Netweb IPO open for subscription

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IPO of Netweb Technologies opened up on 17th July. Size of IPO of Rs 631 crore. The IPO will be open for subscription from 17th July to 19th July. Its price band is Rs 475-Rs 500. The IPO comprises Rs 206 crore fresh issue and the rest Rs 425 crore is offer for sale. Through this OFS promoter will sell 85 lakh shares. Its lot size is 30 shares and to buy a lot investors have to spend Rs 14,250. By the end of day 1, the issue was subscribed 1.24 times.

Objective of issue

The capital raised will be used for working capital, a new production line and debt repayment. Rs 128 crore will be spent on working capital needs. Rs 23.2 crore will be spent on buying new surface mount technology (SMT) production line. Similarly, Rs 22.5 crore will be spent on debt repayment. Rs 9 crore will be spent on building construction and industrial development of SMT line.

Company’s business

The company is in the business of high-end computing solutions and also supercomputing systems. It is in a range of businesses related to IT such as AI, Private cloud, enterprise workstations, high-performance storage solutions as well as data center servers.

Risks

There are some risks associated with the company. The biggest one is the fact that the top 10 customers account for 57.8% share. The company does not make long-term contracts with customers. 70% of its earnings come from Supercomputing solutions along with the Private cloud and HCI segment.  The impact of demand on any of these sectors can impact the business.

Brokers’ recommendations

Brokers have given mixed opinions between subscribe and may subscribe. Capital Markets and Dilip Davda have given “may apply” rating while Choice Broking and Geojit Financial Services have given Apply rating.