Info Edge - Annual Report - 2008-2009

INFO EDGE (INDIA) LIMITED

ANNUAL REPORT 2008-2009

DIRECTOR'S REPORT

Dear Shareholders,

Your Directors have pleasure in presenting the Directors Report together
with the audited accounts for the year ended March 31, 2009.

FINANCIAL RESULTS:
(RS. MILLION)
PARTICULARS 2008-09 2007-08

Revenue:

Net sales 2,451.66 2,189.39
Other income 286.30 207.25
Total Income 2,737.96 2,396.64
Expenditure
Advertising and Promotion Cost 433.20 481.24
Administration and Other
expenses 324.92 255.75
Personnel expenses 933.88 746.28
Network and other charges 90.41 60.53
Finance and other charges 17.26 11.19
Depreciation 71.10 55.51
Total expenditure 1870.77 1,610.50
Net profit before tax 867.19 786.14
Tax 270.33 231.27
Net Profit after Tax 596.86 554.87

FINANCIAL REVIEW:

Net Sales increased by 11.98% from Rs. 2,189.39 million in 2007-08 to
Rs. 2,451.66 million in 2008-09. Other income increased by 38.14% to
Rs. 286.30 million in 2008-09, primarily due to sale of investments in
mutual funds. Consequently, Total income increased by 14.24% from
Rs. 2,396.64 million in 2007-08 to Rs. 2,737.96 million in 2008-09.

Total expenditure increased by 16.16% from Rs. 1,610.50 million in 2007-08
to Rs. 1,870.77 million in 2008-09. There was a conscious effort to
optimize advertisement and promotion expenditure. In fact, advertising and
promotion costs decreased by 9.98% from Rs. 481.24 million in 2007-08 to
Rs. 433.20 million in 2008-09.

Profit before tax increased by 10.31% from Rs. 786.14 million in 2007-08 to
Rs. 867.19 million in 2008-09 and Profit after tax increased by 7.57% to
Rs. 596.86 million in 2008-09.

DIVIDEND:

Your Directors are pleased to recommended dividend at the rate of Re. 0.75
per share for 2008-09, subject to the approval of the shareholders. The
proposed dividend together with corporate dividend tax would mean an
outflow of Rs. 23.95 million.

TRANSFER TO RESERVE:

Since your company is not paying dividend exceeding 10% of the paid-up
capital, the Companies (Transfer of Profits to Reserves) Rules, 1975 is not
applicable.

OPERATIONS REVIEW:

In terms of revenue, our primary business remains online recruitment
classifieds and related services through naukri.com, naukrigulf.com and
quadrangle business divisions. Revenues from the recruitment solutions
business increased by 7.75% from Rs. 1,964.26 million in 2007-08 to
Rs. 2,116.47 million in 2008-09. This business generated around 86.33% of
the companys net sales in 2008-09. We also provide matrimonial and property
related classifieds and related services through our jeevansathi.com and 99
acres.com divisions respectively. With revenues from these other verticals
increasing by 48.89%, their combined contribution to the companys net sales
increased to 13.67% in 2008-09. During 2008-09, the Company diversified its
business base by entering the online education classifieds business by
launching shiksha.com.

Detailed analysis of the performance of the Company and its businesses,
including initiatives in the area of Human Resources, Information
Technology, has been presented in the section on Management Discussion and
Analysis of this Annual Report.

FUTURE OUTLOOK:

We are optimistic about the long term prospects of the company. There is
immense potential in the businesses and the growing upwardly mobile urban
population in India offers several opportunities to build our businesses.
In the near term, we believe that the global economy will remain depressed
and growth in India will be slower than what was witnessed in the recent
past. However, there will continue to be opportunities and we are
witnessing an increase in our market share vis-a-vis our competitors.
Today, we are in a consolidation phase. We are working on cost management,
productivity improvements and product quality enhancements to be well
prepared o leverage the upturn in the economy as and when it comes.

SUBSIDIARY COMPANIES:

As of March 31, 2009, the Company had the following five subsidiary
companies.

* Naukri Internet Services Private Limited.

* Jeevansathi Internet Services Private Limited.

* All checkdeals India Pvt. Limited.

* Info Edge (India) Mauritius Limited.

* Info Edge USA Inc.

PARTICULARS OF EMPLOYEES:

In a difficult business environment in 2008-09, we have not undertaken any
layoffs. Most of the workforce reduction has been due to natural attrition.
The focus this year has been on improving the productivity of our people
through a structured process of rationalization. We have had several
instances where vacancies have been filled up by internal staff. Employee
costs have been managed primarily by incorporating a variable pay systems
where extra expenditure is not incurred if performance targets are not met.

The particulars of employees required under Section 217 (2A) of the
Companies Act, 1956 and the rules there under, are required to be annexed
to this Report as Annexure. However, pursuant to the provisions of Section
219(1)(b)(iv) of the Companies Act, 1956, the Annual Report and Accounts
are being sent to all the shareholders of the Company without the above
information. Any shareholder interested in obtaining such particulars may
write to the Company.

EMPLOYEES STOCK OPTION PLAN (ESOP):

We had adopted ESOP schemes to include our employees in wealth sharing and
in having a more retention oriented compensation program. As the Company
was a private limited unlisted company, therefore SEBI ESOP Guidelines were
not applicable to our old ESOP scheme (ESOP 2003) under which the first
round of options were granted in August 2004. However, with the listing of
Companys shares in November 2006, the Company introduced a new SEBI
compliant ESOP scheme (ESOP 2007), which was approved by passing a special
resolution in the Extra-ordinary General Meeting (EGM) held on March 26,
2007.

Disclosures as required by clause 12 of the SEBI Employees Stock Option
Scheme and Employee Stock Purchase Scheme Guidelines, 1999 are annexed to
this report.

A certificate from M/s. Price Waterhouse, Chartered Accountants, Statutory
Auditors, with regards to the implementation of the Company Employees Stock
Option Schemes, would be placed before the shareholders in the Annual
General Meeting.

