Newgen Software Q3 Results: Net Profit Dips 23% Amid Labour Code Impact, Revenue Flat

Shares of Newgen Software Ltd. experienced a sharp decline of over 15% on Tuesday, January 20, following the announcement of the company’s Q3 results. Investors reacted strongly as the company reported a fall in profitability, while revenue remained stagnant compared to the previous quarter.

Market Performance

• Stock performance: Shares dropped 15% on Tuesday, settling at ₹627.25.
• One-year trend: The stock has declined approximately 57% over the last 12 months.

The sudden drop reflects investor concern over the sequential decline in profits, despite marginal improvements in margins and EBIT.

Newgen Software Q3 Financial Highlights

Newgen Software’s Q3 results for the quarter ending December 31 showed mixed signals, with profitability taking a hit but operational margins showing slight expansion. Key numbers include:

• Net Profit: ₹63 crore, down 23.2% from ₹82 crore in the previous quarter.
• One-time impact: ₹35 crore loss due to the new labour code. Adjusted for this, profits would have shown sequential growth.
• Revenue: ₹400 crore, flat compared to ₹401 crore in Q2.
• EBIT: ₹97 crore, up 3.1% from ₹94.4 crore in the previous quarter.
• EBITDA Margin: 24.2%, up 70 basis points from 23.5% in Q2.

Business Segment Performance

Breaking down revenue by geography:

• India: ₹115.4 crore, down from ₹117.8 crore.
• EMEA: ₹123.6 crore, unchanged from last quarter.
• APAC: ₹65.32 crore, a slight increase from ₹63.45 crore.
• US: ₹96 crore, marginally up from ₹95 crore.

While India’s revenue showed a small decline, other regions remained steady or grew slightly, helping offset some of the domestic pressure.

Company Overview

Newgen Software operates in the enterprise software space, serving clients across India, the US, EMEA, and APAC. The company continues to manage operational efficiency, reflected in improved EBITDA margins, even amid regulatory challenges like the new labour code.

The Q3 results underline the mixed performance: flat topline, declining net profit, but slightly better operational efficiency.

Summary

Newgen Software’s Q3 results indicate a challenging quarter with a notable impact from the labour code.

• Revenue remained flat at ₹400 crore.
• Net profit fell 23.2% to ₹63 crore due to a one-time ₹35 crore impact.
• EBIT rose modestly to ₹97 crore, and EBITDA margins expanded to 24.2%.
• Business segments showed mixed trends: India dipped, US and APAC saw minor growth, EMEA remained flat.

The results suggest that while regulatory pressures affected profitability, the company maintained operational discipline, showing resilience in key overseas markets.

Source: CNBCTV 18