by Welcome back to Traders Ideology, In this article, we’ll do the fundamental analysis of Info Edge Ltd where we’ll cover its business profile leadership key strengths competitors, and future growth and then we’ll cover the financials of the company, finally we’ll conclude if naukri.com are fundamentally strong or not.
Introduction
- Info Edge is almost 50% from its peak of 7465 to levels of 3775 and now it is available at a PE ratio of just 4.63. This company is a major investor in recent tech IPOs of India zomato and policy bazaar.
- Well, a high-growth stock with bright growth respect is available at a PE of 4.63. A lot of people commented that Info Edge is available at a dirt-cheap valuation with a PE ratio of just 4.63, should we buy or not?
- Info Edge Founded in 1995 by Sanjeev Bikhchandani, Info Edge is one of the early age internet companies in India. It started its business with a classified recruitment online business named Naukri.com.
- Today Naukri.com is the largest player in the Indian online recruitment business and Info Edge is a very well-diversified company with a presence in multiple online businesses. It has got mainly four major business segments.
Fundamental Analysis of Info Edge (India) Ltd
Fundamental Analysis of Info Edge (India) Ltd are as follows:
Business Model of Info Edge
It has manly four business are as follows:
1. Recruitment
- The first is recruitment. Recruitment includes… Naukri.com, which is a clear market leader in the Indian e-recruitment space. Naukrigulf.com, which is a job site focused on the Middle East Market.
- Firstnaukri.com, which is a fresher hiring website. Additionally, Info Edge provides job seekers value-added services such as resume writing. Info Edge is also acquiring a lot of potential companies in the recruitment space.
- For example, it acquired iimjobs.com, which is India’s leading recruitment platform for management professionals, then required hirist.com, which is an exclusive recruitment platform for premium technology talent.
2. Matrimony
- The second business segment is matrimony, In the matrimony segment, includes Jeevansathi.com, which is among the top three online matrimonial spaces in India.
- It also has official Jeevansathi match points and franchisees.
3. Real Estates
- The third segment is real estate.
- Real estate includes 99acres.com, which is India’s largest property marketplace, covering almost all the major cities and a large number of agents and developers.
4. Education
- The fourth business segment is education.
- Education includes shiksha.com, which is essentially a college and course selection website and not a course provider website.
In addition, Info Edge is a key investor in some of the leading startups in India, including Zomato, where Info Edge has a 15.18% shareholding. Info Edge held about an 18.5% stake in Zomato before Zomato’s IPO, but it sold around 2.5% stake, which it has invested in policy bazaar, where it holds 13.3%.
Then Info Edge has a stake in ixigo, which is an online travel portal. then has stakes in USTRA, which is a men’s grooming product company apart from these companies Info Edge is invested in many potential startups, including your NoPpaperForms, Univerity, ShopKirana, MEDCORDS, adda247, Coding Ninjas, Shipsy, etc.
In FY 21, Info Edge had total revenue of 1098 Crore out of this the major contribution is from Naukri.com, which is rupees 771 crore. So, 70% of the revenue of Info Edge in FY 21 was from Naukri.com.
The next major contributor is 99acres.com with a revenue of 173 crores, which means that Info Edge has received 16% of the revenue from 99acres.com. This means around 86% of the company’s revenue is from Naukri and 99acres and the remaining contributes 14%. Please note that these are standalone numbers and not consolidated numbers.
As far as Info Edge’s EBITDA is concerned, it reported an EBITDA of 254 crores in FY 21. But interestingly Naukri.com’s EBITDA is worth 415 Crore, which means so far Naukri is the only venture that is in profit.
Also if we look at the operating margin Naukri.com has a margin of 54%. Basically, Naukri.com is the bread and butter business of the company, which is highly profitable and the remaining businesses are still not in profit, the reason being that other businesses are still in the growth phase and spending heavily to acquire the market.
Infoedge business breakup
- If you look at the revenue breakup of Naukri.com 90% of the total revenue of Naukri is from the B2B segment from corporates looking for potential candidates.
- Some of the B2B services include resume database access, job posting, employer branding, etc. Rest is from B2C or consumer segment where the job applicants pay for premium services.