CORPORATE GOVERNANCE:

Separate detailed chapters on Corporate Governance, Additional Shareholder
Information and Management Discussion and Analysis are attached herewith
and forms a part of this annual report.

PUBLIC DEPOSITS AND LIQUIDITY:

We continue to be almost debt-free, and believe we maintain sufficient cash
to meet our strategic objectives. During 2008-09, your Company has not
accepted any deposits or raised any fresh equity from the public.

ENERGY CONSERVATION, TECHNOLOGY ADOPTION AND FOREIGN EXCHANGE FLOWS:

Since the Company is a service sector company and does not own any
manufacturing facility, the other particulars in the Companies (Disclosure
of Particulars in the Report of the Board of Directors) Rules, 1998 are not
applicable. However, on a proactive basis, we are disclosing the details of
energy conservation and technology absorption as part of annexure A to the
directors report. The particulars regarding foreign exchange earnings and
expenditure are furnished below:

(RS. MILLION)
PARTICULARS 2008-09 2007-08

Foreign Exchange Earnings
Sales 290.44 215.56
Total Inflow 290.44 215.56
Foreign Exchange Outgo
Travel 0.58 1.91
Expenses on server, etc 58.47 36.62
Advertisement, Promotion and
Marketing 4.44 16.53
Foreign Branch Expenses 26.17 15.00
Others 10.04 7.16
Total Outflow 99.70 77.22
Net Foreign Exchange Flow 190.74 138.34

LISTING OF SHARES:

The Companys shares are listed on Bombay Stock Exchange Ltd. (BSE) &
National Stock Exchange of India Ltd. (NSE) with effect from November 21,
2006, post its initial public offering (IPO).

DIRECTORS:

As per the requirements of Section 256 of the Companies two-third of the
Board shall consist of retiring directors out of which one third shall
retire at every annual general meeting.

Accordingly, Mr. Kapil Kapoor, Ms. Bala Deshpande and Mr. Ambarish
Raghuvanshi shall retire and shall seek re-appointment in the ensuing
Annual General Meeting of the Company.

INTERNAL CONTROL SYSTEMS:

The Company has in place adequate systems of Internal Control to ensure
compliance with policies and procedures. Internal Audits of all the units
of the Company are regularly carried out to review the internal control
systems. The Internal Audit Reports along with implementation and
recommendations contained therein are constantly reviewed by the Audit
Committee of the Board.

The Company has undertaken to implementation of an ERP solution namely
Microsoft Navision which is expected to provide better control and strong
support to our growth plans.

AUDITORS:

M/s. Price Waterhouse, Chartered Accountants hold office until the
conclusion of forthcoming Annual General Meeting and being eligible offer
themselves for re-appointment.

DIRECTORS RESPONSIBILITY STATEMENT:

The Directors confirm that:

* In the preparation of the annual accounts, the applicable accounting
standards have been followed;

* They have selected such accounting policies and applied them consistently
and made judgements and estimates that are reasonable and prudent, so as to
give a true and fair view of the state of affairs of the Company at the end
of the financial year and of the profits of the Company for the year;

* They have taken proper and sufficient care for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956, for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities; and

* They have prepared the annual accounts on a going concern basis.

NOTES TO ACCOUNTS:

The observation of auditors and notes on accounts are self explanatory.

ACKNOWLEDGMENTS:

We thank our clients, vendors, investors and bankers for their continued
support during the year. We place on record our appreciation of the
contribution made by employees at all levels. Our consistent growth has
been made possible by their hard work, solidarity, cooperation and support.

For and on behalf of the Board of Directors

Date : June 26, 2009 Kapil Kapoor
Place: Hongkong Chairman

ANNEXURE-I

DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY, RESEARCH
AND DEVELOPMENT:

Particulars pursuant to Companies (Disclosure of particulars in the report
of the Board of Directors) Rules, 1988.

1. Conservation of energy:

While our operations are not energy-intensive, we continued to take steps
to reduce energy consumption. Some of the significant measures undertaken
during the year are listed below:

i) Regular Monitoring of Temperature inside the buildings and controlling
the Air-conditioning System.

ii) Rationalization of usage of electrical equipments-air-conditioning
system, office illumination, beverage dispensers, desktops.

iii) Facility audit to incorporate correct air-conditioning / DG ratings,
usage of auto phase corrector.

iv) Replacement of halogens to CFL illumination.

v) Signage timings rationalization.

vi) Planned Preventive Maintenance (PMP) schedule put in place for electro-
mechanical equipments.

2. Research and Development (R&D):

We operate in the internet/ information technology industry where
developments happen on a continuous basis. We regularly evaluate these
developments & factor their suitability to us. Accordingly, research and
development of new services, designs, frameworks, processes and
methodologies continue to be of importance to us. This allows us to enhance
quality, productivity and customer satisfaction through continuous
improvements /innovation.

a. R&D initiative:

Our Technical Team works to optimize the existing software applications and
to be able to optimally use the existing hardware on a continuous basis.

b. Specific areas for R&D at the company & the benefits derived there from.

Our search engine team has worked on bringing about significant
improvements to the job and resume searches offered on the website by
exploring newer and better ways to search.

c. Future plan of action:

We constantly keep working on finding / evaluating new technologies,
processes, frameworks and methodologies to enable us in improving the
quality of our offerings and user satisfaction.

d. Expenditure on R&D for the year ended March 31, 2009:

Our Research and Development activities are not capital intensive and we do
not specifically provide for the same in our books.

ANNEXURE-II

Information regarding the Employee Stock Option Schemes:

ESOP 2003- Under the scheme, the first round of options were granted in
August 2004. The Company made last grant under the scheme on 26 September
2006 and has now discontinued the scheme for any fresh grants. However,
options already granted before that date continue to vest and be exercised.

Being a Pre-IPO scheme, the SEBI (ESOP & ESPS) Guidelines, 1999 were not
applicable to this scheme.

