Although the third quarter of financial year (2023-2024) FY24 (Q3FY24) was marginally below expectations, Info Edge (India) is witnessing strong investment trends and hitting new highs.
The big driver is optimism about a pickup in the jobs market, which benefits Naukri.com and could mean upgrades in Q4FY24 expectations.
The JobSpeak Index, which Naukri.com releases on a monthly basis, is showing a “transformative shift”.
The February 24 index had 13 per cent month-on-month improvement over January 24, with strong hiring across oil & gas and pharma sectors although it was weaker on a Y-o-Y basis.
The management remains optimistic that the slowdown in IT hiring (which contributes around 50 per cent of jobs) has bottomed out, with large IT firms hitting 85 per cent utilisation levels by early Q4FY24.
Non-IT demand has been resilient through 9MFY24 and the focus on expanding into smaller towns could reduce the dependence on IT.
Naukri.com continues to be the market leader among recruitment portals with a database of over 95 million and 70 per cent traffic market share in the segment.
On margins, InfoEdge believes that with mid-teens growth, it should maintain operating profit margins of 55-57 per cent and if growth is faster, margins could rise above 60 per cent.
The real estate vertical 99Acres has benefited from the rising demand for newer houses, higher disposable income and higher buyer confidence.
InfoEdge estimates that the real estate advertisement market is around Rs 5,000 crore in size, with an online share of 45-50 per cent.
Facebook and Google together hold 50-55 per cent of the online market share with the remaining equally distributed among three vertical players, including 99Acres.
InfoEdge says with stable marketing spending, its real estate business could reach breakeven with quarterly revenues of Rs 110 crore.
In the matrimony portal, Jeevansathi, the focus is on turning profitable.
The company has made changes to its business model by making some features free, and reducing marketing spend.
This has led to traffic growth of 15-20 per cent within the last year, and reduced losses from minus 141 per cent of revenues in Q3FY23, to minus 63 per cent in Q3FY24.
This segment (matrimony) is a three-player market. Similarly, Shiksha could hit breakeven in FY25.
In terms of its strategic investment portfolio, the management estimates it usually takes 8-12 years for a startup to achieve IPO status, based on the experiences in Zomato and PolicyBazaar.
It believes most of its current unlisted holdings will take some more time to monetise, via listing.
This excludes recent late-stage investments in Ixigo and Bluestone, which could go public faster.
On Zomato and PolicyBazaar, InfoEdge noted that while it evaluates these investments quarterly, it intends to continue holding stakes, given the visibility of growth and better profitability.
Given Rs 3,720 crore of cash/cash equivalent on the balance sheet, it does not have a cash crunch and it can afford to wait.
The issue with Google Play Store has been resolved and the apps have been relisted.
Google’s policy of charging distribution fees on in-app purchases impacts its B2C business (Jeevansathi), which is a small part of its portfolio.
Purchases in the properties are mostly done through its website or offline.
Valuations for Info Edge will depend on the following: An assessment of IT hiring recovery, managing to grab market share and improve margins in the competitive real estate, matrimony, education segments, and valuation of the investment portfolio.
Most analysts remain optimistic and the stock has returned 50 per cent in the last year.
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