- Naukri is further building up the business with investment in multiple ventures including; IIM jobs, which is a leading recruitment platform for management professionals, and hirist, which is an exclusive platform for premium technology talent.
Promoters & Leadership
- Info Edge promoter and Chairman is Mr. Sanjeev Bikhchandani. He is among the pioneer of internet-based business in India.
- After completing his MBA from IIM Ahmedabad in 1989, he has successfully established multiple internet companies in India that are leaders in their category, including Naukri.com, Jeevansathi, 99acres, and shiksha.com.
- In 2010, he stepped down as CEO of Info Edge and focused on the 5th vertical of the company, which is investments in startups.
- We have already seen the bumper listing of Zomato and Policybazaar, where Sanjeev invested during the initial stages. There are many potential companies where he is invested.
- Info Edge’s MD and CEO is Mr. Hitesh Oberoi, he has done his BTech from IIT Delhi and MBA from IIM Bangalore, he has been associated with Info Edge since the year 2000.
- There is no doubt that the promoter and the leadership pedigree of Info Edge are top-notch. Overall on the company and its leadership.
Future Growth Prospects
- If you look at the future growth prospects, there is no doubt that the future is digital and Info Edge is a leader in not just one but multiple segments of online business, including recruitment, real estate, matrimonial, and education.
- There is an explosion of internet users in India over the last few years due to affordable smartphones and low-cost internet. This has opened up the market for 1.4 billion people in India.
- Although Currently there are around 761 million internet users in India in FY 21, it is expected to reach 974 million by 2025. So, internet penetration would continue to rise in India.
- As far as individual businesses are concerned Naukri.com has seen a sharp rise in demand. This was mainly due to high demand from the IT sector and the demand in the recruitment space would continue to rise.
- The real estate sector was badly impacted due to COVID. However, the company has mentioned that there is an increase in real estate ad spending on online platforms.
- If we look at the matrimonial segment, the online matrimonial business is expected to grow at a 14-15% CAGR.
- There’s already a growing trend to use online portals for matchmaking. Although 50% of matchmaking business in India is contributed from South India.
- Info Edge is now focusing on deepening the penetration in North and West India for the next level of growth. Although operationally Jeevansathi is still at the loss.
- Info Edge is investing heavily in its existing platform with the adoption of newer technologies like AI & ML to make the platform more personalized, and increase the platform efficiency and overall product experience, for example, it added a video profiling feature on its platform.
- Due to COVID, there is increasing usage of video profiles for recruitment as well as video interviews. Likewise, Jeevansathi is also using video profiling, along with a video chat option for prospective brides and grooms.
- Apart from this, the investments of Info Edge in multiple companies, including Zomato and Policybazaar, would continue to grow and Info Edge is now investing in a lot of startups.
- There was an article in September 2001 that mentioned that Info Edge has invested in nearly 2 startups per month in 2021 with a total of 15 startups by September 2021. So, you can imagine the amount of startups Info Edge is investing in. As far as future growth is concerned, the future is bright.
Key Risk
Although you should also understand the risk aspect of the company.
1. Risk Obsolescence
Since Info Edge is a new-age internet company it faces the risk of obsolescence, it has to stay updated with the latest technology to ensure that it sustained its position in the market.
2. Strong Competition
The company is a strong competition in each vertical. Although Nokari.com is an undisputed leader in the online recruitment business, there is strong competition in other verticals. for example, in matrimony, it has competition from shaadi.com, in real estate, it has competition from Magic bricks, silica, and so on, likewise, there is strong competition in every sector.
3. Investment Risk
The third risk is investment risk. The company has a lot of exposure to startups, and not every startup would become a Zomato. In fact, the company has mentioned that it has already returned 13.6% of its investment. So there is always a risk of failure from startups.
Infoedge Financials
If you look at the financials of Info Edge, at present, its market cap is 57,209 crores and its PE Ratio is 4.63. Now, why is such a low PE ratio, we will figure it out.
ROE & RoCE
If you look at the ROCE, it is 3.67 and ROE is 3.06%. The reason for low profitability is because Info Edge is basically investing in your internet companies that are in their growth phase. So they are not yet profitable and due to that, it has got very low profitability.