Nature of Disclosure ESOP 2003

1 Total Options granted 7,461,201

2 Total number of options vested 7,238,303

3 Total number of options exercised* 6,983,907

4 Total number of Equity Shares arising as a
result of exercise of options* 842,666

5 Total number of options lapsed/forfeited 133,038

6 Money realized by exercise of options Rs. 7,931,977

7 Total number of options in force as at 31 March, 2009 344,251

* Number of option exercised & number of Equity shares issued thereof is
different due to consolidation of equity shares (from Re. 1 per share to
Rs. 10 per share) and bonus allotments.

ESOP 2007- This scheme was adopted Post-IPO in March 2007. The Company made
first grant of options under the New SEBI compliant ESOP scheme (ESOP 2007)
on May 31, 2007. During the year the terms of options under the new scheme
have not been varied. The new ESOP scheme has been approved in principle by
both NSE and BSE.

Nature of Disclosure ESOP 2007

1 Total Options granted 692,042

2 Total number of options vested 86,101

3 Total number of options exercised 2,230

4 Total number of Equity Shares arising as a
result of exercise of options 2,230

5 Total number of options lapsed/forfeited 129,173

6 Money realized by exercise of options Rs. 713,600

7 Total number of options in force as at 31 March 2009 560,639

Exercise price:

During the year, fresh ESOP Grants were made under ESOP 2007 at the
following prices:

No. of Options Granted Exercise Price

292,200 948
15200 994
11000 853
2000 871
8500 405

Details of option granted to Senior Management/Directors during the year:

1 Grant to Directors NIL

2 Any other employee
who received a
grant in any one Name & Designation No. of Options year
of option amounting to 5% or
more of option Vibhore Sharma 20,000
granted during that year SVP (Tech &
Product)

3 Identified employees who
were granted option, during N.A.
any one year, equal to or
exceeding 1% of the issued
capital (excluding
outstanding warrants and
conversions) of the Company
at the time of grant.

4 Earning Per share (EPS) Rs. 21.87

5 Method of calculation of
employee compensation cost The Company has calculated the employee
compensation cost using the intrinsic
value of stock options.

3 Difference, if any, between
employee compensation Rs. 108,038 Thousand
cost (calculated using the
intrinsic value of stock op
tions) and the employee
compensation cost (calculated
on the fair value
of the options)

4 The impact of this difference Profit would have been lower by
on profits and on EPS of Rs. 108,038 Thousand
the Company and the EPS
would be Rs. 17.91.

5a Weighted-average exercise
prices of options
whose exercise price:

i) Either equals
market price; or Nil

ii) Exceeds market price; or 994.00

iii) Is less than the market
price of the stock 929.46

5b Weighted average fair
values of options
whose exercise price:

i) Either equals
market price; or Nil

ii) Exceeds market price; or 558.71

iii) Is less than the
market price of the stock 544.97

6 Description of method &
significant assumptions
used during the year to
estimate value of
options including the
following weighted-average
information:

(i) Risk-free interest rate; 7.87%

(ii) Expected life (in years); 6.46

(iii) Expected volatility 46.97%

(iv) Expected dividends 0.10%

(v) The price of the
underlying share in the mar 950.61
ket at the time
of option grant.

7 Impact on the profits N.A.
and EPS if the Company
had followed the accounting
policies specified
in Clause 13 of the SEBI
ESOP Guidelines.

MANAGEMENT DISCUSSION & ANALYSIS

Driven by the vision of creating world class platforms that transform
lives, Info Edge (India) Limited (Info Edge or the Company) is one of
Indias leading companies in the internet content based business. In fact,
it is Indias premier on-line classifieds company with a dominant presence
in online recruitment, matrimonial, real estate and educational classifieds
and related services in India.

The business is managed through five main divisions.

These are:

* The online recruitment classified division, which operates primarily
through the portal www.naukri.com;

* The online matrimonial classified division, which operates through the
portal www.jeevansathi.com.

* The online real estate classified division, which operates through the
portal www.99acres.com;

* The offline executive search division, which operates through the
Quadrangle division and the portal www. quadranglesearch.com; and

* The online educational classified division, which operates through the
portal www.shiksha.com.

These divisions are supported by several other businesses that focus on
particular segments within the divisions business domain. These include the
web portal-www.naukrigulf.com that caters to the Middle-East job markets;
the career counselling and guidance site-www.asknaukri.com; the
professional networking site-www.brijj.com; the real estate brokerage
business-www.allcheckdeals.com which is now operated through a subsidiary;
and the fresher hiring site- www.firstnaukri. com.

In addition to these specific business verticals, Info Edge also undertakes
strategic investments in companies and start-up ventures. In 2007-08 the
Company had made commitments to invest in Studyplaces Inc, USA. In 2008-09,
it increased its investments by committing to take a stake in Applect
Learning Systems (Pvt.) Limited, which operates the kindergarden to class
12 (K-12) www.meritnation.com, an assessment based learning portal; and
Etechaces Marketing & Consulting Private Limited, which operates the
insurance sales portal www.policybazaar.com.

Info Edge develops community networks primarily on the world-wide web that
cater to specific societal needs. To begin with it focused on employment.
The Company pioneered the concept of on-line recruitment in India through
naukri.com. It successfully built a platform that brought together a large
group of recruiters and job-seekers and revolutionised the hiring processes
in India. However, it took the business time to grow. And, like with most
new businesses, the online recruitment business had to go through all the
different stages of evolution including conceptualisation, incubation,
development, accelerated growth and stabilisation. Having laid the
foundation, the Company leveraged its early bird advantage and built on the
experience gained at each stage of development to grow naukri.com at a very
rapid rate and attain leadership status in India. In December 2008, Info
Edge launched Naukri Jobspeak an index of jobs based on job listings on
Naukri.com.

