Netweb Technologies

Pitch Deck And Valuation

Team Brookstone
Adesh Kyal
Parth Gupta
Archis Welankar
Economic Environment Effects On IT Industry
Global and national economic environment playing a key role.
Global slowdown
 Inflation hitting a record high in European
nations.
 Uncertainty looms as Russia-Ukraine war goes
on.
 Major economies like Germany, Italy, Spain,
France, New Zealand falling to recession.
 As a service model gained popularity with
onset of covid pandemic
 Global GDP growth rate to be around 3%
 North America holds the biggest share In IT
industry with 39%, while Asia being the fastest
growing.
Source: CMIE Industry Outlook ,News articles
Emerging India
 Stable political environment.
 Most populous country in the world with a
youthful demographic.
 Beneficiary of China +1.
 Government spending increased in
infrastructure.
 Hybrid workspace culture picking up
 Government spending on digitization to help IT
industry
 High untapped opportunity present in Indian
market
 Government looking to promote make in India
 Industry Landscape – Key Segments & Competitors
Company well positioned vis-à-vis its competitors to capture the high growth in Indian market
High-Performance Computing
 Powerful processor to solve complex prob.
 Global Mkt. size $43.1Bn (4.4% CAGR)
 Indian Mkt. size $493Mn(9.3% CAGR)
 Used by BFSI,IT, Govt. and defense
 Key Players: IBM,ATOS, Netweb
B2C
 High Capex requirement
15%
20% 60%
Storage Systems
 Central Storage for corporate data
 Global Mkt. size $63Bn (3.3% CAGR)
 Indian Mkt. size $677Mn(5% CAGR)
 Used by Telcom, IT, Govt. and BFSI
 Key Players: NetApp, Hitachi, Netweb
B2B
 Consolidation in the market
Source: Company report, DRHP
Private Cloud Solutions
 Secured high perf. Cloud soln.
 Global Mkt. size $195Bn (17.5% CAGR)
 Indian Mkt. size $2.3Bn(19.2% CAGR)
 Used by BFSI, telcom, Govt. and defense
 Key Players: Nutanix, VMware, Netweb
 Modernizing leading the growth
Cloud Managed Services
 Mgmt. of client’s cloud services
 Global Mkt. size $79Bn (13.2% CAGR
 Indian Mkt. size $910Mn(23.1% CAGR)
 Used by BFSI, Govt. and defense
 Key Players: HCL tech, tech Mahindra
 Benefits from industry shift
AI and Enterprise Workstations
 Hardware for specialized AI tasks
 Global Mkt. size $6Bn (4.5% CAGR)
 Indian Mkt. size $260Mn(27.3% CAGR)
 Used by Electronics, intelligence
 Key Players: NVIDIA, Netweb
 AI solutions Becoming mainstream
Enterprise Networking
 Network tools like routers, switches
 Global Mkt. size $67.3Bn (5.3% CAGR)
 Indian Mkt. size $1.2Bn(6.2% CAGR)
 Services: Ethernet switches, router
 Key Players: Cisco, Tejas, Netweb
 Drivers: PLI scheme and 5G.
Data Centers
 Solutions to manage critical data
 Global Mkt. size $103Bn (9.7% CAGR)
 Indian Mkt. size $3.2Bn(5% CAGR)
 Used by Media, Govt. and Oil & gas
 Key Players: HPE, Dell, Netweb
 Drives: China +1 and Make in India
Open Radio Access Network, 5G
 Global Mkt. size $0.8Bn (51.5% CAGR)
 ORAN revolutionizing telcom
 High Capex requirement
 5G just launched in India
 Expected to grow at 90% CAGR
 Very nascent stage
 Technology needs to proven
Industry Landscape – Key Trends
Company well positioned vis-à-vis to capitalise on long term migration to digital assets and increasing popularity of as-a-service
918.6
Industry landscape 4.4% 8.8% 840.4
55.8 58.2 768.9
51.2 53.4 703.5
 Global Mkt. size $2353.7Bn (4.4% CAGR) 45 46.9 49 643.6
588.9
 Indian Mkt. size $201Bn (8.8% CAGR) 538.8
 Covid boosted the demand of industry
 Companies extensively looking for software solutions
 Demand for high computing increasing as AI becoming mainstream
 Very less Indian companies' representation in hardware and solutions 2023 2024 2025 2026 2027 2028 2029
provider 2023 2024 2025 2026 2027 2028 2029
 Industry dominated by big US tech companies
 Indian government policies favoring Indian companies giving them Global IT Industry Lookout Indian IT Industry Lookout
edge

Growth drivers & Future prospects Core Characteristics Top industry players
5G introduction BFSI sector getting Keep customers satisfied &
in India modernize retain them over their lifetime
extracting maximum revenue
Maintain high standards
Expand to the unserved of governance as it
and under-served parts of
AI gaining encompasses handling of

Sustain
Innovations world, targeting a new data and cybersecurity
popularity and R&D audience

Innovate Quality

Continuous innovation for Always provide the highest quality

Shift towards of solutions with best service
China plus one and emerging needs of the
hybrid market
workspace PLI schemes for
India
Source: Company report, DRHP
Company Overview
Netweb is a high-end computing solutions provider, selling an array of products under the brand name Tyrone.

