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Newgen Software IPO subscribed 19% on day one
Photo Credit: Shah Junaid/VCCircle

The initial public offering of New Delhi-based IT company Newgen Software Technologies Ltd was covered 19% on the first day of the issue on Tuesday, led by retail investors.

The public issue of 12.21 million shares, excluding anchor investors’ portion, received bids for 2.31 million shares, stock-exchange data showed.

The quota of shares reserved for institutional buyers was subscribed about 1% while the retail portion, in which bids cannot exceed Rs 2 lakh, was covered 32%.

The portion set aside for non-institutional investors, comprising corporate bodies and wealthy individuals, saw just a handful of bids. High-net-worth individuals (HNIs) typically bid on the final day of a public offering to keep their financing costs low. HNIs deploy a small fraction of their own capital and borrow short-term capital from various avenues, barring banks, to place large bids in IPOs.

Ahead of the IPO, Newgen raised Rs 127.38 crore ($20 million) by selling 5.19 million shares to a bunch of anchor investors including Goldman Sachs and hedge fund Forefront Alternative Investment Trust on Monday.

Newgen is selling shares in a price range of Rs 240-245 apiece. It is seeking a valuation of as much as Rs 1,696.27 crore ($266 million) through the IPO.

At the upper end of the price band, the company will issue 3.87 million fresh shares while its founders and investors will sell 13.45 million shares. The investors include Ascent Capital, IDG Ventures and SAP Ventures.

The total IPO size is about Rs 425 crore and will result in a 25.03% stake dilution on a post-issue basis.

The company had filed its draft IPO prospectus with the Securities and Exchange Board of India on 27 September last year. It received the regulator’s nod on 17 November.

Newgen will use the proceeds from the fresh issue to buy and furnish office premises in Noida. It will use the balance amount for general corporate purposes.

ICICI Securities, Jefferies India and IDFC Bank are the merchant bankers managing Newgen’s IPO.

Newgen offers a software platform that enables customers to develop applications for their businesses. The platform comprises enterprise content management tools that help digitise content and information, business process management and customer communication.

It earns revenue from multiple streams such as the sale of software products. It also earns annuity-based revenue such as software-as-a-service subscription fees, and annual technical and annual maintenance charges. The company had about 450 customers in almost 60 countries as of 30 June 2017.

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