Newgen Software Technologies, a software products company, is coming up with an initial public offering (IPO) on 16th January to raise over INR 400 crore. The Newgen Software Technologies IPO offer will close on January 18th, 2018.

The issue will raise funds consisting of fresh issue of INR 95 crores and Offer for Sale (OFS) of 1,34,53,932 shares by existing venture capital investors. The face value is Rs. 10 per equity share, lot size is of 61 shares and the price band for the same is INR 240-245 per equity share. The company will get list the stock on both BSE and NSE.

Newgen Software – Offer for Sale (OFS)

The Venture capital investors that are selling their stakes consist of IDG Ventures, Ascent Capital and SAP Ventures. Ascent Capital is expected to sell almost its entire 11.42% stake in Newgen, while IDG and SAP Ventures are selling 4.57% and 3.31%, respectively. Ascent, IDG and SAP Ventures are exiting the company. SAP Ventures had invested in the company in 2008, and Ascent and IDG in 2014.

ICICI Securities Ltd, Jefferies India Pvt Ltd and IDFC Bank Ltd Ltd are investment banks for managing the Newgen Software Tecnologies IPO sale.

IPO funds usage

The funds raised will be used to purchase and furnishing of office premises near Noida-Greater Noida Expressway, Uttar Pradesh, as well as for general corporate purposes.

Financial Background

In FY 17, the company had reported a profit of Rs. 50.1 crore compared to Rs. 26.7 crore in the previous year. Further, in FY 17, Newgen has reported the revenue of Rs. 389.7 crore, up from Rs. 315.4 crore in the previous financial year. The company expects its revenue to grow at a compound annual growth rate of 21% over the last five financial years.

Should you Invest in Newgen Software IPO?

At the upper end of the price band, the company will able to raise around Rs. 424.6 crore. The company expects to increase its geographical footprint by adding more verticals beyond the core five verticals, which the company has and also by going deeper into existing verticals by offering new products to the clients.

The industry has an average P/E of 19x, therefore the company’s IPO is slightly over valued. The investors may take part in this IPO.