In more ways than one, naukri.com has been the backbone of Info Edges
business. Not only has it provided the Company with necessary skill-sets to
diversify and develop other online businesses in India, but it has also
helped create the Companys financial resource base, which is used to fuel
the development of new business domains for the next round of accelerated
growth. And, Info Edge has left no stone unturned in its endeavour to
secure long-term growth. It has diversified to developing online
communities in matrimonial search, property search and education advisory.

Info Edge is today a portfolio of different businesses that are knitted
together by the common primary revenue generating concept of online
classifieds. Each of the respective businesses in the Companys portfolio is
at a different stage of evolution. Also, the individual businesses have
their own set of opportunities and challenges. As a result, they have
different gestation periods, risk return profiles, execution paths and
inflection points. It may also be the case that some businesses do not take
off as planned. However, the returns from the successes of the ones that
attain accelerated growth offset such setbacks. In essence, this is what
determines the success of the concept of portfolio based investments in new
business. Such a business model seriously relies on the spirit of
enterprise and innovation at every stage of the execution processes.

As of today, among the principal business divisions, naukri.com has
attained significant growth and continues to generate high returns. 99
acres.com and jeevansathi. com are in a consolidation phase. They are
progressing towards healthy top-line growth and closing in on breaking even
in terms of profits. Shiksha.com was launched in 2008-09 and is in the
startup or incubation phase. Many of the other investments made in
associate companies have been done to support these primary business
verticals.

BUSINESS ENVIRONMENT:

Info Edge remains a technology driven company, relying primarily on the
internet as the medium of service delivery. However, much of its businesses
are geared to satisfying Indian customers and is largely affected by
developments in the Indian economy.

From a global perspective, as a fall-out of the sub-prime crisis, several
large financial institutions either folded up or severely curtailed their
operations. This significantly affected employment opportunities and
recruitments were virtually frozen internationally, especially in the
financial sector. The period September-December 2008 was one of severe
liquidity crunch. Sentiments and consumer confidence were at an all time
low, and growth in the real economy came to a virtual standstill. As Chart
A shows, world output reduced from 5.2% in 2007 to 1.1% in 2008 an
estimated to be (-) 1.3% in 2009. The US and the Euro Zone have been in
recession since the second half of 2008-09 and even the emerging economies
witnessed a slowdown in growth.

This slowdown, particularly in the large advanced economies, has affected
employment generation globally. Several multinational enterprises have even
initiated programmes for reducing their workforce across their global
operations. To add to this, with severe stress on margins, several
businesses have cut-back on non-core expenditures like spend on Information
Technology (IT) and Business Process Outsourcing (BPO). Consequently, the
export oriented Indian IT services sector has been hit hard. Thus,
companies that were earlier dominant in the Indian recruitment space have
significantly curtailed their activities. As a result, naukri.com was faced
by a slump in activity, especially the recruitment of the IT and BPO
companies.

Even the domestic economy was affected adversely. With international
financial institutions having to write down profits and deleverage their
balance sheet, emerging economies like India witnessed stress in the
financial system in the second half of 2008. This led to a serious credit
crunch in India. Soon the real economy, particularly in the industrial
sector, witnessed a slowdown.

As Chart B shows, after five years of strong growth, Indias GDP growth
started slowing down from Q3, 2008-09. The real estate sector, too, has
been hit hard. There has been a sharp correction and slump in demand. This
is reflected in the fall in growth of construction activities from 10.1% in
2007-08 to 6.8% in Q4, 2008-09.

Naturally, both naukri.com and 99acres.com have witnessed significant
demand constraints during 2008-09, especially in the second half.

Info Edge has internalised the fact that it has to operate in different
economic conditions, and that it should have systems in place to overcome
economic downturns, just as these should help leverage growth opportunities
during economic booms. For the established businesses, there has been a
conscious change in focus from pushing sales to reducing cost of sales,
streamlining processes and systems, controlling overheads and focusing on
improving customer experience. These measures have not only helped the
Company in steering through the economic slowdown, but also in marginally
increasing the 2008-09 profits vis-a-vis 2007-08. The company has
undertaken implementation of an ERP namely Microsoft Navision to provide a
strong backbone for future growth.

FINANCIAL REVIEW:

Apart from the parent company, Info Edge (India) Limited has five
subsidiaries. These are: Naukri Internet Services Private Limited and
Jeevansathi Internet Services Private Limited, (which own internet domain
names and related trademarks); All checkdeals India Private Limited (which
provides brokerage services for the Indian real estate sector); Info Edge
(India) Mauritius Limited (for making overseas investments); and Info Edge
USA Inc. In addition to these, there are also associated companies in which
Info Edge has made strategic investments. The consolidated financial
results given in Table 1 take into account the performance of the stand-
alone Company, its subsidiaries and associated companies.

The Company, in spite of a difficult environment, managed to grow its top
line albeit at a lower rate compared to earlier years. This reduction in
growth rate was due to pressure on sales realization which in turn is
attributable to two reasons. First, given the economic slow down, customers
have moved from higher value subscriptions to lower value subscriptions.
Second, some customers bought lower volumes while in some cases discounts
had to be increased in a depressed market.

ABRIDGED CONSOLIDATED PROFIT AND LOSS ACCOUNT:
(RS. MILLION)

2008-09 2007-08

NET SALES 2,457.99 2,189.39
Network and other charges 90.41 60.53
Employee costs 933.88 746.28
Advertising and promotion cost 433.20 481.24
Other expenditure 355.65 266.88
TOTAL OPERATING
EXPENDITURE 1,813.14 1,554.93
OPERATING EBIDTA 644.85 634.46
Interest 0.37 0.39
Depreciation/Amortisation 71.15 55.1
EBT 573.33 578.56
Other income 279.24 207.25
PBT 852.57 785.81
Tax 270.37 231.33
PAT 582.20 554.48
Share in loss of Associate
Companies 11.92 0.0
PAT after minority interests
and share in loss of Associate
Companies 570.28 554.48

The operating EBIDTA margin (EBIDTA/ Net Sales) declined from 29% in 2007-
08 to 26.6% in 2008-09. This was mainly due to continued investments in
other verticals e.g. Shiksha.com which has a gestation period before it
generates adequate revenues. However, in a relatively more established
business, like recruitment solutions EBIDTA margin grew from 41.6% in 2007-
08 to 43.5% in 2008-09. Within this Naukri.coms EBIDTA margin grew from
44.3% in 2007-08 to 46.7% in 2008-09.

