Companies

Newgen eyeing double-digit turnover growth: Diwakar Nigam

Abhishek Law Kolkata | Updated on September 01, 2021

Diwakar Nigam, MD and Chairman, Newgen Software

Company is reworking business models towards a more annuity-driven one, says MD and Chairman

IT product company Newgen Software is expecting EBITDA (earnings before interest, tax, depreciation, and amortisation) in the 23 to 25 per cent range and profit margins to be in the 17 to 19 per cent range in FY22 as it reworks business models towards a more annuity-driven one, primarily in markets like APAC, Middle East, the US, and Europe.

Hybrid working models leading to digital transformation in the organisation in a post-pandemic new normal have seen the company look at the possibility of a “double-digit turnover growth.”

Compared to India, where revenue growth was slowing due to the second wave of the Covid-19 pandemic and increased attrition rate, the “mature markets” are witnessing higher growth. Moreover, the mature IT markets also look for annuity and subscription-based models over a licensing-based system.

Newgen Software bullish on growth prospects

Each of the geography — India, EMEA, and the US— contributes 30 per cent to Newgen’s revenues. The APAC accounts for the remaining 10 per cent.

According to Diwakar Nigam, MD and Chairman, Newgen Software, 75-80 per cent of the company’s revenues come from renewals by existing clients and 20 per cent from new customer acquisition.

While margin pressures continue to rise because of higher attrition rate (25-30 per cent) and salary costs, the company is confident of improving the margin. Rupee appreciation is not expected to further hurt margins due to the company’s hedging policy.

“I think we can easily manage 23 to 25 per cent EBITDA and 17-19 per cent net profit margins. Margins are not the issue. For us, it is important to be able to close more and more deals, to deliver, and so on,” he told BusinessLine. In FY21, profit margins were at 18.4 per cent.

Targeting North American markets

Order pipelines are now “good and growing” over the last year across markets like APAC, EMEA and the US. In absolute value terms, deal sizes and renewal contracts are higher in most of these markets.

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The company is targeting an increased presence in the North American markets with its flagship platforms, including low code process automation (BPM), contextual content services (ECM), and omni-channel customer engagement (CCM).

Gartner pegs the ECM, BPM, and CCM markets globally to be at $12 billion, $10 billion, and $6-7 billion annually, with a 10-12 per cent growth every year.

Going forward, 60-70 per cent of revenues would be annuity-based (subscriptions, AMCs, etc).

High debtor position continues in geographies like India and ME, but there is “no alarm” as these numbers “reflect the first half of the fiscal but will most likely even-out towards the latter half.”

Published on September 01, 2021

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