Article

Newgen Software Technologies -IPO Note (Not Rated)

07 Aug 2019 Nikita Bhoota

Issue Opens: January 16, 2018
Issue Closes: January 18, 2018
Face Value: Rs 10
Price Band: Rs 270-275
Issue Size: ~Rs 425 cr
Public Issue: 17.33 lakh shares (at upper price band)
Bid Lot: 61 Equity shares
Issue Type: 100% Book Building

% shareholding Pre IPO Post IPO
Promoter 70.3 66.3
Public 29.7 33.7

Source: RHP

Company Background

Newgen Software Technologies (NST) is a software products company providing solutions in Enterprise Content Management (ECM), Business Process Management (BPM) and Customer Communication Management (CCM) platforms. NST creates applications on its platforms that aid organizations to drive digital transformation. The applications enable businesses to automate routine business functions and manage data & processes. As of September 30, 2017, NST had over 450 active customers in over 60 countries. NST caters to BFSI, Government/PSU and BPO/IT sectors accounting for 48%, 12% and 11% of its overall revenues respectively (September 2017).

Objective of the Offer

The offer consists of Fresh Issue of Rs95cr and OFS of up to 13.45 lakh shares (aggregating to ~Rs330cr) at upper end of the price band. Amount of ~Rs84cr from proceeds will be used for purchase/furnishing of office premises and balance for general corporate purposes.

Financials

Consolidated cr FY14 FY15 FY16 FY17 1HFY18
Revenue 248 308 347 427 207
EBITDA Margin % 19.3 18.7 11.3 16.4 4.6
PAT 41 46 28 52 6
EPS (Rs)* 5.9 6.7 4 7.6 0.8
P/E* 40.5 35.9 59.8 31.8 --
P/BV* 9.6 7.9 7.3 6.1 --
EV/EBITDA* 33.8 28.2 42.1 23.3 --
RONW (%)* 28.3 24.1 12.6 20.8 --

Source: Company, 5 Paisa Research; *EPS & Ratios at higher end of the price band, on post IPO shares

Key Points

NST has been recognized by analyst firms like Gartner and Forrester. These research and advisory firms’ views help enterprises to make software purchase decisions. Usually the comprehensive research provided by these firms are expensive, but both these firms have other options like Gartner’s Magic Quadrant research and Forrester’s Wave report, which list the top vendors and their products in the specific markets. According Gartner’s research, NST was the only vendor positioned in all four Magic Quadrants of ECM, IBPMS, BPM-Platform Based Case Management Framework and CCM. Forrester has also labeled NST as leader and strong performer across platforms. Endorsements by leading technology research and advisory firms bode well for new client wins for NST.

NST has a diversified customer base that includes 17 Global Fortune 500 companies. Most of its Indian and overseas customers are well known and revenues from repeat customers were ~72% in FY17. Strong relationships with clients has enabled to get repeat business, which is more expansionary in nature, as the client utilizes the solutions in other geographies. Cross-selling opportunities with existing clients for different platforms and geographies, and ability to make inroads into recently won client’s accounts will aid revenue growth for the company.

Key Risk

NST’s performance in FY16 had come under pressure owing to weakness in markets like the Middle East and currency related issues in Nigeria. The issues also resulted in sharp increase in receivables, as the customers were unable to pay AMC fees. Weakness in key markets can impact company’s overall financials

Research Disclaimer

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Newgen Software Technologies -IPO Note (Not Rated)

07 Aug 2019 Nikita Bhoota

Issue Opens: January 16, 2018
Issue Closes: January 18, 2018
Face Value: Rs 10
Price Band: Rs 270-275
Issue Size: ~Rs 425 cr
Public Issue: 17.33 lakh shares (at upper price band)
Bid Lot: 61 Equity shares
Issue Type: 100% Book Building

% shareholding Pre IPO Post IPO
Promoter 70.3 66.3
Public 29.7 33.7

Source: RHP

Company Background

Newgen Software Technologies (NST) is a software products company providing solutions in Enterprise Content Management (ECM), Business Process Management (BPM) and Customer Communication Management (CCM) platforms. NST creates applications on its platforms that aid organizations to drive digital transformation. The applications enable businesses to automate routine business functions and manage data & processes. As of September 30, 2017, NST had over 450 active customers in over 60 countries. NST caters to BFSI, Government/PSU and BPO/IT sectors accounting for 48%, 12% and 11% of its overall revenues respectively (September 2017).

Objective of the Offer

The offer consists of Fresh Issue of Rs95cr and OFS of up to 13.45 lakh shares (aggregating to ~Rs330cr) at upper end of the price band. Amount of ~Rs84cr from proceeds will be used for purchase/furnishing of office premises and balance for general corporate purposes.

Financials

Consolidated cr FY14 FY15 FY16 FY17 1HFY18
Revenue 248 308 347 427 207
EBITDA Margin % 19.3 18.7 11.3 16.4 4.6
PAT 41 46 28 52 6
EPS (Rs)* 5.9 6.7 4 7.6 0.8
P/E* 40.5 35.9 59.8 31.8 --
P/BV* 9.6 7.9 7.3 6.1 --
EV/EBITDA* 33.8 28.2 42.1 23.3 --
RONW (%)* 28.3 24.1 12.6 20.8 --

Source: Company, 5 Paisa Research; *EPS & Ratios at higher end of the price band, on post IPO shares

Key Points

NST has been recognized by analyst firms like Gartner and Forrester. These research and advisory firms’ views help enterprises to make software purchase decisions. Usually the comprehensive research provided by these firms are expensive, but both these firms have other options like Gartner’s Magic Quadrant research and Forrester’s Wave report, which list the top vendors and their products in the specific markets. According Gartner’s research, NST was the only vendor positioned in all four Magic Quadrants of ECM, IBPMS, BPM-Platform Based Case Management Framework and CCM. Forrester has also labeled NST as leader and strong performer across platforms. Endorsements by leading technology research and advisory firms bode well for new client wins for NST.

NST has a diversified customer base that includes 17 Global Fortune 500 companies. Most of its Indian and overseas customers are well known and revenues from repeat customers were ~72% in FY17. Strong relationships with clients has enabled to get repeat business, which is more expansionary in nature, as the client utilizes the solutions in other geographies. Cross-selling opportunities with existing clients for different platforms and geographies, and ability to make inroads into recently won client’s accounts will aid revenue growth for the company.

Key Risk

NST’s performance in FY16 had come under pressure owing to weakness in markets like the Middle East and currency related issues in Nigeria. The issues also resulted in sharp increase in receivables, as the customers were unable to pay AMC fees. Weakness in key markets can impact company’s overall financials

Research Disclaimer