Hiring segment uptick key trigger for InfoEdge, cash flows to remain strong

While cash flows from core businesses will remain strong, new investors in food, insurance and other ventures will help tap growth opportunities

A few months after online financial services firm policybazaar.com, a company in which Info Edge is an investor, raised $200 million, its online food delivery business Zomato raised a similar amount valuing the latter at $2 billion, this week. The fresh investments in the investee companies such as Zomato, in which it now has 27 per cent stake (post latest fund-raise) is assuring for the street both on growth prospects and the ability of the company to get additional investments in what is a high cash-burn business. Sarath Zutur of Karvy Stock Broking said, “Zomato and Policybazaar.com would require high investments in the future as the business model is being disrupted. Hence, the presence of seasoned global investors (SoftBank, Alibaba) with deep pockets should help the companies to cope up with the competition.” 

Growth trajectory for Zomato looks robust given the company’s recent announcement of 21 million monthly online orders with annualised gross merchandise value of $1 billion as compared to a fifth of that number at the start of 2018. Analysts at Morgan Stanley believe that the company could surpass their FY19 expectations on the food ordering business if the current momentum continues.

While additional investments in Zomato is positive, the street will look at the progress of Info Edge’s job classified segment, Naukri as it accounts for 70 per cent of its revenues. After growing at 17 per cent over FY14-17, the job classified business had slowed down in FY18 to 12 per cent. If hiring plans by India’s largest IT services provider Tata Consultancy Services is anything to go by, Naukri could see growth go back to historical levels. 

Analysts at Ambit Capital believe that reduced campus hiring in IT but the emphasis on skill-based hiring will benefit Info Edge as the latter encourages intra-company churn. Investment in a Recruitment Management System (RMS) is expected to enhance customer lock-in and increase Naukri’s share of corporate recruitment, they add. 

The other major segment of the company is real estate classifieds, 99acres. With online ad spends at just 10 per cent of builders ad spends, increased reach of the online medium, the realty classified model could see a growth of over 15 per cent going ahead. While proportion of builder and broker revenues are similar, analysts believe that rising proportion of new project launches could see a surge in builder listings. This should help the company’s volumes and realisations.