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The grand job-wedding-housewarming party is here!

Job, wedding and own house are the three (stereo) typical and interconnected life
goals in the Indian sociocultural construct. Besides the parental influence, this
trinity now seems to have another common driving force – liquidity!

As we anticipated in mid-Jun-21, hiring across sectors has witnessed a
robust pickup. Net EPFO additions in Jun-21 were ~85% higher than the pre-covid
run-rate. RBI’s Aug-21 ‘State of the economy’ report hints at up to ~38% YoY
salary hikes across sectors – the best in 15 years. Resignations and voluntary
retirements too are surging in line with global trends. ‘Rethinking of work’ by
employees is driving massive supply-demand mismatch across industries further
boosting the need for ‘search’ platforms like Naukri. We foresee an employees’
job market for at least 12-18 months (vs employers’ market for 5+ years now).
This is driving strong traction in online realty too (99 Acres DAUs in Jul-21: +28%
v/s Feb-21) further led by: (1) low interest rates, (2) new launches, (3) online shift.

We expect a sharp pent-up increase in Jeevansathi’s (downloads in Jul-21: >13x
v/s Feb-21) paid listings as wedding restrictions ease and most of the ~17mn
deferred weddings (I-Sec est., CY20 & CY21) come into planning pipeline. The
robust volume spike at 99 Acres / Jeevansathi should come along with EBITDA
profitability surprising the street. Post our upgrade in mid Jun-21, the stock was
up ~29% (vs ~10% return in NIFTY). Given the improved growth and margin
outlook across segments, we upgrade FY22E - FY24E EBIT by 23%-35% and TP
by 28%. We value Naukri at 75x FY23E EPS. As elaborated in our report, our
1-year forward valuation of Zomato stands at US$22bn. We factor in holding
company discount of 15% on listed / to be listed investments of Infoedge.

* Strong hiring. Naukri can be a key beneficiary of demand-supply mismatch. As
we expected in mid Jun-21, there was a robust and broad based pick-up in hiring –
across sectors. Trends in markets like the US, which publish job market data
periodically, hint at a significant demand-supply mismatch. For instance, the US
currently has 10mn job openings while 8.4mn people are unemployed! This is being
led by rethinking of work, family responsibilities & flexibility by employees. While
granular data on Indian market is absent, anecdotally, we notice similar trends.

Entrepreneurship, preference to work in start-ups and need for flexibility are the
biggest drivers of the demand-supply mismatch. In this backdrop, we foresee
employees’ market for at least 12-18 months with search platforms like Naukri
benefitting. Under-investment by India Inc. for the previous 5+ years, and current
reflationary environment give us the confidence. Notably, even as the NIFTY 50 /
BSE 200 aggregate revenues grew 52% / 47% over FY16-20, permanent headcount
increased just 16%/15%. Even accounting for technology led productivity gain, we
see further headroom for hiring.

* Vibrant job market is driving traction in online real estate classifieds. In
addition to the foregoing, other tailwinds such as: (1) low interest rates, (2) strong
pipeline of new launches, (3) print to online shift, and (4) recent D2C approach
taken by many builders are driving robust traction in online real estate classifieds.
For instance, Daily Active Users (DAU) of 99 Acres in Jul-21 was 28% higher from
that in Feb-21 - before the start of the covid 2nd wave. Competitive intensity has
been a key reason for the suboptimal profitability in this segment for Info Edge.

However, both the number of VC / PE funding rounds and the funded amount came
down over CY20 and CY21-YTD (exhibit 7). Further to the robust demand, this is a
key positive hinting at potentially low cash burn by competition going ahead. In
conjunction with an expected spike in paid listings, we expect EBITDA profitability to
exceed the street estimates. Nevertheless, the full stack aspirations of competitors
like Square Yards is a key risk to watch out for.

* Post the deferral of 17mn weddings, massive pent-up demand on the cards.
Lockdown-led limitations to traditional matchmaking translated into significant traffic
share gain for matrimonial sites (from physical channels). This digital shift was more
pronounced in tier-2 and tier-3 cities. Lockdowns and stringent wedding related restrictions (on guest count, etc.) meant that nearly 17mn weddings (vs annual run-rate of 10mn-12mn, I-Sec est.) are deferred over CY20-CY21. Some of these deferrals might already be past the search phase, i.e. the 6-9 months before the wedding date when people list the profiles on the matrimonial site.

Others should come into the search / planning phase soon encouraged by: (1)
easing lockdown restrictions, and (2) best in a decade job security / outlook.
Incipient signs of this uptick are already seen in the exponential increase in
Jeevansathi’s downloads in the recent past (July 21: >13x Feb-21). We anticipate a
sharp increase in paid listings in the near term to also drive EBITDA profitability (in
FY23) – a surprise on the street’s current expectations.

* Info Edge is the best proxy on the grand job-wedding-housewarming party! Given the improved growth and margin outlook across segments, we upgrade our FY22E-FY24E EBIT estimates by 23%-35%. However, we trim our other income estimates primarily led by the lower than earlier expected quantum of cash proceeds from Zomato’s IPO (Rs 3.8bn v/s Rs 7.5bn). Our normalized earnings (ex- gain on sale of Zomato) estimates / TP witnesses 13%-19% / 28% upgrade.

We value Naukri at 75x FY23E EPS. We value 99 Acres and Jeevansathi each at 20x FY23E sales. As elaborated in our report, our 1-year forward valuation of Zomato stands at US$22bn. We factor in a holding company discount of 15% on the listed / to be listed investments of Infoedge. Impending IPO of an investee firm will be a key catalyst. Covid third wave can be a risk to our estimates / TP.

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