Info Edge

Investors can retain the shares of Info Edge (India), which owns the job portal naukri.com among others, considering the revival in the recruitment scenario across sectors in the country. The company's fortunes are closely linked to the prevailing state of the economy.

Even as India continues to clock healthy GDP growth rates, with FY-11 expansion likely to be 8.5 per cent (as per the National Economic Survey) job opportunities and employee turnover could increase, benefitting players such as Info Edge.

Some surveys suggest that close to a million jobs are likely to be added in 2010-11 with sectors such as IT/ITES, real-estate, hospitality and healthcare leading the way. Apart from its job portal, the company's matrimonial portal, Jeevansathi, and real-estate Web site, 99 acres, also hold potential to drive growth.

At Rs 870, the share discounts its likely FY-11 per-share earnings by about 28 times. Info Edge does not have any listed peers and, therefore, offers no comparables. The stock trades at a premium to the broader market. But given the growth that is likely from a depressed base on account of increased recruitment by companies, the stock may offer scope for capital appreciation over a two-year period.

Over 2006-09, the company tripled its revenues to Rs 245.1 crore, while net-profits jumped 4.5 times to Rs 59.7 crore. With the global slowdown and its lag effect being felt in India with lay-offs and recruitment-freeze being the norm for much of 2009, the financials did take a knock.

For the nine months of FY-10, the company's revenues fell by 10.9 per cent to Rs 167 crore, while net profits fell by 4.8 per cent to Rs 43.7 crore, compared to the corresponding previous period. That the revival is on its way is evident from the fact that the December quarter was flat compared to 2008 after two successive quarters of double-digit fall in revenues.

As a macro environment indicator for online business, Internet penetration is still low in India. But the impending broadband wireless access (BWA) spectrum auction this month and the expected commencement of operations in the next one year by several operators are likely to drive subscriber growth by doing away with wired last-mile dependence

REVIVAL IN Recruitments

Info Edge's flagship job portal, n aukri.com, contributes around 85 per cent to the overall revenues. It derives revenues from the fee that companies pay for job listing, employer brand-building advertisements and the fee for giving access to the database of resumes of job-seekers.

There are a few other minor revenue streams such as those from providing job-seeker services and mobile services. The company has a 60 per cent ‘traffic-share' according to Comscore and has remained consistently at this level, scoring over peers such as monster.com and timesjobs.com. This is important as it would enable Info Edge increase advertisement rates going forward.

Naukri.com is likely to benefit substantially from the job market bounce-back. The number of resumes in the portal has jumped 24 per cent over the last one year to 19.7 million and corporate customers by 7 per cent in the December quarter to 18400. From a broader economic perspective, IT/ITES and infrastructure (including real-estate, engineering, cement etc) clients who contribute close to 48 per cent to the portal's revenues are set to recruit more. The attrition in the IT sector has already increased, suggesting that movement in the job market is well underway. The naukri new job index that covers hiring across sectors has reached its highest level of 947 in the last one year. The index has grown by 14 per cent in this period.With an EBITDA margin of over 40 per cent, this division holds the key for overall margin expansion.

Other portals

Apart from naukri, Jeevansathi and 99 acres are the two other portals that the company runs. It is not the market leader in these segments as it is with respect to the job Web site.

But Jeevansathi, being the matrimonial portal, did not witness any serious dent in growth as the marriages by themselves are not that cyclical. In fact, for the nine months of FY-10, the portal has seen a revenue growth of 18.6 per cent. This may not grow substantially, but is likely to be a steady revenue contributor. Jeevansathi is likely to breakeven in 2009-10.

99 acres, the real-estate Web site, was the worst hit in the slowdown. Thanks to attractive interest rates and relatively lower home prices, this segment is witnessing a revival. In the December quarter, the company had an 8.6 per cent sequential growth in revenues.

A recent report from FICCI-KPMG predicts Internet advertising to grow at a compounded annual rate of 29.6 per cent over the next four years to Rs 2 850 crore in India. This would mean more advertising revenues for some of Info Edge's portals.

via BL