Digital transformation is a story which seems to be only gaining traction and steam, with more and more companies opting for the same. In the world of artificial intelligence, quantum computing, and cloud, among others, digital transformation has become a necessity for various sectors.
Newgen Software, posted a 29.6% Rs 293.2 crore in Q2, FY24 from Rs 226.1 crore, during the same year in the corresponding year. It posted a 56% increase in net profit to Rs 47.7 crore in Q2,FY24 from Rs 30 crore in Q2,FY23. The Banking, Financial Services and Insurance (BFSI) sector, and the public sector are some of the industries which account for most of the revenue.
In a conversation with BrandWagon Online, Runki Goswami, global marketing head, Newgen Software, talks about the company’s growing business, marketing strategies besides its expansion plans. (Edited Excerpts)
What percentage of growth do you anticipate in the annuity and subscription areas for Newgen Software, considering that SAAS currently dominates the majority of the growth? What are your expectations for the rest of the financial year?
The total income stands at Rs 1,080 crore which reflects a 25% year-on-year (YoY) growth. Our subscription revenue has increased by 31% YoY growth, amounting to over Rs 100 crore in SaaS revenue. Specifically, subscription revenue reached Rs 322.7 crore which accounted significantly to the overall growth. The Profit After Tax (PAT) margin is 18%, and the EBITDA margin is 22%.
For the rest of this financial year, we’ve hit some major milestones, like the recent order worth Rs 68 crore order from a leading public sector bank in India. It’s a significant win, and we play a crucial role in its journey, as we provide a complete digital business platform for development and management.
Our collaborations are diverse—we’re working on agri-lending solutions with one of India’s largest banks. We’re also fortifying business ties in India, particularly in Saudi Arabia, with a substantial project for digital lending under the Central Bank of Saudi Arabia.
And it doesn’t stop there. We’ve created five new logos for different business, and have expanded in the US and Egypt.Looking ahead to the next fiscal year, the trend will remain the same. We are on a mission to keep collaborating with major brands for agri lending solutions and will continue partnerships with public sector banks. We will continue to focus on the following sectors- banking, financial services, insurance, government, and other enterprises, including retail or healthcare.
Our partnerships with global digital services giants such as GSI, Duck Creek, Guidewire, and others continue to flourish. Recognised as the market leader by third party agencies such as Gartner, especially in accounts payable, we’re looking at more action in marketing next fiscal year., We plan to ramp up our brand image, dive into digital marketing, work with influencers, and give branding the attention it deserves.
What is the ratio between renewed and new subscriptions in your subscription model, and could you elaborate on your strategy for acquiring new subscribers?
The 31% year-on-year growth in subscription revenues, with Rs 100 crore from SaaS is a clear indicator of the significant contribution from new subscription revenues. This growth rate, surpassing industry standards, reflects a robust strategy, with new subscriptions playing a predominant role. If we were to quantify, you can consider it to be a 40:60 ratio, with a substantial portion of revenues being driven by new subscriptions.
Digital transformation has been a key area of concern for many mid-cap and SMEs – what are the kinds of companies you target?
We exclusively target top-tier banks and insurance companies in the BFSI sector, categorising them based on substantial asset sizes, such as Rs 5oo crore and extending up to Rs 10,000 crore and above. In the US, for instance, our business classification begins with tier-1, 2 and 3 banks, focusing on its revenue or asset size. Our business engagement starts at a minimum threshold of Rs 500 crore, and we do not pursue business below that threshold in the BFSI sector.
While sectors like banking and insurance, have enough financial backing to avail your services, is there a plan to ensure other sectors too can avail your products and services?
While our primary focus remains on financial services, insurance, and government sectors, we are also expanding into healthcare, particularly from a US standpoint. Additionally, we are exploring opportunities in the retail sector.
India accounts for 31% of the total revenue – by what percentage do you expect a spike in this?
We always aim for more and more, and considering that our targets for this year have already been met, I wouldn’t be surprised if the growth rate even crosses 40%. However, the exact figures are something which uncertain until the sales and order bookings are finalised.
As per Statista, the Indian IT industry is projected to grow at a CAGR of 13.97% over the next five years. How is Newgen Software planning to position itself to leverage this growth potential?
Given that we are one of the leading platform providers for some of the most significant banks in India and globally, our position in the product business establishes long-term associations with our clients. While I can’t provide the exact percentage of our contribution to the projected 14% and above growth, we are undoubtedly making a substantial contribution to this upward trajectory.
How is Newgen Software planning to up its marketing game?
The current focus for Newgen Software in marketing is heavily geared towards branding. Our emphasis is on getting recognition for Newgen’s end-to-end automation platform which should be known because it is a unique offering in the market. Currently, we have more than 520 active customers. Now the goal is to generate demand and potentially increase the customer base to 700 or 800 in the next fiscal.
To achieve this, the marketing team is exploring new strategies for lead generation. We are collaborating with leading global service integrators, such as Duck Creek and Guidewire, to bring synergy and enhance the positioning of Newgen’s platform and brand. Continuous product launches are on the agenda, with 44 patents filed and 23 already approved.
A notable achievement is the 27% increase in average deal sizes, with over 51 customers reporting an order billing of Rs 5 crore and above. The challenge for the marketing team is to further boost these numbers in the next fiscal, making it a comprehensive 360-degree strategy.
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