Newgen Software Technologies shares slipped 10 per cent to Rs 1,405.85 on the BSE in Tuesday’s intra-day trade on profit booking as the company reported single digit revenue growth of 5.5 per cent sequentially in the December 2024 quarter (Q3FY25). In Q2FY25, the company’s revenue had risen 14.8 per cent on a quarter-on-quarter (QoQ) basis.
 
The stock of the computer software & consulting company is trading lower for the fourth straight day, down 20 per cent during the period. It corrected 22 per cent from its record high level of Rs 1,795.50, touched on January 15, 2025. However, in the past six months, Newgen has outperformed the market by surging 45 per cent, as compared to the 4.4 per cent decline in the BSE Sensex. In one year, the stock has zoomed 82 per cent, as against the 9 per cent gain in the benchmark index.


Newgen is the leading provider of AI enabled unified digital transformation platform with native process automation, content services, and communication management capabilities. Its customers are organisations belonging to sectors such as banking, telecommunication and insurance.
 
The company's revenue growth moderation was due to a lower-than-expected revenue realisation from the India business, attributed to execution challenges and extended implementation cycles (beyond one year) for certain large, complex deals. 
 
The management, however, remains optimistic about sustaining 20 per cent plus revenue growth, supported by continued momentum in the licensing business across India and APAC, and shorter deal cycles. It guided for profit after tax (PAT) margins in the 20-23 per cent range in FY25. The company's management reiterated their commitment to reaching their aspirational goal of US$500 million in revenue within the next 3-4 years, leveraging growth momentum in mature markets. The growth momentum is likely to be a key monitorable, going ahead, ICICI Securities said in a note.

Meanwhile, Newgen reported 6 per cent QoQ/18 per cent year-on-year (YoY) revenue growth, at Rs 381.1 crore, driven by solid deal wins. License sales were up by 70 per cent YoY due to good deal velocity. The company said it added 15 new logos during the quarter. Its earnings before interest, tax, depreciation and amortisation (Ebitda) was up 41 per cent YoY, at Rs 108.3 crore, with margins climbing approximately 460 bps YoY to 28.4 per cent. The company reported PAT of Rs 89.0 crore, up 26.5 per cent QoQ and 30.2 per cent YoY.
 
A focus on larger customers with bigger orders, continuous development and innovation in products and increasing overseas sales in new geographies will lead to revenue growth over the medium term. The top 10 customers contributed 25-30 per cent revenue in fiscal 2024 and exports accounted for around 70 per cent. Diversity in geographic reach and clientele should continue to support the business, CRISIL Ratings said in rationale.
 
However, as a majority of revenue comes from the international market, any sharp fluctuation in forex rates affects realisation and cash accrual. This exposes the company's operating margin to fluctuations in forex rates, the ratings agency said.