BOX 1: PERFORMANCE HIGHLIGHTS

* Net sales increased by 12.27% from Rs. 2,189.39 million in 2007-08 to
Rs. 2,457.99 million in 2008-09.

* Earnings before depreciation, interest, tax and amortisation (EBIDTA)
increased by 1.64% to Rs. 644.85 million.

* Profit before tax (PBT) increased by 8.50% from Rs. 785.81 million in
2007-08 to Rs. 852.57 million in 2008-09.

* Profit after tax (PAT) & after minority interest and loss from associate
companies, increased by 2.85% to Rs. 570.28 million in 2008-09. This
includes the losses from associate companies which are in development
stage. Discounting for these losses, which were not accounted for in 2007-
08, PAT increased by 5% to Rs. 582.20 million.

* Basic and diluted earnings per share (EPS) increased marginally from
Rs. 20.31 in 2007-08 to Rs. 20.89 in 2008-09.

The Company did respond to the changed market environment. While the
results of overhead management did not percolate much into the financial
performance of 2008-09 because much of it happened only in the last
quarter, the Company succeeded in significantly reducing its advertising
and promotion costs which came down from 29.9% in 2007-08 to 25.3% in
2008-09. These initiatives helped the Company maintain its EBIDTA at 2007-
08 levels. PAT has increased in 2008-09, although, the growth is moderate.

With a total debt exposure below Rs. 1 crore, Info Edge continues to be
almost a debt free Company. And it maintains a healthy cash position. As of
31 March 2009,the cash and bank balances with the Company were Rs. 3,220.96
million deployed conservatively mostly in bank fixed deposits. This balance
sheet strength will help the Company in overcoming the market slowdown and
gain market share to propel future growth.

BUSINESS MODEL:

Info Edge embodies a new age business. The Company operates in the online
media space, which is still at an embryonic stage in India. It is driven by
a young workforce, having an average of 26 years. It primarily caters to
the rapidly growing upwardly mobile young population in India.

Being primarily an online media company, Info Edge has three broad areas
from where it generates revenues. These are:

* ONLINE ADVERTISING:

Where the focus is on creating websites that generate enough traffic and
quality or quantity of eyeballs to warrant a good price for companies or
organisations to advertise in. This is a market which partly competes
directly with other media like print.

* SHARING OF DATABASES OR PROTECTED INFORMATION:

These are revenue streams that flow after the registration or subscription
by online visitors. This is a product which does not exist in other media.

* VALUE ADDED SERVICES PROVIDED ON THE BASIC PLATFORM:

Examples include risumi development or CV push services offered by
naukri.com. These services are pursued once a critical level of expertise
is attained in a business space. For many of these services, an off-line
approach is also pursued. These type of services evolve over a period of
time and are pursued actively to realise their revenue potential. While
Info Edge gears its present business practices to meet the challenges of
the prevalent economic slowdown, the Company remains committed to its
longer term growth aspirations. Accordingly, it has continued with its
investments in the businesses that are at a development stage.

Essentially, there are two key macro factors that will determine the
fortunes of Info Edges long-term business goals. These are:

* The growth in the upwardly mobile urban population in India:

Despite the current economic slowdown, the long-term growth and demographic
trends remain intact. According to the National Council for Applied
Research (NCAER), within the growing urban population, the proportion of
people with aspiration lifestyles and income levels Info Edges target
market segment is expected to increase manifold. As Chart C shows, their
percentage in urban population is expected to increase from 26% in 2003 to
54% in 2013.

* Internet usage in the country:

Among the upwardly mobile urban population, Info Edges business focuses on
what is classified as regular internet users. The Juxt consult India Online
Survey 2009, which analyses net usage behaviour and preferences had the
following observations:

+ Regular users (defined as people who use the internet at least once in a
month) increased 10% to reach 38.5 million in 2008. Of this, 33 million
were urban users

+ Daily internet users increased by 28% from 25 million in 2007 to 32
million in 2008.

+ 80% online Indian are in the prime of their life (19-35 years).

+ 75% of them belong to the consuming and aspiring class (almost half of
them belong to SEC A and B).

These results show that, while internet penetration in India is less than
comparable economies, the quality of Indias internet user base is improving
with an increase in regular and daily users. It is also important to note
that much of this regular internet user base falls in Info Edges target age
and income profile.

Thus, Info Edge is playing a leading role in a rapidly growing market. To
continuously leverage this growth potential, there are two critical back-
end factors that matter. These are:

* Continuous emphasis on innovation and customisation of products and
services. The Company regularly enhances the utility and features of the
existing products and services to meet the changing needs of customers. It
also develops suites of new products and services that better meet the
requirements of its diverse users. Cutting edge technology and top-of-the-
line algorithms are used to provide customers with a world class online
experience.

* Continuous focus on customer behaviour and preferences. There are often
intricate nuances in the behaviour of different members of the virtual
communities that Info- Edge creates. It is imperative to keep gathering
customer insights and understand trends in behavioural patterns. These
become critical inputs in enhancing the functionalities of the portals.

In 2008-09, Info Edge increased its focus on these back-end initiatives.
The stress is on making the websites functionally more useful and user
friendly for the customers. What is more important is not to merely
generate traffic but to increase the traffic of customers who matter. As an
example, an issue that has been uniformly taken up across the portals is to
reduce spam on the Companys websites. Spam spoils the reputation of a
portal and increases the navigation time for customers. Info Edge is
continuously identifying all such issues and working on solutions.

