Netweb Technologies India Limited’s Initial Public Offering to open on July 17, 2023, sets price band at ₹475 to ₹500 per Equity Share

 Netweb Technologies India Limited’s Initial Public Offering to open on July 17, 2023, sets price band at ₹475 to ₹500 per Equity Share

 

·         Price Band of ₹475 – ₹500 per equity share bearing face value of ₹2 each (“Equity Shares”)

·         Bid/Offer Opening Date – Monday, July 17, 2023 and Bid/Offer Closing Date – Wednesday, July 19, 2023.

·         Minimum Bid Lot is 30 Equity Shares and in multiples of 30 Equity Shares thereafter.

·         The Floor Price is 237.50 times the face value of the Equity Share and the Cap Price is 250 times the face value of the Equity Share.

·         The Price to Earnings Ratio for Fiscal 2023 based on Diluted EPSat the Floor Price is 52.37 times and at the Cap Price is 55.13 times.

 

Risks to Investors:

Business Risk:

·         A significant proportion of the orders are from government related entities which award the contract through a process of tender. Tenders, typically, are awarded to the lower bidder once all other eligibility criteria are met. The Company’s performance could be adversely affected if it is not able to successfully bid for these contracts or required to lower itsbid value.

Particulars	Revenue from operations (%)
	Fiscal 2023*	Fiscal 2022	Fiscal 2021
Government Customers	53.19	61.84	46.57
Non-Government Customers	46.81	38.16	53.43
Total	100.00	100.00	100.00

*Revenue from operations excludes Other operating revenue.

•    The Company has low-capacityutilisation in Fiscals 2023, 2022 and 2021. The capacity utilisation for Fiscal 2023, 2022 and 2021 of the facility are 51.64%, 53.11% and 52.01% respectively.

Concentration risk:

•    TheCompany’s success is dependent on the long-term relationship with itsCustomers. In particular, the Companyisheavily reliant on its top 10 Customers. The Company does not, generally, enter into long term contracts with Customers, which exposes the company to risks emanating from the inability to retain the established Customers as the clients.

Particulars	Revenue Contribution (%)
	Fiscal 2023*	Fiscal 2022	Fiscal 2021
Top 10 customers	57.80	49.47	52.26

*Revenue from operations excludes Other operating revenue.

Loss of all or a substantial portion of sales to any of the top 10 Customers, forany reason could have a material adverse impact on theCompany’s business, results ofoperations, financial condition and cash flows.

• The Company derives a majority portion of the revenues from operations from a selectfew of the HCS offerings. Loss or decline in the demand of such offerings mayresult in an adverse effect on the business, revenue from manufacturingoperations and financial condition.

Business Verticals	Revenue from operations (%)*
	Fiscal 2023	Fiscal 2022	Fiscal 2021
Supercomputing systems	39.19	41.70	9.72
Private cloud and HCI	33.13	19.38	28.39
Total	72.32	61.08	38.11

*Revenue from operations excludes Other operating revenue

Other Risk:

• The companies disclosed as peer set of the Company in the ‘Basis for OfferPrice’ section are not in the same line of business as that of the Company i.eproviding HCS offering. There is no direct comparison with these listed peers.Therefore, investors must rely on their own examinations of accountingratios of the Company for the purposes of investment in this Offer.

• While the Promoters and Whole Time Directors of the Company possess educationalqualifications in management and commerce, they do not possesseducational qualifications in the field of information technology. The Company’s futuresuccess will depend, on among other factors, the ability of the Company toevolve with the changing landscape of the business verticals in which the Companyoperate.

• The Weighted Average Cost of acquisition of all Equity Shares transacted inlast three years, 18 months and one year preceding the date of the RHP:

Period	Weighted Average Cost of Acquisition (in ₹)	Upper End of the Price Band (₹500) is 'X' times the Weighted AverageCost of Acquisition	Rangeof Acquisition Lowest Price - Highest   Price (in₹)
Last 1 year	14.84	33.69	0-500
Last 18 Months	14.84	33.69	0-500
Last 3 years	13.77	36.31	0-500

As certified by M/s APT & Co LLP, the Independent Chartered Accountant, vide their certificate dated July 10, 2023

Weighted average cost of acquisition compared to Floor Price and Cap Price:

Past Transactions	Weighted Average Cost of Acquisition (in ₹)	Floor price of ₹475	Cap price of₹500
Past 5 primary issuances /secondary transactions	445.42	1.07 times	1.12 times

As certified by the Statutory Auditors, S S Kothari & Company, pursuant to a certificate dated July 10, 2023.

