Started in 1992, Newgen Software Technologies Limited is a software products company offering a platform that enables organizations to rapidly develop powerful applications addressing their strategic business needs. The applications created on their platform enable organizations to drive digital transformation and competitive differentiation. Company's platform comprises of:1. Enterprise Content Management (ECM): Its OmniDocs Enterprise Content Management Software allows digitization of enterprise content and information. Our platform provides smart tools for enterprises to capture and extract information from various sources, classify, store, archive or retrieve as well as dispose off any content and documents required in day-to-day business operations.2. Business Process Management (BPM): Its OmniFlow Intelligent Business Process Suite (OmniFlowiBPS) is an integrated system which allows enterprises to manage a complete range of business processes, including designing and modeling flow of work, executing the flow of work through the workflow engine and monitoring the flow of work for future improvement.3. Customer Communication Management (CCM): Its OmniOMS Customer Communication Management suite offers a unified communication platform that allows enterprises to improve communication with their customers by delivering a personalized, targeted and consistent communication through various channels. Company's business has multiple revenue streams including from:1. Sale of software products: One-time upfront license fees in relation to the platform deployed on-premise2. Annuity based revenue: Recurring fees/charges from the following:o SaaS: subscription fees for licenses in relation to platform deployed on cloudo ATS/AMC: charges for annual technical support and maintenance (including updates) of licenses, and installationo Support: charges for support and development services3. Sale of services: Milestone-based charges for implementation and development, and charges for scanning services Company's go-to-market strategy consists of direct sales supplemented by sales through their channel partners. Their direct sales are made by the Company itself, in India and their Subsidiaries located in USA, UK, Singapore and Canada, through their sales and marketing teams, which, as of June 30, 2017 comprised 265 employees. As of June 30, 2017, they had more than 300 channel partners globally. As of June 30, 2017, company had over 450 active customers (invoiced in the last 12 months) in over 60 countries. Some of the key active customers include Trust Company of America, Mercantil Bank, ICICI Bank, Trafigura, Bajaj Electricals, United Arab Bank, National Commercial Bank Jamaica, Axis Bank, Yes Bank, Kotak Mahindra Bank, Bank Islam Brunei Darussalam, Philippines Resource Saving Bank, ICICI Prudential Life45Insurance, Reliance General Insurance, Max Life Insurance, Strides Shasun and Shriram Transport Finance. As of the date of this Draft Red Herring Prospectus, company had four patents registered in India and 27 outstanding patent applications in India and one outstanding patent application in the USA. Their patents include: (i) Method and system for document authentication, (ii) System to instantly generate an online image of a document from multiple images captured through a camera-equipped mobile device, (iii) System and method for automatically verifying the authenticity of signatures, and (iv) System and method for assessing document image viability. On performance front, NSTL has posted turnover/net profits of Rs. 205.55 cr. / Rs. 36.96 cr. (FY13), Rs. 255.17 cr. / Rs. 41.08 cr. (FY14), Rs. 316.21 cr. / Rs. 46.38 cr. (FY15), Rs. 349.67 cr. / Rs. 27.82 cr. (FY16) and Rs. 433.77 cr. / Rs. 52.36 cr. (FY17). For H1 of FY18, it has reported net profit of Rs. 5.84 cr. on a turnover of Rs. 209.95 cr. Thus company has posted healthy growth over last couple of years on consistent basis. In FY16 and H1 of FY18 bottom line has seen some decline and as per RHP, its due to increased spending on (i) travelling and conveyance expenses, (ii) provision for doubtful trade receivables, (iii), rent, (iv) net foreign exchange loss, and (v) legal and professional expenses. The increase in travelling and conveyance expenses was due to an increase in the number of orders executed and marketing initiatives undertaken by company. NSTL has posted an average EPS of Rs. 8.65 and average RoNW of 17.23% for last three fiscals. Issue is priced at a P/BV of 5.74 as per NAV on 30.09.17. It has no listed peers to compare with as per RHP. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 145 and when we calculate at FY17 earnings then its around 32. So issue looks fully priced. As per financials, company's growth is good, RoNW is 17.23% for last three fiscals and issue is priced at P/E of around 145. Company has shown decline in bottom line in H1 of FY18, which is due to increased spending related to marketing. As NSTL is software products company, they have long standing relationships with existing customers and they are increasing their customers YoY, which are spread across the globe, So future of company looks good. Thus, we give SUBSCRIBE rating to this IPO.
✍️ Post a Comment