BUSINESS SEGMENTS:

As of today, the company has four business segments: recruitment services,
matrimonial services, real estate services and education services. Based on
the Juxtconsult India Online Survey 2009, two of Info Edge four segments
job search and matrimonial search are part of the top 10 online activities
undertaken by Indians (see Table 2).

2. PROPORTION OF PEOPLE UNDERTAKING DIFFERENT ONLINE ACTIVITIES:


Activity % %
Under- Change
taking from
2008

1 Job search 72.0 1.0
2 Instant messaging/chatting 68.0 -2.0
3 Check general news 63.0 -0.3
4 Dating/Friendship 56.0 6.0
5 Check sports
(other than cricket) 53.0 -4.0
6 Check cricket content/score 53.0 3.0
7 English info search engine 50.0 1.0
8 Matrimonial search 50.0 0.5
9 Listen/stream music online 49.0 0.6
10 Download music 48.0 -6.0

(Source: Juxtconsult-India Online Survey 2009).

Recruitment solutions under naukri.com have been the Companys primary
business over the last decade. By accounting for 86.3% in net sales, the
recruitment resolutions business continues to be the largest segment in
Info Edges business portfolio. However, it is important to note that with
net sales from other verticals (mainly jeevansathi.com and 99acres.com)
increasing by 49% to Rs.33.5 crore in 2008-09, the share of these business
in the Companys net sales increased from 10.3% in 2007-08 to 13.6% in 2008-
09.

RECRUITMENT:

The recruitment services business segment comprises the following portals:

* Naukri.com:

This is the Companys flagship brand and Indias largest online jobsite.

* Quadrangle.com:

This is primarily an off-line headhunting business that derives revenues
from successfully placing a person with a company.

* Naukrigulf.com:

This is a jobsite that focuses on the middle-eastern market

* Asknaukri.com:

This is a repository of career related questions and answers that acts like
a career guidance site.

* Brijj.com:

This is a professional networking site.

* Firstnaukri.com:

Launched in January 2009, this site focuses on fresher hiring in India.

All the different businesses in this segment were affected by the slowdown
in economic activity. Chart D plots the Jobspeak index, which is based on
job listings on naukri. com. The index, which was at 1,000 in July 2008
fell to 697 in December 2008. Since then, it has estabilised around 710.
Much of this reduction in hiring has happened in the sectors such as
banking and insurance,IIT services and infrastructure. As mentioned
earlier, the IT sector has been hit particularly hard and its share in
naukri.coms revenues declined from 29.7% in 2007-08 to 26.1% in 2008-09.
This remains a cause of concern.

D. THE JOBSPEAK INDEX

JUL 08 1000
AUG 08 902
SEP 08 907
OCT 08 781
NOV 08 776
DEC 08 697
JAN 09 738
FEB 09 774
A 711

(Source: Naukri Job Speak).

Naukri.com is the major revenue generator in this business segment. There
are two primary revenue streams.

These are:

* Payments for job listings and employer branding and visibility, and.

* Payments from recruiters for resume database access. In addition,
revenues are also generated from other added services like fees for job
seeker services; Google Ad Sense; advertising on the website other than for
jobs; fees from mobile CV management services; and fees for risumi short
listing and screening.

All these revenues are clubbed under two heads based on the end-customer:
naukri Recruitment Solutions and naukri Candidate Services. Revenues from
naukri Candidate Services increased by 31% in 2008-09; while those from
naukri Recruitment Solutions grew by 6.6%.

Naukri.com continues to be Indias No.1 job site, enjoying over 50% share of
page views across the top three job sites. It continues to leverage its
first mover advantage by building an extensive database of risumis and
corporate clients who are patrons of naukri.com. The large database of job
seekers, the comprehensive nature of the client list and our matching
solutions form a self-generating cycle that propels business growth on a
sustainable basis.

It is a virtuous cycle. High quality corporate clientele ensures that
naukri.com is the portal of choice for a large number of prospective job
seekers. The portal makes sure that the applicants come in contact with the
appropriate recruiters, and increases the probability of a successful
fitment. Equally, the presence of a large number of job seekers ensures
that companies continue to use naukri. com as a source of tapping talent.
This model also allows us to consolidate operations through a large number
of repeat transactions and referrals for from our comprehensive database.
Here are some facts:

* Number of risumis in naukri.coms database increased by 31% from around
13 million at the end of 2007-08 to around 17 million at the end of 2008-09

* Number of risumis added daily increased by 17% from 12,000 in 2007-08 to
14,000 in 2008-09.

* Number of corporate customers (corporates and placement consultants) grew
by 5% from around 32,500 in 2007-08 to approximately 34,000 in 2008-09.

The dominance of naukri.com is also reflected in its leadership position in
terms of share in traffic share among the leading Indian online job-sites.
Chart & below shows the traffic share based on data from comscore. com. It
shows that while naukri.com has got over 50% share for most of the year,
compared to between 40-50% in 2007-08, the nearest competitor has got
around 30%.

Quadrangle offers off-line placement services to middle and senior
management, with revenues based on a success fee model. It complements the
growing online recruitment business. Given the market slowdown, Quadrangles
revenues declined by 6% during 2008-09.

The slowdown in hiring activities in India has been moderate when compared
to the sharp fall in the Middle-East. Consequently, naukrigulf.com has had
a difficult year, and expansion plans are being pursued in a calibrated
manner. However, the Company has extended its presence by opening an office
in Riyadh, Saudi Arabia.

Brijj.com, the professional networking site, is still at a nascent stage of
development in terms of revenues. However, it is building its business
potential by registering members, which is in excess of 1.8 million by the
end of 2008-09 and growing at the rate of 2,000 a day. Here, the focus
remains on improving engagement and getting visitors to the site to
network.

To overcome the effects of the market slowdown, the Company has continued
to:

* Focus on investments in technology.

* Undertake product innovations.

* Give emphasis to promoting telesales and improved efficiencies of the
sales system.