Cloud & Computing Soln.

 Provides private cloud and high Founded: 1999
computing solutions

Broad
Products Served:
 sells additional offerings in form of • Computing • Containers
software • Storage • Biga Data & AI
 Targets high end clients that value • Cloud • Virtualization
performance and are environment • HPC

Narrow
conscious NETWEB
Infrastructure Software  IT Infra like data centres and AI Sales: ₹ 445Cr (FY23)
workstations are also part of product Market Cap: ₹ 4,971 Cr
Cost Leadership Differentiation
offerings.

SWOT Analysis Competitive Strengths Offering wise %Sales

Strengths Weakness Supercomputing and cloud offerings dominate
• Strong research • Limited Long-serving High Innovation the sales
capabilities Presence customers Focus
• Quality innovation S W • High 50% government R&D forms the 35%
32.5
• Experienced player Capital entities, 50% base of %
in the industry investmen private players 17.5%
company’s

%Sales
t 15%
• Rapidly operations
Opportunities O T evolving
Threat Geographical
• Potential to task New Market
• Increased Expansion
enter new environme Company has plans
Competition Company is planning
markets like nt
• Giant firms to enter the 5G
to launch itself in
5G, AI etc. actively market
markets such as
• Applications in engaging in CAGR of 90% over
EMEA region
diverse fields HPC market 5-yr horizon Supercomputing Infra cloud software

Source: Company report, DRHP

Management And Business Analysis
Netweb is a high-end computing solutions provider, selling an array of products under the brand name Tyrone.
Business segment analysis
 Cloud and HPC business drive the major revenue for the business, >70%.
 Infra segment consists of storage centres and hardware for AI specialization.
 Cloud is one of the fastest growing segment ~ 20%CAGR.
 Software growth is aided by cloud managed services growing at ~ 23%CAGR.
 HPC is a steady growth business with long term contracts, generating regular C/F.
 Hardware specialized in AI are seeing a very high growth ~27%, whereas data centres are
a steady business with 5% CAGR providing regular C/F.
Source: News articles, DRHP, Mordor Intelligence
Business quality analysis
 Long term contracts with customers, ensuring long term relationships.
 Most of the revenue comes from few costumers, creating concentration risk, but it’s
decreasing over last 3 years.( 56% to 48%)
 One of few Indian companies providing end to end high computing products.
 Have a good history of R&D and innovation.
 Eligible for make in India and PLI scheme under government initiatives.
 Have collaboration with companies like NVIDIA, Intel and Samsung.
 Very high barrier to entry, capital extensive and IP protected.
Management analysis
 Top management are associated with company with a long time and has seen a low
attrition at higher management, indicating no stability issues.
 Directors of the company hold a major stake, indicating skin in the game for board of
directors.
 Independent directors was assigned as chair in IPO and audit committee indicating
good practices.
 No contingent remuneration for executive directors, decreasing the motive to
fabricate financials.
 Non-disclosure partnerships with some companies.
Competitor Analysis
Deep diving into the competition Netweb faces across various segments
High Performance
Computing
 Global Players like HPE,IBM and Lenovo dominate
this segment.
 Netweb dominates supercomputers deployment in
India by any private player.
 Global players expand in India with help of strategic
partnerships.
 Government imposing restrictions on hardware import
hurting global players.
Data Centers & Servers
 IBM, HPE and Dell dominate the market as the industry
leaders.
 Netweb differentiated by creating servers suitable for
building private cloud solutions.
 For that Netweb was recognized by government and awarded
multiple contracts.
 Netweb is also eligible to seek incentives based on PLI
scheme from govt. giving them a competitive edge.
Source: News articles, DRHP, Google Images
Private High Performance
Cloud Solutions
 Netweb provides the quickest and simple solutions for
High performing private cloud solutions.
 Global players like Nutanix and VMware provide
conventional and complex solutions
 Netweb is better for easy-to-use solution whereas
Nutanix/VMware provides faster solutions.
 Indian players like HCL tech and Tech Mahindra only
provide cloud management services.
AI & Enterprise Workstation
 Netweb is one of the first and major player in Indian to
provide new generation workstations for applications
requiring powerful processing.
 NVIDIA provides unparalleled products and is the
leader of the segment.
 Netweb products are more economic compared to
NVDIA.
 Netweb has partnered with NVIDIA to provide
enhance experience in this segment.
Business Drivers And Success Factors
Looking at various internal and external success factors which will drive company’s growth
1. Sectors Tailwinds
 Cloud adoption is leading the growth drive
with As-a-service changing industry trend.
 CAGR of 21.18% is expected during the
forecast period (2023-2028)
 Increasing investments in the Industrial
Internet of Things (IIoT)
 India launching 5G opens a new market to
capture which is expected to grow at ~90%
CAGR
4. Diverse Applications
 HPC has applications in variety of sectors
including BFSI, Defense, IT,
Telecommunications and Oil & Gas
 HPCs application in the government and
defense sector held the largest share (39%)
in FY2022.
 Long term relations with govt. and other
customers helps with long term contracts
Source: Company report, DRHP
2. Geographical Leadership
 The industry in Asia Pacific (APAC) is
developing and is the fastest-growing region
for the global HPC market
 Over the projection period, the expansion of
HPC market in APAC will be facilitated by an
increase in the number of data centers in the
region and improved infrastructure.
5. PLI Scheme
 Production Linked Incentive Scheme (PLI) for IT
Hardware extends an incentive of 4% to 2%/ 1%
on net incremental sales
 Support under will be provided to companies who
manufacture specified products - Enterprise
Equipment: Switch and Router; Core transmission
Equipment; 4G/5G
3. Innovation and Research
 India is a leader in terms of technological
innovation and acceptance, with a high
adoption rate of 87%
 HPC enable financial institutions to further
streamline and automate processes, improve
data management and utilization, and
ultimately enjoy efficiencies and build
resilience.
 Low attrition rate ~9%
Data governance in India covers three aspects :-
 Regulation of personal data in ways based on the
principles set out under the EU’s General Data
Protection Regulation (GDPR).
 India is in the process of establishing a nonpersonal data
framework—a path down which no other country has
yet embarked.
 Governance of government data, which is covered under
National Data Sharing and Accessibility Policy
Risks And Mitigants
Top 3 reservations about investment and mitigation
1. Cyber security risk
 With the current trend of Cloud
Managed Services workloads and
infrastructure increasingly becoming
Description
cloud-like security has become a great
concern at an accelerating rate
 Examples include resource pooling, on-
demand self-serving, interacting with
the cloud etc.
Degree
HIGH
 Conducting a cybersecurity risk assessment can
offer insight into the assets that need to be protected
and the security controls currently in place
Mitigation
 Establishing network access controls helps
minimize both the likelihood and impact of threats
or attacks
Source: Company report, DRHP
2. Concentration risk
 The company derives a majority portion
of its revenues from operations from a
select few of its HCS offerings
 Loss or decline in the demand of such
offerings may result in an adverse effect
on our business, revenue from
manufacturing operations and financial
condition.
MEDIUM
 Diversification of revenue streams by
collaborating with customers from different
industries can reduce this risk
 Since majority of revenue comes from
government tenders, increase in service
offerings can help the company attract wide
range of clients and create sustainable earnings
3. Key Person risk
 Migration of key employees, without
grant of patents, might cause the loss
of technology for the company
 Educational qualifications of two of
the key persons in company -
included in the company’s
‘management’- is not traceable
LOW
 The company can formalize and patent all the
reports with government’s patent office to
mitigate loss of innovation risk
 Netweb can build credibility of its directors and
promoters by providing relevant supporting
documents about their education
 Key Financial Metrics And Valuation
Peek into the valuation method, projections and assumptions

