Traction in hiring, improving real estate demand positives for Info Edge

Cash deployment and valuation upside for new business/investee firms are other triggers

Continued traction in hiring trends and improving demand trajectory in the real estate space is positive for online classifieds major Info Edge (India). The Naukri JobSpeak index for February was up 31 per cent y-o-y (13.3 per cent up sequentially) taking that index to an all-time-high signifying the highest ever hiring activity. This coupled with data for FY22 till January (10 months) from the Employees’ Provident Fund Organisation indicates strong momentum in the formal job market.

The company, which runs the country’s largest online recruitment portal, naukri.com with a market share of 62 per cent, is a key beneficiary of the record hiring in the information technology (IT) sector. Given the large deal wins, expanding software market and high attrition, the demand trends are expected to continue in the near to medium term. While a majority of hirings are in IT, there has been an improvement in the non-IT space as well with strong growth registered in financial services, retail, pharmaceuticals and hospitality sectors.

The company is also looking to tap adjacencies in the recruitment space for specific segments such as senior management hiring, software to manage recruitment process, talent assessment platform and blue collar hiring. This, according to IIFL Research, is expected to capture higher wallet share with its clients and enables it to look for new opportunities that can scale up.

A similar trend is noticed in the real estate segment. The company’s portal, 99acres.com which caters to this business is expected to benefit from the real estate up-cycle supported by favourable interest rates and likely improvement in new launches given that absorption is picking up, say analysts led by Swapnil Potdukhe of JM Financial. The brokerage expects the standalone business to deliver 28 per cent revenue growth and 42 per cent operating profit growth annually over the FY21-24 period.

While the prospects of its core businesses are strong, the stock has corrected by over 20 per cent from its January highs. Analysts have revised down the value of the investee companies (Zomato, Policybazaar) amid a stock correction and holding company discount.

In addition to the core and investee ventures, how it utilises its spare cash is a key trigger for the stock going ahead. Given the target price around the Rs 5,000 levels, the upside from the current levels is 15 per cent.