* Lay stress on gaining market share.

Consequently, even in this depressed market, it has actually increased its
EBIDTA margin in the recruitment division. The details of the segments
financial performance is given in Box 2.

BOX 2: RECRUITMENT SEGMENT PERFORMANCE HIGHLIGHTS:

* Net sales from recruitment increased by 8% from Rs. 1964.3 million in
2007-08 to Rs.2116.5 million in 2008-09.

* EBIDTA from recruitment increased by 13% from Rs. 817.2 million in 2007-
08 to Rs. 920.4 million in 2008-09.

* EBIDTA margin increased from 41.6% in 2007-08 to 43.5% in 2008-09.

* EBIDTA margin in naukri.com grew from 44.3% in 2007-08 to 46.7% 2008-09.

Recruitment continues to be an active opportunity in India. While the
economy has slowed down, it is still expected to grow at 6.5% to 7% for the
next couple of years. Info Edge believes that the worst is over and
slowdown in hiring activities has bottomed out. While it will take some
time for it gain significant momentum, the market will continue to provide
opportunities for the Company to grow profitably.

MATRIMONIALS:

Aggregating and sharing data for arranging marriages is an old concept in
India. Earlier it was done at the local temple or by a specialised agent.
Then came the concept of matrimonial pages in newspapers. And, finally the
concept graduated to the virtual space initially with a focus on the NRI
community.

Online matrimonial advertising has a distinct advantage over its nearest
competitor, the newspapers. First, there is the advantage of much larger
storage space. Second, is its larger global reach. Third, it has faster
speed of communication and fourth, it is interactive and allows images etc.
Consequently, internet is rapidly becoming the vehicle of matrimonial
search. This is also been driven by swift urbanisation and breakdown of
traditional networks.

With over 300 million people estimated to get married in the next 30 years
in India, matrimonial services is a fast growing market in India. However,
it is also highly segmented relying on local, religious, regional,
linguistic and caste-based factors. Success in this market will be
determined by the service providers ability to provide tailor made
solutions that meet the specific requirements of each of the different
segments in the market.

Jeevansathi.com has adopted a model that focuses on penetrating specific
market segments. Currently its primary markets are the Hindi-heartland and
Maharashtra.

The portal believes in subtle product differentiation that will enhance its
target customers experience in focusing the website. In
essence,jeevasathi.com remains discovery-led, preference mapped and
constantly data-updated so that it can meet the specific requirements of
its consumers. All these elements have been incorporated in the complete
site revamp undertaken in 2008-09. Investments continue to be made to help
build the brand and grow the business.

The online business is being supplemented by 14 offline centres called
Jeevansathi Match Points. These centres provide hand-holding services to
customers who are not internet savvy, helping them to utilise
jeevansathi.com online services. As of today, these centres are a pilot.
The success of which is being reassessed for future course of action. The
highlights of the segmental performance are given in Box 3.

* Net sales from matrimonial segment increased by 31% to Rs. 170.1 million
in 2008-09.

* EBIDTA was a loss in 2008-09 Rs.46.9 million. The business is in the
investment phase and is expected to break even by the end of 2009-10.

* Profile listings increased from 2.14 million at the end of 2007-08 to
2.9 million at the end of 2008-09.

* This is a business that is largely insulated from economic developments
and success will depend on the companys ability to increase market share by
continuing to invest in a focused manner to grow its share in its market
segments.

REAL ESTATE:

The real estate segment comprises two portals. These are: 99 acres.com: the
property based online classified business with a focus on the Indian market

Allcheckdeals.com: the property broking business with a success based
revenue model 99 acres.com generates revenues from property listings,
builder or broker branding and visibility including page links and banners,
international listings and others like buyer database access.

The performance of 99acres.com is given in Box 4.

BOX 4: 99 ACRES.COM PERFORMANCE HIGHLIGHTS:

Net Sales from 99acres.com increased by 54% to Rs.139 million in 2008-09

EBIDTA loss decreased from Rs. 108.5 million in 2007-08 to Rs. 95.3 million
in 2008-09 Property listings grew from around 200,000 at the end of 2007-08
to 248,000 at the end of 2008-09 Number of paid transactions rose from
around 7,500 in 2007-08 to 16,600 in 2008-09 Given the significant slowdown
in the real estate sector in 2008-09, Info Edge had to align its business
to the new market realities. 99acres.com has has reoriented its sales force
and laid emphasis on developing selling skills. The Company has had to
increase efforts in marketing its value proposition to the final customers.
While internet is a more cost effective medium for developers to promote
their projects, especially in depressed markets, the developer / agent /
broker community in India still does not fully understand internet as a
sales channel. Therefore, they are often reluctant to spend on online
activities. The sales team at 99acres.com is being trained and developed to
rise to this challenge and promote this platform more systematically to the
developers.

Several changes were made to the website during 2008-09 and a revamped
version was launched recently. The revamped site has laid emphasis on an
upgraded search algorithm that helps customers by improving the quality of
their search results, which includes spam filtering. The focus now is on
quality of the community participating on the site rather than the
quantity.

Info Edge launched allcheckdeals.com in November 2007 with a view to tap
into the large brokerage market. The objective is to promote real estate
deals among buyers who believe in fair transaction practices and prefer a
full check payment. allcheckdeals.com closed 645 deals in 2008-09.

Activities in the real estate space are expected to remain subdued. While
there are some new projects being launched especially in the low cost
housing space, in the medium term this market is expected to remain weak.
In this period, Info Edge intends to increase its market penetration and
improve its product offerings.

EDUCATION:

As a sector, education is increasing rapidly in India, especially in terms
of private sector participation. Estimates suggest that the sector in India
is already valued at US$40 billion and it is growing at double digits. The
spend by education institutes on advertising is estimated at around
Rs.2,000 crore to Rs. 2,500 crore, but much of this is in print media. The
online education advertising spend is expected to be only around Rs. 40
crore.

