Newgen Software IPO: Should You Invest?

Newgen Software IPO is almost here to subscribe opening on the 16th of January 2018. Should you invest in this IPO and see if you get it or should you wait till it comes to the market?

That depends on how knowledgeable you are. If you are new to the markets and don’t know much about the markets, its best to stay away from shares and IPO. Instead, rely on mutual funds.

If you do have the required knowledge, research carefully and decide! Read the information below to make a decision.

UPDATE: Newgen Software Share Price – stock surges 8% upon being listed.

Newgen Software Info

Newgen Software is a Delhi based Software Product Company which was incorporated in 1992.  The company provides services in form of product and platform to help organizations rapidly develop powerful software applications.

Newgen mainly offers products in ECM and BPM space. The company has 300 strong channel partners globally which it leverages to directly sell its products

In India, the company has four patents registered and 27 outstanding patent applications. Also, one patent application is outstanding in USA. It has over 450 active customers in over 60 countries. These customers are served by over 265 employees.

The company has been helping organizations around the world since more than 2 decades. This has helped its clients gain a competitive advantage through increased efficiency and quality, enhanced service, and bottom line results.

Strengths of Newgen IPO:

• The company has a strong industry recognition.
• The company has expanded its product base to cater to its clients in sectors like banking, information technology, insurance, healthcare etc.
• It gets subscription fees from multiple geographies.
• The company generates both recurring as well as non-recurring revenues
• Its clients include 17 Global Fortune 500 companies
• It carries on innovation by doing in-house research and development

Newgen IPO Details

Newgen is planning to raise INR 424.6 crores from the market with its share in the price band of INR 240-245. Minimum lot size is 61 shares at upper price end of 245 will make the minimum investment of INR 14945 by a retail investor. The shares will be listed at both National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

The issue opens on 16^th Jan and closes on 18^th Jan. The Lead Manager for Newgen is ICICI Securities Ltd and the registrar is Karvy Computershare Pvt Ltd.

Senior vice-president at Newgen, Virender Jeet said “The three spaces of the technology market that we operate in – ECM (enterprise content management), BPM (business process management) and CCM (customer communication management) are all growing globally at a rate of 7%-10%, while the rest of the technology space is growing at a much slower rate.

Within India these three areas are expected to grow at more than double of the global growth expectation and 40% of our business comes from India. The company is making investments in the US which will help it get a bigger share of the US market, the biggest globally for ECM, BPM and CCM.”

Approx 26% of the company’s revenue comes from US, whereas Middle East contributes 27% and Asia Pacific contributes 7% of company’s total revenue. The company’s revenue has almost doubled to INR 50.1 crore as compared to its previous year. Also, the revenue of the company has grown by 23.55% to INR 389.7 crores.

Newgen IPO Objective

• Offer for Sale: Offer for Sale by the existing shareholders will be done wherein the company will not receive any issue proceeds.
• Fresh issue: Objects of the fresh issue are
• Purchasing, furnishing of office premises Noida and Utter Pradesh- INR 34 crores
• Other corporate purposes- Balance amount

Should I Invest in Newgen IPO?

• Newgen’s revenue grew at 41% CAGR in the last 5 years
• It operates in the niche segment by focusing on ECM and BPM spaces

Newgen IPO Valuation Parameters

Boost to Mutual Funds

All this increase in funds into the capital market through Initial Public Offerings (IPOs) have not just improved the market in terms of market capitalisation, but has also boosted the investor’s sentiment.

Because of more and more number of companies getting listed, Mutual Fund companies are also getting more option of companies to invest in. All this has ultimately increased the number of people willing to invest in the market through mutual funds.

First time investors prefer investing in mutual funds rather than directly investing in the market because mutual funds are basically a portfolio of different stocks and so the risk gets reduced.

IPO vs Mutual Funds

If you have no knowledge of the equity markets but are looking to gain from the equity markets, mutual funds are ideal. Investments can be made in Mutual Funds since they provide a wide variety and also the amount of investment can vary as per investor’s preference.

Many mutual funds invest in IPOs – many times at discounted rates that are not available to retail investors.

It is necessary to not get carried away by the hype surrounding IPOs. Don’t jump into IPO if you do not have the necessary skills.

In a mutual fund, a skilled and trained professional handles all investments for you and therefore, you can benefit from the equity markets without spending too much time gaining the skills needed to understand the markets.

Mutual Funds for 2018

Large Cap Fund:

These funds invest in large companies that have a history of good performance and stable balances.

• SBI Bluechip Fund

Mid Cap Fund:

These are funds that are high risk – high return. They’re a bit riskier than large cap funds.

• Aditya Birla Small & Midcap Fund

Small Cap Fund:

These are the funds that you can invest in if you want very high growth. They are very high risk too.

• HDFC Small Cap Fund

Happy investing!

Disclaimer: the views expressed here are those of the author. Mutual funds are subject to market risks. Please read the offer document carefully before investing.