NEWGEN SOFTWARE TECHNOLOGIES LIMITED

COMPANY OVERVIEW

Newgen a software products company offering a platform that enables organisations to rapidly develop powerful applications addressing their strategic business needs. The applications created on its platform enable organisations to drive digital transformation and competitive differentiation.

Companies customers use its platform to rapidly design, build and implement enterprise-grade custom applications through their intuitive, visual interface with minimal coding.

Companies platform comprises of:

• Enterprise Content Management (ECM)

• Business Process Management (BPM)

• Customer Communication Management (CCM)

Newgen Software has four patents registered in India and 27 outstanding patent applications in India and one outstanding patent application in the USA. Newgen has over 450 active customers in over 60 countries. These customers are served by over 265 employees.

 ISSUE DETAILS 

• Issue Open    :   16th January, 2018
• Issue Closes  :   18th January, 2018
• Issue Type     :   Book Built Issue IPO
• Face Value     :   Rs 10/ Equity Shares
• Issue Price     :   Rs.240– Rs.245/ Equity Share
• Issue Size       :   13,453,932 Equity Shares
• Valuation       :   Rs 425 Cr.(Approx.)
• Market Lot    :    61 Shares 
• Minimum Order Quantity: 61 Shares and in multiples
• Listing At       :    BSE, NSE

TENTATIVE DATES

• Basis of Allotment(Finalization)  :   TBU
• Refund Initiation                               :   TBU
• Crediting of Shares                           :   TBU
• Commencement of Trading            :   TBU

*TBU: To Be Updated

ISSUE OBJECTS

• (OFS) The Offer includes an Offer for Sale of 13,453,932 Equity Shares by the Selling Shareholders. Company will not receive any proceeds from the Offer for Sale by the Selling Shareholders.; and

• (FRESH ISSUE) The objects for which the Net Proceeds of the Fresh Issue will be utilized are as:
  1) Purchase and furnishing of office premises near Noida-Greater Noida        Expressway, Uttar Pradesh; and
  2) General corporate purposes

COMPANY PROMOTERS 

Mr. Diwakar Nigam and Mr. T.S. Varadarajan.

TOP 10 SHAREHOLDERS 

COMPETITIVE STRENGTHS OF COMPANY

• Software product company with strong industry recognition

• Diversified business across several verticals

• Diversified revenue streams from multiple geographies with low customer concentration

• Recurring and non-recurring, repeat revenues from long standing customer relationships

• Focused on driving innovation through in-house R&D

• Experienced senior management team ably supported by a qualified talent pool of employees

• Profitable track record, strong balance sheet and stable cash flows

INDUSTRY OVERVIEW

Unless noted otherwise, the information in this section has been obtained or derived from the report titled “Ovum– Business Software Industry Report: Digitalisation, IT modernisation and automation are driving market growth” dated August 7, 2017, prepared by Informa Telecoms & Media Limited (“Informa” or “Ovum”, and such report, the “Ovum Report”), as well as other industry sources and government publications.

• Global Technology Spending

• Software Spend

• Global ECM, BPM and CCM Software Spend and Forecast Figures

VALUATIONS

As the issue seems to have reasonably fair valuations @22.73(@ floor price) and @23.20(@ cap price). However we can see more more details in below table:

EARNINGS PER SHARE

• As per Standalone Financial Statements 

• As per Consolidated Financial Statements 

RoNW

• As per Standalone Financial Statements 

• As per Consolidated Financial Statements 

Net Asset Value (“NAV”)

i. Net asset value per Equity Share as per Restated Standalone Summary Statements of our Company as on March 31, 2017 was Rs.42.93 and as on September 30, 2017 was Rs.42.11.
ii. Net asset value per Equity Share as per Restated Consolidated Summary Statements of our Company as on March 31, 2017 was Rs. 43.34 and as on September 30, 2017 was Rs. 42.67.
iii. After the Offer (unconsolidated):
a. At the Floor Price: r 52.36
b. At the Cap Price: r 52.42
iv. After the Offer (consolidated):
a. At the Floor Price: r 52.87
b. At the Cap Price: r 52.93

COMPARISON WITH LISTED PEERS

There are no listed entities in India which are similar to its line of business and comparable to its scale of operations.

RESTATED STANDALONE FINANCIAL POSITION SUMMARY

RESTATED STANDALONE STATEMENT OF PROFIT & LOSS ACCOUNT

RESTATED CONSOLIDATED FINANCIAL POSITION SUMMARY

RESTATED CONSOLIDATED STATEMENT OF PROFIT & LOSS ACCOUNT

ANALYSIS & SUBSCRIPTION SUGGESTIONS BY AUTHOR

Fellas what we have already been fascinated about in our earlier analysis as well that a unique business model in this IPO as well as the company has claimed that it has comparably no listed peers which makes this IPO attractive one. But we cannot just go on by having a unique business model.

Let’s have a look on major things to consider before rushing to put money in the company:

• Valuations: Issue is considered to be priced at par with a P/E Ratio of 22.73 and 23.20 both at upper price band as well as lower price band respectively. Though before coming to conclusion one should consider the industry P/E Ratio as well but as the company claims it has no listed peers so we cannot compare this ratio with industry P/E Ratio ,

• RoNW/EPS: Though RoNW have declined as compared to last three year but the improvement from previous year is considerable. Though RoNW has improved but the story remain the same in case of EPS as well,

• CAGR: Companies revenue grew @ a CAGR of 41% from the last 5 yrs which could be a good judgment parameter,

• Earnings: Companies earnings have seemed to be promising as it have consistent growth in “Total Revenue” over the years which is necessary for any business to run exponentially over the years.

• GMP: Not promising but its GMP stands @ 70-75 as on 13th January, 2018

Fellas we have discussed above more positive points than negative one’s but one should be careful before applying as the company do have unique business model but the RoNW & EPS have shown knee jerk over 3 consecutive years though what we have positive is that company has shown consistent rise in Total Revenue over the years that is what matters the most although if the cost would have under control then we would have seen consistent EPS growth as well. 

We can say that one may apply in the IPO for medium to long term perspective though we may see good listing gains if the IPO gets oversubscribed at least for more than  20 times.*