Newgen Software CEO wants to burn cash to take the around $100-mn firm to $500-mn in five years

A day after Newgen Software reported 8.8 percent increase in consolidated net profit at Rs 57.4 crore for the fourth quarter of 2021-2022 versus Rs 52.7 crore in the same quarter in 2020-21, CEO Virender Jeet told CNBC-TV18 the firm wants to grow into a $500-million company in the next five years.

He said Newgen was still a small company, touching roughly around $100 million. "Our goal is to grow up to $500 million in the next five years. So most of the cash will be deployed for aggressive growth. Some parts can be organic, some will be led by inorganic initiatives. Next year we are going to look at some more acquisitions," Jeet said.

Revenue from operations increased 15.7 percent to Rs 231.42 crore during the quarter from Rs 199.98 crore in January-March 2020-21. In the year ended March 2022, net profit grew 29.83 percent to Rs 164.21 crore from Rs 126.48 crore in 2020-21.

"The US has been a weak year, we are expecting to do better. What happened last year – we did a one-time business and there was a significant jump of roughly around Rs 35 crore," he said.

He also said Europe, Middle East and Africa (EMEA) business would see strong growth in FY23.  “It is a high base business but the market is looking very positive for us right now. Traditionally, it has been a strong market for us. we should be able to substantially grow that number,” he said.

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“Next year we expect the margin pressure to continue slightly. In the near-term we are seeing a net margin of 18-19 percent, EBITDA margin we are at 23-25 percent,” said Jeet.

On attrition, the CEO said: "Our business is not completely dependent on people because a lot of our business is on license and on the annuities we generate, so a very small part of our business is dependent on people. But overall, the cost pressure at resources and the higher attrition is going to continue for this year – at least for a significant part of this year."

The company's board has also approved the merger of Number Theory Software (NTSPL) with Newgen Software. Newgen had entered into a share purchase agreement with shareholders of NTSPL in January to acquire 100 percent stake in the company for Rs 14.05 crore of which over Rs 7 crore were paid on January 28 after the completion of acquisition and remaining will be paid over the next three years.