Shares of Newgen Software Technologies tumbled nearly 13% in Tuesday’s session after the company reported a weak set of Q3 earnings, triggering sharp investor disappointment.
The primary reason behind the sell-off was a steep sequential decline in net profit. For the third quarter, Newgen Software reported a net profit of Rs 63 crore, down 23.2% quarter-on-quarter from Rs 82 crore in Q2. The sharp drop in profitability raised concerns over earnings momentum, especially at a time when valuations in the IT mid-cap space remain elevated.
Revenue performance also failed to impress the Street. The company’s Q3 revenue came in at Rs 400.3 crore, marginally down 0.2% QoQ from Rs 401 crore in the previous quarter. While the decline was modest, the flat topline growth signaled slower deal ramp-ups and limited near-term growth visibility, which added to negative sentiment.
That said, some operational metrics showed improvement. EBIT rose 4% QoQ to Rs 97 crore from Rs 93.3 crore, supported by tighter cost controls. As a result, operating margin improved to 24.2%, compared with 23.3% in Q2, indicating better operating efficiency despite revenue pressure.
However, markets largely focused on the profit decline and muted revenue growth, overshadowing the margin improvement. The sharp fall in the stock price suggests investors were expecting stronger earnings traction and reacted swiftly to the earnings miss.
At around Rs 638, the stock also hit the top loser list, reflecting broader risk-off sentiment in mid-cap IT stocks following earnings that failed to meet market expectations.
