New Delhi based IT firm Newgen Software Technologies’ Initial Public Offer (IPO) to raise up to Rs 424 crore which opened for subscription today, is progressing slowly, and got subscribed by nearly 14% as the issue received bids for 17,39,598 shares as against the issue size of 1,22,12,821 shares. Newgen Software Technologies said that it raised around Rs 127.39 crore by selling shares to institutional investors as part of its anchor book allocation, ahead of its IPO.

The company has set a price band of Rs 240-245 for the issue, and looks to raise upto Rs 424 crore at the higher end of the band. The issue would constitute fresh issue worth of Rs 95 crore and offer for sale worth of Rs 330 crore (at upper band). The company will dilute 5.6 per cent of its post-offer paid-up equity share capital. Newgen Software IPO will remain open for subscription from 16th January to 18th January 2018. The lot size is fixed at 61 shares and in multiples of 61 shares thereafter.

Founded in 1992, the company is involved in manufacturing of products that facilitate development of software applications. The company sells its products to banks, insurance firms, BPOs and healthcare organisations. While investors may be mulling whether to subscribe to the issue, we take a look at what brokerages have to say about the issue.

Angel Broking-Neutral

Angel Broking says that the issue is priced higher than its peers. “In terms of valuations, the pre-issue P/E works out to 274x its 1HFY2018 annualized earnings (at the upper end of the issue price band), which is higher compared to its peers like Intellect Design Arena (trading at PE 143x – 1HFY2018 annualized earnings). Further last four years historical financial records and 1HFY18 doesn’t provides confidence. Hence, we recommend Neutral rating on the issue,” noted Angel Broking.

SSJ Finance- Subscribe

“Newgen Software Technologies Ltd has reported a CAGR of 20.7% and 9.1% on revenue and net profit fronts respectively over FY2013-2017. On its upper band of price of Rs 245, the issue is priced at PE ratio of 30.6x of its FY2017 EPS of Rs 8.0. We believe that the IPO is fairly priced leaving a room for upside. Hence, we recommend to Subscribe the IPO,” said the firm.

HEM Securities- long-term subscribe

“The company is bringing the issue at p/e multiple of 33 on FY17 eps of Rs 8.26 at higher price band of Rs 240-245/share. Looking after financials of company, we recommend “Long Term Subscribe” on it,” HEM Securities said in a note.