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Published on 19/08/2019 12:09:24 PM | Source: HT Media

Info Edge’s investments drag Q1 performance, stock valuations remain lofty

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Shares of Info Edge (India) Ltd have slipped nearly 11% after scaling a 52-week high of about ₹2,444 on June 3. Continuing losses in investee companies have been worrying investors lately. Post its first-quarter results, some analysts have even downgraded the stock.

In the first quarter ending June, Info Edge’s standalone revenue growth remained healthy at 20.5% yoy, much in line with analysts estimates. In fact, the recruitment business continues to grow at a healthy clip. Revenues here were up 19.2% yoy in Naukri. 99acres grew at a faster clip at about 34.6% yoy, while other segments contributed about 10% revenue growth.

Real estate growth, though, has been sluggish, and growth numbers seem high due to 99acres’ tiny base. Its strong foothold in the online listing space with about 50% market share though, should provide room for growth.

Its flagship portal, Naukri though has seen a decent growth, driven by IT and IT services. Naukri adds about 19,000 resumes on a daily basis. Its recent acquisition IIMJOBS.com has seen a 22% growth in revenues in the first quarter to ₹57 crore, and is close to break-even, according to the management.


On a consolidated basis, though, Info Edge’s growth numbers have been a drag. Some of Info Edge’s investments such as Zomato and PolicyBazaar have been loss-making. These businesses are currently in a growth phase with Zomato starting to control costs and reducing losses. On a consolidated basis, though revenues grew at 15.4% YoY, which is reasonable. InfoEdge, though, reported a loss of ₹190 crore in the first quarter against ₹22 crore in the year-ago quarter.

Much of Info Edge’s business is in a growth phase. However, the stock has climbed about 47% in the past year with valuations touching sky-high levels. “INFOE’s market leadership positions in recruitment and real estate segments, as well as investments in Zomato and PolicyBazaar make it well-positioned in the classifieds space. Current valuations, however, more than capture these positives," said analysts Kotak Securities Ltd institutional business.

“We downgrade the rating to SELL with a revised fair value of Rs1,910 as we roll forward to June 2021E," noted Kotak Institutional Equities.

That’s about 14% lower than current levels, though much of its future depends on the valuations that Zomato and other investee companies command during the next round of fundraising.