Projection Valuation Assumptions*

FY23 FY24E FY25E FY26E FY27E FY28E
 Projected EMEA expansion of the planned
Income 445 667 934 1,308 1,766 2,384 Current market 892 products.( industry growth ~45%)
price  Portfolio augmenting by including 5G products
YoY growth 80% 50% 40% 40% 35% 35% which is expected to grow at 90% CAGR.
PEG Ratio 1.21  Weighted average of the growth of various
EBITDA 71 103 154 229 321 435 segments( weight= revenue proportion)
Industry PEG 2  No direct competitor present in India.
Y-o-Y growth 100% 47% 49% 48% 40% 35%  Competitors are segments for global IT giants.
Adj. made* 25%  Competing directly with NVIDIA in AI segment.
Net Profit 47 73 109 162 229 314  Took PEG ratio of global Cloud and AI solutions
Target PEG 1.5
provider.
YoY growth 109% 56% 51% 50% 41% 36%  Adjusted for India and HPC segments
Target Price 1124(26%up)

Values in Crores*

Financial analysis used for assumptions

- Money raised in IPO will aid the geographic and product expansion.
- Company can generate a healthy return on the capital employed which should continue in foreseeable future.
- All direct competitors are listed in US where equities trade at a relative lower valuation compared to Indian markets.
- TAM for the company is very huge ~$30Bn( India and EMEA for now) and growing at very high pace and provides space for multiple players to co-exist and grow.
- Netweb is market leader for supercomputing in India which provides a technological advantage over other players.
- Margins should continue to remain healthy as it is a niche software solution company with high barrier to entry.
- Concentration risk is there considering majority of revenue comes from 10 customers.

Source: News articles, DRHP, Screener

Thank You

Team Brookstone
Adesh Kyal
Parth Gupta
Archis Welankar

10
References

• https://www.sebi.gov.in/filings/public-issues/mar-2023/netweb-technologies-india-limited-drhp_69580.html
• https://www.screener.in/company/NETWEB/
• Netweb Technologies IPO: RHP flags documentary evidence of 2 promoters 'not traceable’; check all key risk factors | Mint
ivemint.com)
• High Performance Computing Market - Share, Trends & Size (mordorintelligence.com)
• Netweb IPO: Concerns and Risks to Consider - The Hindu BusinessLine