In order to tap and grow this market, Info Edge launched shiksha.com in May
2008. This business has the opportunity to grow in a space that is fairly
insulated from economic downturns.

There are significant challenges in developing an online classifi eds
business in education. First, unlike Info Edges other businesses,
shiksha.com cannot have a listing based approach. The website has to have
information that is distinct and not available elsewhere including
detailed description course content, quality and hostel infrastructure.
Essentially, the site is designed to act as a trusted guide or advisor to
students in their endeavour to chalk out a career path with a focus on
higher education.

In shiksha.com, the Company is working on developing the site and improving
the product. The sales team is in place; the response to listings on the
site is improving and the feedback is getting better. The agenda is to
improve the site, and to ensure current clients are satisfied so that it
build brand value and generate repeat business.

Already, shiksha.com has around 85,000 listings and offi ces in 15 cities.
The Company is investing in online marketing of shiksha.com. An education
fair was organised in April 2008 in Delhi to promote shiksha. com, and
there were approximately 5,000 walk-ins. The Company will continue to
invest in developing this business.

NEW BUSINESSES:

Info Edge recognises that the internet will witness a significant change
with the increasing of value added services on mobile phones. With the
advent of 3G services, mobiles have the potential to replace the computer
as the mode of accessing the world-wide-web. With this in mind, Info Edge
has actively started exploring and extending its platforms to this medium.
As a starting step, it has integrated the naukri.com platform with mobile
connectivity where customers get alerts on jobs on their mobiles and have
the ability to send their CVs to prospective recruiters using mobile
messaging.

As a part of getting into new initiatives, Info Edge has made investments
in three associate companies.

* It has committed to invest Rs.65 million in tranches for a 40% stake in
Applect Learning Systems Private Limited. Of this, Rs. 29.6 million has
been invested as on 31 March 2009. Applect has launched a site called
meritnation.com, which is delivering assessment based learning solutions
for standard 6 to 12 students as also solutions for CBSE curriculum. It has
started getting traction, and proposes to expand to other curriculums. The
site was initially free and has gone paid since April 2009.

* It has also committed to invest Rs. 200 million in tranches for a 49%
stake in Etechaces Marketing & Consulting Private Limited. It has invested
Rs. 50 million as on 31 March 2009. Its website Policy bazaar.com helps
customers understand their insurance needs and select insurance schemes
that best suit their requirements. Revenues are generated primarily from
lead generation and also fulfi lment of sales.

* It also has a minority stake in Study Places Inc. USA running an online
education information site-studyplaces.com.

SUPPORT SERVICES HUMAN RESOURCES (HR):

People continue to be the Companys most treasured asset. Therefore, despite
being in a tough business environment, the Company did not lay-off any
employee. There has been natural attrition, which has decreased employee
strength from an all time high of 1,800 in the middle of 2008 to 1,676 by
the end of March 2009. While there have been no pay cuts, the performance
based variable component, like sales incentive and bonus payments, have
reduced purely due to lower growth. As a result of both these factors,
employee cost relative to sales has trended downwards.

The Company has actively followed a policy of HR rationalisation, based on
the principle Use Internal Resources First. The concept of internal job
postings has been institutionalised which has helped reallocate staff
surpluses in some departments to meet deficits in others. For example, the
entire shiksha.com platform has been developed and launched by a taskforce
comprising primarily of internally recruited candidates. Similarly a part
of the sales team at naukri.com has been moved to the telesales model and
considerable training imparted for the same.

The Company continued to focus on training during 2008-09 particularly
regarding product sales and the managerial development of young
professionals in Info Edge. In addition, a new Human Resource Information
System (HRIS) module is being implemented to improve HR processes and
enhance employee connectivity. Performance evaluation standards have also
been raised.

TECHNOLOGY:

Info Edges websites are hosted by Verio Inc., a service provider located in
the US. It has 65 high speed servers in the US which are exclusively
dedicated to hosting naukri.com and its related applications. There are
also backup servers in the US. In addition, there are locally hosted
servers to run backend operations at Noida. The Company is in the process
of rolling out a disaster recovery system.

The technology team continues to actively work on refining algorithms that
enhance the customer experience of all the Companys websites. In naukri.
com there have been upgrades done to the job search function. This has
improved the quality of search results, and started immediately firing job
alerts to customers on loading of a new job opportunity. Both the
jeevansathi.com and the 99 acres.com websites have been significantly
revamped.

The Company has successfully integrated the naukri.com portal with Google
Chat, where Google Talk can be used to search for jobs. Also, the express
CV concept has been executed, where jobseekers can directly send their CVs
to recruiters through a SMS.

Info Edge has initiated the process of rolling out a new ERP solution. The
process mapping exercise is over, and the Company will go live on this
system in the middle of 2009-10.

In order to cut costs on hardware resource and bandwidth, the Company is
focusing on optimising technology spends. This involves the concept of
virtualisation of servers to reduce overall costs.

INTERNAL CONTROLS AND THEIR ADEQUACY:

Info Edge has a proper and adequate system of internal controls to ensure
that all assets are safeguarded and protected against loss from
unauthorised use or disposition, and those transactions are authorised,
recorded and reported correctly.

The internal control is supplemented by an extensive programme of internal
audits, review by management and the Audit Committee, and documented
policies, guidelines and procedures. The internal control is designed to
ensure that financial and other records are reliable for preparing
financial information and other data, and for maintaining accountability of
assets.

CAUTIONARY STATEMENT:

Statements in this Management Discussion and Analysis describing the
Companys objectives, projections, estimates and expectations may be forward
looking statements within the meaning of applicable laws and regulations.
Actual results might differ substantially or materially from those
expressed or implied. Important developments or factors that could affect
the Companys operations include a downtrend in the Indian online sector,
laws and regulations governing the internet, privacy laws, new and
disruptive technologies, internet connectivity and availability,
significant changes in political and economic environment in India,
exchange rate fluctuations, tax laws, litigation, labour relations and
interest costs.