From ₹500 to ₹2,000: This IPO delivered 4X returns in just 10 months

In the financial year 2023-24, 76 companies raised ₹61,915 crore through initial public offering (IPO) route, with an average listing gain (based on closing price on listing date) of 29%, indicating buoyant market conditions. Netweb Technologies, one of India's largest manufacturers of Supercomputing systems, was one the best performing IPOs in FY24 with multifold returns of around 300%. 

The Delhi-based high-end computing solutions (HCS) provider made a stellar debut on the stock market on July 27, 2023, listing at a premium of 89.4% at ₹947 per share on the NSE against the IPO price of ₹500 apiece. The ₹631-crore IPO of Netweb Technologies garnered significant attention, with an overall subscription of 90.55 times, driven by record response from qualified institutional buyers (QIB), with the quota allotted to them subscribing by 200.69 times. The portion reserved for high net-worth individuals (HNIs) was booked 83.21 times, while that of retail investors and employees quota subscribed 19.48 times and 55.92 times, respectively.

Since its listing, Netweb has demonstrated consistent strength in the market, delivering solid returns to its shareholders. The stock touched its record high level of ₹2,057 on May 13, 2024, while it hit a low of ₹739.70 on October 26, 2023. In the last 10 months, the stock price has jumped more than 4-fold to ₹2,057 from its IPO price of ₹500. The midcap stock has surged 153% in six months and 69% in the calendar year 2024. The counter added 27% in a month and nearly 6% in a week.

Early today, Netweb Technologies shares opened higher at ₹1,999.80, after ending 2% lower at ₹1,961 on Friday. During the session, the stock gained as much as 4.9% to ₹2,057, while the market capitalisation climbed to ₹11,395 crore, in an otherwise weak broader market.

The rally in Netweb shares was seen after the company inaugurated a high-end computing server, storage and switch manufacturing facility in Faridabad (Haryana) last Friday. The new facility will enable Netweb to manufacture ‘Make in India’ high-end computing systems based on the new generation chips from its global technology partners Intel, NVIDIA and AMD. The company plans to market its products and solutions to new industry verticals, which demands critical and high-performance computing architectures.

In the financial year ended March 31, 2024, Netweb posted profit after tax at ₹75.9 crore, up 61.7% over FY23, while total income rose 65.1% year-on-year (YoY) to ₹736 crore. On the operating front, EBITDA stood at ₹114.4 crore, an increase of 61.8% over FY23, while margin was at 15.5%. The board of the company also declared a dividend of ₹2 per share, subject to shareholders’ approval, which will result in a dividend pay-out of 14.9%.

As of March 31, 2024, the company’s order book stood at ₹411.2 crore as against ₹71.2 crore at the end of previous fiscal. The net debt improved significantly to ₹(101.71 crore) in FY24 as compared to ₹28.5 crore in FY23.

Post FY24 results, Equirus Securities on May 3 assigned ‘Add’ rating to the stock with a target price of ₹1,890, which the company breached on May 6, 2024. The brokerage in its report says that sales growth in coming years is likely to be robust given a very strong pipeline and order book. “In addition to its unique tie up with NVIDIA (on Grace CPU Superchip and GH200 Grace Hopper Superchip MGX server designs with its Elite partnership across many competencies), Netweb is expected to benefit from GOI’s recently announced Indian AI mission with a budget of ₹10,370 crore (for 5-years) to create a ‘Sovereign AI’ computing infrastructure (by setting up 10K-30K GPUs).”

Considering its order book and L1 order pipeline worth ₹725 crore and growth catalysts across its high growth segments, the brokerage believes that Netweb’s sales growth CAGR expectations of 30-35% over coming years (especially for FY25E) is conservative.

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