 • Average cost of acquisition of Equity Shares for the selling shareholders namely, Sanjay Lodha is ₹0.43, Navin Lodha is ₹0.11, Vivek Lodha is ₹0.35, Niraj Lodha is ₹0.84 and Ashoka Bajaj Automobiles LLP(formerly known as Ashoka Bajaj Automobiles Private Limited) is ₹1.56 and Offer Price at upper end of the Price Band is ₹ 500 per Equity Share.

• The Price/Earnings ratio based on diluted EPS for fiscal 2023 for the Company at upper end of the price band is 55.13 times and Price/Earnings ratio of the average industry peer group as on the date of the RHPis 79.82 times.

• Weighted Average Return on Net Worth for Fiscals 2023, 2022 and 2021 is 64.35%.

 • The market capitalization of the Company at the lower end and higher end of price band to total income for fiscal 2023 is 6.00 times and 6.29 times respectively.

• The two BRLMs associated with the Offer have handled 40 public issues in the past three Fiscal Years, out of which 13 issue closed below the Offer price on the listing date

Name of the BRLM	Total Issues	Issues closed below IPO price on listing date
Equirus Capital Private Limited*	8	3
IIFL Securities Limited*	31	10
Common Issues of above BRLMs	2	Nil
Total	41	13

*Issues handled where there were no common BRLMs

Mumbai, July 17, 2023:Delhi-NCR-based Netweb Technologies IndiaLtd (Netweb Technologies)one of country’s leading high-end computing solutions (HCS) provider, with fully integrated design and manufacturing capabilities (Source: F&S Report)has fixed the price band at ₹475to ₹500per Equity Share for its initial public offering of equity shares (“IPO” or “Offer”). The IPO will open on Monday, July 17, 2023, for subscription and closes on Wednesday, July 19, 2023. Investors can bid for a minimum of 30Equity Shares and in multiples of 30 Equity Shares thereafter.

 

Netweb Technologies is compliant with the ‘Make in India’ Policy of the Government and is one of the few OEMs in the country eligible to seek production linked incentives schemes of the Government of India for IT Hardware for manufacture of servers,and Telecom and Networking Products Manufacturing in India for the manufacture of networking and telecom products (Source: F&S Report).

Netweb Technologies has both design and manufacturing capabilities inhouse and have undertaken installation of over 300 supercomputing systems and over 4000 accelerator / GPU based AI systems and enterprise workstations as of May 2023. Intel Americas, Inc., Advanced Micro Devices, Inc., Samsung India Electronics Private Limited, Nvidia Corporation are some of the companies it collaborates with to design and innovate product offerings.

It is a high-end computing solutions (HCS) provider based in India catering to many Indian and multinational Customers based in India and is planning to grow its geographical footprint in Europe, Middle East and Africa.

Between March 31, 2022 and May 31, 2023 it has almost doubled its order book value from Rs. 48.56 crore to Rs. 90.21crore.

 

In case of any revision to the Price Band, the Bid/Offer Period will be extended by at least three additional Working Days after such revision in the Price Band, subject to the Bid/Offer Period not exceeding 10 Working Days. In cases of force majeure, banking strike or similar circumstances, the Company may, in consultation with the Book Running Lead Managers, for reasons to be recorded in writing, extend the Bid / Offer Period for a minimum of three Working Days, subject to the Bid/ Offer Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/Offer Period, if applicable, shall be widely disseminated by notification to the Stock Exchanges, by issuing a public notice, and also by indicating the change on the website of the Book Running Lead Manager and at the terminals of the Syndicate Member(s) and by intimation to the Designated Intermediaries and the Sponsor Bank, as applicable.

The Offer is being made through the Book Building Process, wherein not more than 50% of the Net Offer shall be available for allocation to Qualified Institutional Buyers, not less than 15% of the Net Offer shall be available for allocation to Non-Institutional Bidders and not more than 35% of the Net Offer shall be available for allocation to Retail Individual Bidders.The Offer also includes an Employee Reservation Portion of up to 20,000 Equity Shares.

Equirus Capital Private Limited and IIFL Securities Limited are the book running lead managers, while Link Intime India Private Limited is the registrar to the offer.