Artificial intelligence (AI) stocks were the flavour of this bull market, with Nvidia rising 18x in the last five years. The rally that started on the Nasdaq also spread to India, with Netweb Technologies and Anant Raj making big gains in the Indian markets and then topping out.
Netweb’s share price rose 233% from ₹898 in July 2023 to ₹3,060 in December 2024, while Anant Raj returned 373% from ₹200 in July 2023 to ₹947 in January this year. However, when the release of Deepseek triggered concerns around demand for hardware growth, share prices of AI related stock fell sharply.
Both Natweb and Anant Raj also fell more than 40% from their highs.
So, how are they placed right now? Let’s find out.
Netweb provides various computer server solutions, including High-Performance Computing (HPC), storage, deep learning, big data analytics, cloud, and virtualization.
It has installed more than 300 Make-in-India HPC and is one of the few players in the market providing end-to-end supercomputing and cloud service solutions.
Netweb has designed, developed, and deployed some of India’s most powerful supercomputers, including the Kabru (India’s second-fastest computer) and PARAM Yuva II (the fastest supercomputer).
In addition, it is also participating in the Indian government’s National Supercomputing Mission. The company is one of the few original equipment manufacturers eligible for the IT Hardware PLI and Telecom and Networking PLI schemes.
The company collaborates with various technology partners, such as Intel Americas, AMD, Samsung, Nvidia, and Seagate India. It also has a diversified client base, including the IIT, the ISRO, Zoho, RailTel, and TCS.
Netweb’s revenue base is diversified, with HPC contributing 36% of total revenue, 37% from private cloud, 11% from artificial intelligence, and the rest from others.
Coming to its financials, Netweb’s operating income has grown at a massive 72% compounded annual growth rate (CAGR) during FY21-FY24 to ₹7.24 billion, while profit rose at 110% CAGR to ₹0.76 billion.
Strong profitability was driven by robust margins, which expanded from 10.2% in FY21 to 14.2% in FY24. The company’s return on equity (RoE) and return on capital employed (RoCE) remain robust at 29.4% and 38.5%, respectively.
Going forward, the company has many growth levers to ride the secular sectoral uptrend. It is working on a state-of-the-art new manufacturing facility with the latest Surface Mount Technology (SMT), which will be commissioned soon.
The company has also partnered with NVIDIA as a select manufacturing OEM for the latest generation of AI systems to unlock the potential of AI and HPC.
In addition, it has launched Intel Sapphire Rapids and AMD Genoa-based ‘Make in India’ high-end computing servers. This aims to capitalize on the massive demand for high-end computing in India’s rapidly growing inbound data centers.
The company is expanding its presence in Europe and the Middle East, with plans to establish service networks in four countries initially. In addition, it has entered new product lines, such as network switches and 5G ORAN devices.
Netweb is trading at a price-to-equity (P/E) multiple of 92x, lower than the 20-month median of 145x. The company was listed only in July 2023. Having said that, its valuations remain significantly high.
Equirus has a target price of ₹2,655 (up 63% from the current price of ₹1,625), citing consistent high growth and strong return ratios.
Anant Raj started as a construction company in 1969 and worked on government contracts and projects for over 30 years.
It gradually became a significant landowner in Delhi NCR and entered commercial leasing and residential real estate. Today, it owns over 240 acres of land across prime locations in NCR.
However, Anant Raj is transitioning from a pure real estate company to a diversified business model with strategic data centers and cloud services investments. It aims to capitalise on India’s growing trends of data localization and digital transformation.
The company has seen a remarkable turnaround in the last four years. Its revenue grew at an impressive CAGR of 78% during the period to ₹15.2 billion at the end of FY24. On the other hand, its profit grew at 189% CAGR to ₹2.6 billion.
The company’s margins improved from 20% in FY21 to 25% in FY25. Anant Raj’s debt also improved with improved profitability, with net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) declining from 27.2x in FY21 to 0.8x in FY24.
Anant Raj Share Price
Looking ahead, the company has shifted its focus to data center and cloud business. It is leveraging its existing technology parks to set up data centers with a 307 megawatts (MW) capacity over the next 4.5 years.
To this end, the company has also been listed as a business partner with RailTel Corporation of India for data centers. It has a strategic alliance partnership with Telecommunications Consultants India Limited for both cloud and colocation services.
The cloud services and data center business yields higher margins, which could boost its profitability. Cloud capacity is expected to rise to 25% by FY32.
India generates 28% of global data, but only 1% of the world’s data centers are in India. With his early-move advantage, Anant Raj aims to leverage the massive tailwinds in the data center and cloud business as this gap narrows.
The company has seen a huge re-rating as its financials grew rapidly. It’s trading at a P/E of 48x, much higher than the 10-year median P/E of 16x. Motilal Oswal has a target price of ₹1,100 per share, 120% higher than the current price of ₹520.
Conclusion
Both stocks have pared back their major gains in the last few months. However, their valuation remains stretched, making risk-reward at the current level not so favourable. Nonetheless, the sectoral uptrend driven by AI adoption and the need for data centers remains intact, making them worthy of monitoring.
Disclaimer
Note: We have relied on data from throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
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