Netweb Technologies IPO GMP (Grey Market Premium)
Netweb Technologies India IPO worth ₹631 crore, comprises of an offer for sale and also of a fresh issue of shares. The offer for sale (OFS) component is by the promoters and early shareholders of the company. Here it must be noted that while the fresh issue component infuses fresh funds into the company, it also is EPS dilutive and equity dilutive. On the other hand, the OFS is just a transfer of shares so there is no fresh infusion of funds, but it also does not dilute the equity. The issue has been priced in the band of ₹475 to ₹500 per share and the IPO allotment price will be discovered post the book building of shares being completed during the IPO process. For our analysis, the upper end of the band is assumed.
Let us now look at the details of the issue of Netweb Technologies India IPO. The offer for sale of the company IPO will entail the issue of 85,00,000 shares which at the upper end of the price band of ₹500 would result in an offer for sale component of ₹425 crore. The fresh issue component of the company IPO will entail the issue of 41,20,000 shares which at the upper end of the price band of ₹500 would result in a fresh issue component of ₹206 crore. Therefore, the overall size of the company IPO will entail the issue of 1,26,20,000 shares which at the upper end of the price band of ₹500 would mean total issue size of ₹631 crore.
The issue opens for subscription on 17th July 2023 and closes for subscription on 19th July 2023 (both days inclusive). The basis of allotment will be finalized on 24th July 2023 and the refunds will be initiated on 25th July 2023. In addition, the demat credits are expected to happen on 26th July 2023 and the stock is scheduled to list on 27th July 2023 on the NSE and the BSE.
GMP story of Netweb Technologies India IPO
The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of Netweb Technologies India Ltd, we already have GMP data for the last 3 days, which should give a reasonable picture of the likely listing performance. There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general IPO market and macro conditions. Secondly, the extent of subscription for the IPO across the retail and the QIB segments also has a deep impact on the GMP as it indicates investor interest in the stock. Strong QIB subscription is a trigger for a spike in GMP.
There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be. GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing. Here is a quick GMP summary for Netweb Technologies India IPO for the which data is available:
In the above case, the GMP trend shows that the grey market premium has opened at around ₹320, but its up by ₹394. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 17th July 2023, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, Netweb Technologies India Ltd has shown good traction in the grey market.
If you consider the upper end of the price band of Netweb Technologies India Ltd at ₹500 as the indicative price, then the likely listing price is being signalled at around ₹815 per share as of the GMP indicator on 14th July 2023. One data point to track will be the subscription update on the stock as that would chart the GMP course from here. As mentioned, the institutional QIB subscription is a key trigger for the GMP pricing.
The GMP of ₹315 on a likely upper band pricing of ₹500 indicates a listing premium of a healthy 63% for Netweb Technologies India Ltd over the listing price. That pre-supposes a listing price of approximately ₹815 per share, when Netweb Technologies India Ltd lists on 27th July 2023. Of course, these are approximations, so you must keep a margin of safety. However, that would depend on the GMP sustaining over the next few days after the issue opens.
GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. The best thing one can do with the GMP is to observe the trend closely as that gives the best hints on listing status. Focus on the time series trend than on numbers.
Netweb Technologies India Ltd is a 24 year old company that provides high-end computing solutions (HCS). This includes computing and supercomputing systems; apart from making available shared infrastructure facilities like private cloud and hyper-converged infrastructure (HCI), AI systems, high performance storage and data centre servers. Netweb Technologies India Ltd also provides the 360 degree solution as it designs, manufactures, and deploys HCS which also comprises of proprietary middleware solutions, end-user utilities, and precompiled application stack. This is the big opportunity with AI an ML being extremely hardware and computing speed hungry. Till date, Netweb Technologies India Ltd has undertaken installations of over 300 Supercomputing systems, 50 private cloud and HCI installations and over 4,000 accelerator-based AI systems.
It has a fairly impressive array of customers. In fact, the customers of Netweb Technologies India Ltd straddle across the sectoral mix. It includes end-user industries like IT, ITES, entertainment, BFSI as well as the government owned defence sector and the education and R&D segment. In terms of specific client portfolios, some examples of its institutional and academic clients include IIT Jammu, IIT Kanpur, NMDC Data Centre, Graviton Research Capital, Institute of Nano Science and Technology, Jawaharlal Nehru University (JNU) etc. It also supports the Indian space program with its existing computing capabilities.
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