Debt to equity ratio
If we look at the debt, it has got 55.9 Crore debt and debt to equity is zero. So, the debt is negligible.
Price to book value
As far as its book value is concerned is got a 1500 rupees book value and its share is 4483 So, the price to book value is 2.98.
Revenue
If you look at the revenue of Info Edge. Info Edge revenue year on year has grown, from 748 crores on March 16 to 888 Crore, then 988 crores, then 1151, then 1312. Basically, there is a consistent growth in revenue, although there was a fall of 1120 crore on March 20. But again there is a jump and the trailing 12-month revenue stood at 1407 crore.
Net Profit
If we look at the profits, now, this is interesting on March 16 the profit was 136 then it fell down to -24 and then again jumped to 512 Crore then 604 then fell down to -238 Crore then jump to 140.7 But look at this sharp jump in trailing 12 months the profit is reported at 12,428 crores.
What is the reason for such high profit in Info Edge’s trailing 12-month number? So, here you can see that it is because of this other income if you observe this other income tab, here it is showing 1584 and then 13,732. So, basically the earnings the high profits are because of the other income, and what is this other income, it is because of the Zomato and policy bazaar listing.
If you look at the quarterly results, you can see that on September 21. It reported another income of 8315 crores and in December it reported another income of 4801 crores. Basically, this income is the unrealized profit due to the listing of Zomato and the policy bazaar. Please note that these are not realized profits.
In fact, according to an article from the business standard, that says Info Edge, can’t sell 25,000 Crore holding in Zomato and PB FinTech for a year, where it clearly mentioned that the company has registered a gain of 357 crores from the sale of a share in Zomato IPO, and it has reported an unrealized market gain of 8941 Crore from its stake in food tech company Zomato.
So, this was based on the q2 results, I hope now you clearly understand the reason for such high profitability, it is because of the unrealized profit due to the listing of Zomato and policy bazaar and since the earnings have increased drastically, the PE ratio has fallen drastically.
Shareholding Pattern
- If we look at the shareholding pattern, the promoter’s shareholding has fallen from 40.76% to 38.17%.
- There was a slight fall in shareholding is still September 20, when it fell down to 38.17. But since then it has been more or less constant.
- Although if we look at the FII movement, FIIs have actually sold their shareholding in the December quarter from 37.7% to 33.99%, and DIIs have actually purchased the holding from 13.61%, they have increased it to 15.66%.
- In fact, DIIs have constantly increased their shareholding since 21. So, it jumped from 11.25% to 13.26% to 13.61% to Currently at 15.66%.
- As far as the target for Info Edge is concerned, Sharekhan has given a report and it says buy Info Edge at a target of 6500.
Conclusion
- In this article, we discuss the business of Info Edge, which is the parent company of Naukri, Jeevansathi, 99-acre, shiksha.com, along with investment in companies like Zomato and policy bazaar.
- Info Edge is among the pioneer in internet business in India and a leading investor in tech startups in India. It is also the leader in the majority of its category.
- Info Edge has very strong leadership and a bright growth perspective due to rising internet usage in the country.
- As far as finances are concerned. Currently, Naukri is the only profitable venture of the company but it is a highly profitable business and there is a huge demand in the recruitment space.
- Other business management recently mentioned that its real estate and matrimony business will play out in the next 5-7 years.
- And there are many startups where Info Edge has invested that can potentially become big in the future. Now, as we discussed, the valuation of Info Edge at a PE ratio of 4.63 is misleading due to its unrealized profit from Zomato and policy bazaar.
- So don’t get confused with a low PE ratio.
- Info Edge is currently commanding a valuation of 57,209 crores. The share has corrected almost 40% from its peak, this moment was mainly linked with Zomato’s performance, and we have seen that both Zomato and policy bazaar have corrected sharply from their peak.
- In the future, if there is more connection in the technology sector, it would directly impact input share price, but I believe that any fall in this company in the future would create a buying opportunity.
- If you want to have exposure to the Indian tech startup ecosystem, then Info Edge is a good option to invest systematically and buy on dips. Now tell me what you think about info edge. Have you invested in it? Let me know in the comments.
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