I agree and it was the case for many of the small caps IT companies which were showing topline growth but reduction in bottom line in 2022.
The lower margins in 2022 for IT companies including Newgen were mainly on account of higher employee salaries (due to heated labor market and very high attrition rates) and high portion of contractors. All IT companies need to do sales and marketing (whether product or services).
So PAT started improving once attrition started cooling down, salary increments came down and subcontracting normalized.
My only point is that let’s not believe that Newgen has got any special sauce that allowed it to outperform its peers in 2022 because it didn’t. The company performed perfectly in line with most of its other IT peers in that year and subsequently.
Disc- Invested in Newgen in 2022 and also track IT universe very closely having large holdings in several IT stocks.
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