Newgen Software surges 19% on heavy volumes; zooms 42% in two weeks

A combined 2.42 million equity shares, representing 1.73 per cent of the total equity of the company, had changed hands on the NSE and BSE till 11:21 AM.

Shares of Newgen Software Technologies hit a new high of 1,547.20, surging 19 per cent on the BSE in Thursday’s intra-day trade amid heavy volumes on expectation of higher revenue growth.

In two weeks, the stock price of the computers software and consulting firm has zoomed 42 per cent.

At 11:21 am, Newgen shares were trading 10 per cent higher at Rs 1,432.55, compared to the 0.25 per cent rise in the BSE Sensex.

The average trading volumes on the counter had jumped over four-fold so far. A combined 2.42 million equity shares, representing 1.73 per cent of the total equity of the company, have changed hands on the NSE and BSE.

Newgen is a global software company engaged in the business of software product development including designing and delivering end-to-end software solutions. It covers the entire spectrum of software services from workflow automation to document management to imaging, among other areas. 

Newgen provides a complete range of software products that helps automate business processes. The company’s solutions enable document intensive organisations and industries in sectors such as finance and banking, insurance (BFSI) and government departments, to improve productivity through better document management and workflow implementation.

The company said it is working steadily towards executing its transformation charters and long-term plans across dimensions. This includes working on new product offerings, strengthening teams across domains, expanding in traditional and mature markets, in order to strengthen its presence and capitalise on emerging opportunities.

Additionally, the company is committed to expanding its product portfolio by working deeper in the banking and insurance verticals, to cater to emerging market demands.

Historically, the business has been seasonal in nature, with Q1 being the leanest quarter, though the impact of seasonality is slowly reducing to a certain extent.

Newgen reported a weak set of numbers in the April to June quarter (Q1FY25), down 16 per cent quarter-on-quarter (QoQ), and up 25 per cent year-on-year (YoY). The sequential weakness was predominantly led by seasonality factors for the products business. 

The company expects good traction in the BFS and Insurance segment particularly and would continue to invest in R&D and new product launches for the segment.

Further, rest of sales strategy in the US, probable merger and acquisition (M&A) in mature markets and higher deal closure in the Asia-Pacific (APAC) region and traditional markets could further boost revenue growth.

The company's management emphasised on hiring more headcount to cater to growing demand. Analysts at IDBI Capital expect Newgen's revenues to grow at 28 per cent YoY. Higher growth in revenues will further boost margins, leading to profit after tax growth of 31 per cent YoY.

Newgen, in its Q1FY25 earnings call, said that the company had good additions in its client portfolio. It added 13 new logos during the quarter.

The management said the company is witnessing increased adoption of the company’s trade, digital lending and supply chain finance solutions, driving significant revenue growth. With substantial license revenues in Q4 of last year, Q1FY25 marked a significant uptick in implementation revenues, management said.

“Key focus areas for growth in the coming quarters for us include continued product innovation, scaling of operations and increased global reach, especially in the mature market and enhancing our banking and insurance solutions,” the company said.

Strong traction in new logo addition, improving client mining, digital lending, improving prospects in APAC, India and Middle East regions will drive the company’s revenue growth. In addition, the company is trying to improve growth in its insurance vertical and tapping trade finance in India and Middle East to drive growth.

Further, Newgen Tech is on track with its strategies to improve market share. GSI partnership and cross sell are expected to drive long-term growth, analyst at IDBI Capital said in the company's Q1 result update.

The stock is, however, trading above the brokerage’s target price of Rs 1,072 per share.