating Profit Margin (OPM): The OPM has also seen a steady increase, from 7.64% in FY 2020-21 to 14.15% in FY 2022-23. This indicates that the company has been improving its efficiency and operational profitability.
d) Net Profit Margin (NPM): Similarly, the NPM improved from 5.72% to 10.56% over the same period. This improvement indicates that the company is not only increasing revenues but is also effectively managing its costs to retain more of each rupee of revenue as profit.
6. Valuation
The Asking P/E based on Fy23 number is ~60x which looks on higher side.
7.Conclusion
The company operates in the specialized segment of High Processing Computing and has recently developed a supercomputer named Airawat, designed for AI applications. Furthermore, they provide cloud services to IT firms requiring high data processing applications by manufacturing servers. In FY 2023, they broadened their product portfolio with the addition of Network Switches and 5G ORAN Appliances, while simultaneously launching a 5G cloud for an international telecom service provider. However, the significant capital investment needed for 5G infrastructure could pose potential financial risks if the projected growth is not realized.
The financial outlook appears promising, with considerable revenue and PAT growth. However, despite operating in a specialized segment, margins remain comparatively low.
Valuations appear inflated, a trend often seen these days with IPOs carrying P/E ratios greater than 50 brought about by Merchant Bankers. Maintaining such high P/E ratios can be challenging in the long term. Additionally, out of the 600 Cr raised from the IPO, 400 Cr will be directed to the promoters, which is another aspect to consider.
Lead Manager of Netweb Technologies India Limited IPO:
Registrar of Netweb Technologies India Limited IPO:
Company Address:
Netweb Technologies India Limited
Plot No H-1, Pocket 9,
Faridabad Industrial Town (FIT), Sector-57,
Ballabhgarh, Faridabad - 121004
Phone: +911292310416
Email: complianceofficer@netwebindia.com
Website: https://netwebindia.com/index.html
Discussion on Netweb Technologies India Limited IPO:
6 Comments
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Very high PE of 60% as against Sector average of 26.4%. Seems to be risky atleast for long term investment. Listing gain may be available due to the boom time. Avoiding.
So, just before the IPO, this agreement is made between two to separate business based on location….this might hinder the growth of IPO company
dono bhaiyon ne geography defined karli hai for next 5 years…….
Netweb Tech ( register in India) and Netweb PTe (Register in Singapore) these are two different companies in the same business run by Sanjay Lodha and Sandeep Lodha……
Non-compete agreement between Netweb Tech and Netweb Pte, and Sandeep Lodha includes the following points:
1. Scope: The agreement prevents competition between the parties involved.
2. Geographical Restrictions: Netweb Tech cannot operate in Indonesia, Vietnam, Malaysia, Thailand, Singapore, and the USA (except for providing infrastructure technology solutions to the oil and gas industry).
3. Restrictions on Netweb Pte and Sandeep Lodha: They cannot operate outside of the territories where Netweb Tech IPO company operates.
4. Duration: The agreement lasts for 5 years from March 20, 2023, with the possibility of extension.
5. Impact: Adverse consequences for Netweb Pte may affect Netweb Tech reputation, and the business operations may be impacted. Netweb Tech growth and operations may suffer due to the inability to operate in restricted territories.
6. Expiration: If the agreement is not renewed, Netweb Pte and Sandeep Lodha can operate in the same line of business Netweb Tech in the geographical territories, potentially impacting the business, financial condition, and results of operations.
https://twitter.com/_InvestorZone/status/1679017186772553728?t=5TchyfJrPIQxzBuGQVJViA&s=08
Understanding Business Model of the Netweb Tech IPO
1. Brand Portfolio: The business operates under the ‘Tyrone’ brand, offering a range of high-computing solutions to varied customer specifications.
2. Supercomputing System: These custom-made systems, scalable up to 1,000 nodes, cater to diverse customer requirements. They feature an integrated software suite for managing clusters. The business has established a testing facility for these systems.
3. Private Cloud and HCI: These offerings combine computing, storage, and networking capabilities, offering custom-made hardware and software stacks. The products are competitive in the market, allowing the business to compete with foreign HCI OEMs, virtualization Independent Software Vendors (ISVs), and other private cloud platforms.
4. AI Systems and Enterprise Workstations: These offerings focus on supercomputing, machine learning, and deep learning. They are equipped with the company’s proprietary containerized application solution and can support a wide range of applications, including computational fluid dynamics (CFD), computer-aided design (CAD), and computer-aided manufacturing (CAM).
5. HPS Solutions: High-performance storage solutions are offered, capable of integration with private and public cloud environments. These systems are designed with no single point of failure, ensuring system resilience.
6. Data Centre Servers: The company offers an extensive range of over 200 dual-processor server models under the brand ‘Tyrone Camarero’, catering to various customer needs, with focus on energy efficiency, wide accelerator/GPU support, and high in-built storage capability.
7. Software and Services for HCS Offerings: Software solutions are offered to manage complex workloads including 5G enterprise cloud, 5G edge compute, private 5G, and enterprise IT. The company also provides managed Kubernetes services, AI-machine learning, and deep learning as a service.
8. Big Data Solutions: The company has offerings designed to cater to data-intensive distributed applications.
9. Engineered Solutions: Alongside the product portfolio, the company provides engineered solutions to enhance the functionality of their products.
10.Revenue Analysis: The business seems to be growing across various industries like higher education and research, space and defence, and IT & ITES. The revenue from the Supercomputing system segment shows significant growth, indicating an expanding market and successful business strategies.
11. Market Size: The business operates in sectors with substantial market sizes, indicating the potential for significant growth and expansion.