Newgen Software IPO opens today. Should you subscribe?

The issue price has been set in the range of Rs 240-245 apiece and the company plans to raise around Rs 450 crore.

  

Another addition to the IPO bandwagon is Newgen Software, which is set to open its initial public offering on Tuesday.

The issue price has been set in the range of Rs 240-245 apiece, and the company plans to raise around Rs 450 crore.

"We are financially doing very well and registering good growth year-on-year. The IPO is mainly to provide exit or monetisation opportunity to some of our existing investors who have been with us since very long time. Around Rs 95-100 crore of the total fund will be used for setting up a new office in Noida," Newgen Software MD Diwakar Nigam told PTI.

Newgen Software recorded consolidated revenues of Rs 433.76 crore for 2016-17 and an operating profit of Rs 52.36 crore.

Brokerages largely recommend subscribing to the issue, barring Choice Broking, which has an ‘Avoid’ call.

SSJ Finance | Rating: Subscribe

The brokerage said the company reported a CAGR of 20.7 percent and 9.1 percent on revenue and net profit fronts, respectively, over FY2013-2017. “On its upper band of price of Rs 245, the issue is priced at PE ratio of 30.6x of its FY2017 EPS of Rs 8.0. We believe the IPO is fairly priced leaving a room for upside,” it said in a report. Hence, it recommends subscribing to the IPO.

Hem Securities | Rating: Subscribe

The brokerage highlighted the company’s enterprise-wide, mission-critical solutions, and said they have been used by some of the leading global businesses in various sectors including banking, govern-ment/PSUs, BPO/IT, insurance and healthcare.

Further, it is bringing the issue at P/E multiple of 33 on FY17 EPS of Rs 8.26 at higher price band of Rs 240-245/share. Looking after financials of the company we recommend “Long Term Subscribe” on it.

Choice Broking | Rating: Avoid

Choice Broking highlighted the issue is aggressively priced as the company is demanding valuation of Rs 16,962.7 million at P/E of 32.4 (x) to FY17 restated EPS. As per the management, there is no listed peer in domestic market with the similar business model. “However if we consider IBM, which the management mentioned a peer on global level, is trading at P/E multiple of 14(x).

Given the high sensitivity of business to global macro events, repellent receivable policy, completely exits of PE players and high demanding valuation, we are of the view that the issue is aggressively priced leaving no space for further upside. Thus we assign ‘Avoid’ rating to the issue.

MORE WILL UPDATE SOON!!