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The leading player in high KEY CHANGES: TARGET -end computing solutions

Netweb Technologies India Ltd. (NTIL) is a Delhi-based company that specializes in High-end Computing Solutions (HCS). They serve various sectors, including IT, ITenabled services, entertainment, media, BFSI, national data centers, and government entities. The company operates a manufacturing facility in Faridabad, Haryana, and has 16 offices across India. NTIL’s 3 supercomputers have been listed among the world's top 500 supercomputers 11 times.

* The Indian IT Industry market worth USD 22,500cr in FY23 and is forecasted to reach USD 37,271cr by FY29, with a CAGR of 8.8% over the period (FY23-29).

* NTIL 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.

* Netweb is one of the few OEMs that has qualified for the production linked incentives scheme for IT hardware and networking products manufacturing in India.

* Intel, AMD, Samsung India, and Nvidia are some of the technology partners Netweb collaborates with to design and innovate product offerings.

* The company has raised Rs.51cr from pre-IPO placement at an issue price of Rs 500 per share from marquee institutional investors, including LG Family Trust, and Anupama Kishore Patil, among others.

* Netweb is expanding its geographical footprint, targeting the European, Middle Eastern, and African (EMEA) markets.

* In FY23, NTIL’s revenue rose by 80% YoY to Rs 445cr, compared to Rs 247cr in the previous year. PAT doubled from Rs 22.5cr to Rs 47cr during the same period. • NTIL’s profitability has improved significantly, with EBITDA margins expanding to 15.7% in FY23 from 10.1% in FY21. Similarly, PAT margins improved to 10.5% in FY23 compared to 5.8% in FY21. • At the upper price band of ?500, NTIL is available at a P/E 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 capitalize on the Indian IT industry's growth. Therefore, we assign a "Subscribe" rating for the issue on a short to medium-term basis.

Purpose of IPO

The IPO consists of a fresh issue of Rs.206cr and OFS of 8,500,000 equity shares, amounting to Rs.425cr. The objects of the offer are: (i) Funding capital expenditure (Rs.32.3cr); (ii) Funding long term working capital (Rs.128cr); (iii) Repayment or pre-payment of the outstanding borrowings (Rs.22.5cr); (iv) General corporate purposes.

Key Risks

* Dependence on top 10 Customers for ~60 of the revenue in FY23.

* Majority of the revenue in FY23 (~72%) comes from higher education & research and IT & ITES industries.

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