Newgen Software shares surge 2% after it secures $1.28 million contract

Over the past six months, shares of Newgen Software have faced significant pressure

Shares of Newgen Software gained 2 percent to Rs 986 apiece on March 27 after the company secured an award letter for an Enterprise Content Management Solution contract worth $1.28 million. The contract is set to be executed over a span of five years.

Over the past six months, shares of Newgen Software have faced significant pressure, tumbling over 30 percent, compared to a 10 percent decline in the benchmark Nifty 50 index.

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Adding to its business momentum, last month, Newgen Software executed a Statement of Work (SoW) with a US-based client. The three-year agreement, valued at $1.93 million, further strengthens the company’s foothold in the global market.

In the third quarter, Newgen Software delivered a robust financial performance, reporting a 31 percent year-on-year increase in net profit, which surged to Rs 89 crore from Rs 68 crore in the same period last year. This impressive growth was fueled by strong operational execution and improved profit margins.

Revenue for the quarter also witnessed healthy expansion, climbing 17.7 percent to Rs 381 crore, compared to Rs 323.7 crore in the year-ago period. The uptick in revenue was driven by increasing demand for Newgen’s digital transformation solutions across multiple sectors.

On the operational front, the company posted a remarkable 40.2 percent jump in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which soared to Rs 107.8 crore. Meanwhile, EBITDA margins expanded to 28.3 percent, up from 23.8 percent year-on-year, reflecting improved cost efficiencies and strong business execution.

However, despite the company’s strong quarterly performance, global brokerage firm Jefferies recently downgraded Newgen Software to "underperform" from "buy." The downgrade came in response to weaker-than-expected Q3 results for FY25 and concerns regarding the company’s high valuation.

Jefferies also revised its earnings per share (EPS) estimates downward by 4 to 6 percent for FY25-27, now projecting a 23 percent compound annual growth rate (CAGR) over the period. Given the moderation in growth expectations and the stock's elevated valuation—currently trading at 55 times its projected FY26 price-to-earnings (P/E) ratio—Jefferies lowered its target price for Newgen to Rs 1,240, applying a 35x P/E multiple.