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REGISTER NOW OR LOGINInfo Edge (NSE:NAUKRI) is India’s premier online classifieds company in recruitment, matrimony, real estate, education and related services. It is one of the few profitable pure-play internet companies in the country. The company has been existence for the last two decades and has successfully tapped a large share of the Indian digital market. It has steadily developed a portfolio of brands across different domains that primarily provide online classified services. The company has a nationwide presence through 74 branch offices in 46 cities in India. Info Edge has a strong brand recall with solid businesses like naukri.com and jeevansathi.com in its basket and is expected to further succeed with a Digital India movement.
Info Edge Positives
i) Diverse Businesses – Info Edge has diverse digital businesses running in India ranging from recruitment to real estate to matrimony websites. Some of its popular businesses include nakri.com, 99acres.com, Jeevansathi.com etc. Naukri.com is the undisputed and dominant leader in the Indian online job market. During the second quarter ending September 2017, more than 43,000 job seekers availed premium services, which involves a payment from job seekers. The average revenue per unique client is growing with increasing number of clients.
The company has also made strategic investments in other leading websites like zomato, happily unmarried, policy bazaar etc. Info Edge owns a ~47% stake in Zomato.
ii) Consistent Growth - Over the last decade, Info Edge, as a standalone entity, grew at a compound annual growth rate of 19.4% — from a revenue of INR 1,395 million in FY2007 to INR 8,209 million in FY2017. The operating EBIDTA margin has increased from 27% in FY2007 to 33% in FY2017. Info Edge posted an increase in revenue y/y in all its leading businesses in FY 17- 12.5% in recruitment segment, 3.67% in 99acres.com, 22% in Jeevansathi.com and 1% for Shiksha.com. The company maintains a strong cash balance, negative working capital, and negligible leverage.
Source: Info Edge Presentation
iii) Info Edge will benefit from India’s booming digital market - According to Boston Consulting Group estimates, digital India is poised to double to $250 billion economy by 2020. India is thus a growing digital market and Info Edge stands in a good position to benefit from this situation. Growth in the number of smartphones has added to the company’s revenues. More than 65% of the sessions in Q2 FY 17-18 (vs 50%+ sessions in Q2 FY 16-17) were from mobile phones. Moreover, Info Edge’s leading businesses include Real Estate, jobs and marriage which are booming in India. Though recession hurts investment in properties and getting a new job, people are still in the search for an attractive opportunity.
Over the last three years, smartphone users have increased to nearly four times while mobile internet users have grown to around 391 million - the second highest number of users in the world.
iv) Strong Customer Base – With over two decades of experience, Info Edge has developed rich insights into customer preference and understanding. The company is thus in a preferable spot to assess how internet-based customer preferences are evolving in India across the domains they operate. The company focuses on delivering quality customer experience by problem-solving which has led to Info Edge becoming a clear market leader in terms of traffic share. The company has a strong customer base and continues to increase it by using analytical tools and a strong technology platform for product and service delivery. The profile/job listings have increased over the years as is evident from the diagram below.
Source: Info Edge Annual Report 2016-17
Challenges
It has been observed that in these digital businesses, a single player often takes away significant market share and customers, for example, Facebook, Amazon, Twitter, Instagram etc. So, it is very important for these companies to keep striving for market dominance with their respective brands. Though Info Edge has built a strong and successful brand name, one cannot forget the fact that Info Edge is a technology driven company operating in the digital space and it just takes another successful brand name to replace the existing one in this space. New technology and innovation play an important role in the internet-based services industry. The internet business space in India is still in a developing phase and will shape-up on the basis of the evolution of the overall digital economy in the country.
Valuation
Info Edge shares are currently trading near INR 1370 level. The company has a market capitalization value of INR 16,616 crore and is trading at a P/B of 10.5x. Very few Indian consumer Internet companies have such high market valuation. This shows market’s confidence in the Info Edge stock. The shares have rallied over the last year and have given solid returns of nearly 60%.
Conclusion
Info Edge is one of the pioneers of the internet enabled services industry in India and is strengthening its position in this space across its brands. Info Edge’s competitive position in naukri.com continues to be very strong. Its businesses should continue to benefit as the economy improves further. Faster adoption of 4G devices, greater proliferation of digital content and growth of Indian internet economy is on an accelerated growth trajectory in India. The smartphone and mobile internet user base has also been growing at a faster pace. With years of experience in the domain, strong cash flow generation and a diversified business portfolio, Info Edge is one of the very few profitable pure play internet companies in the country.
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