Macroeconomic concerns such as global instability, higher domestic interest rates and inflation are impacting are a cause for concern for Info Edge, which owns classifieds businesses such as Naukri.com, Jeevansathi.com, Shiksha.com, among others. “…growth has come off in some areas due to macroeconomic concerns such as global uncertainty, higher domestic interest rates and inflation. There is usually a lag till it shows up in revenue since it is cushioned by deferred sales which are brought forward from previous quarters,” Info Edge CEO Hitesh Oberoi said on the companys Q2-FY12 earnings conference call. Info Edge accounts income on a deferred sales basis, and its deferred sales revenues declined to Rs 91.8 crores versus Rs 95 crores sequentially, even though it was up 43% year on year. The collection growth has been lower than the companys revenue growth in the first half of the year, and “that is why we have seen a slowdown going forward because our revenue gets recognized over a period of time,” Oberoi said.
In addition, the company’s collection growth is reducing as clients are defering purchases or buying shorter duration products. It’s Naukri Job Speak index, indicative of job listings on its website Naukri.com, but which has no direct correlation with revenue, has stabilized over the last three months and has stopped growing further, the company said, even though it is higher than what it was at the same time last year.
Oberoi said on the call that they are not in a recessive mode, and are growing, and “one does not know what is going to happen going forward but there is no comparison to 2008-2009 at the moment”. They managed to renew most of their clients during the quarter, but some clients just paid what they paid last year when there was a slowdown. Clients in sectors such as insurance, Telecom and real estate have been impacted more than the other sectors. Info Edge Vice Chairman added that in the short run, the foreign exchange movement “may boost IT company’s prospects but volatility is so high overseas in the economies and certainly very high in Europe, people are being very cautious about committing long-term resources.”
Also keep in mind that the Diwali quarter (Q3-FY12 this year) tends to be a slow one for the company.
An interesting aside: Comscore is moving from a panel based methodology to a tagging based methodology in India, which has impacted the 99Acres traffic share. “our traffic share therefore has moved to in the late 30s (percentage of total) as opposed to the early 40s till sometime back. We are trying to seek greater clarity from ComScore on the change in methodology.”
In the first half of the fiscal year, all six investing companies (excluding AllCheckDeals) put together had a top-line of about Rs 23 crores and incurred a EBITDA loss of about Rs 14 crores. Bikhchandani said that “Now this should more than double (by the end of the fiscal) in my view because these companies are still in investment mode, they are still losing money and they will lose more money as they grow and they invest in growth.” He added that “our current estimate is that our share of the loss at the post-tax level would be higher than the Rs 20 crores we saw last year.”
In Q2, Info Edge committed to additional investments of Rs. 18 crores in Mydala Rs. 13.5 to Zomato and Rs. 20 crores to Meritnation.
On valuations & “an e-commerce bubble?” Bikhchandani said on e-commerce valuations that they are pretty conservative, and they “are unlikely to put money into companies at those kind of valuations, especially companies which are yet to break even no matter how fast they are growing and no matter how promising the sector is, simply because it is still fairly high risk. Many of these companies that are getting the valuations still carry early stage risk. I think what we have heard it is just a hearsay anecdotal is even regular venture capital companies are being outcompeted by some of the private equity players who have decided to enter e-commerce.” … “we may or may not be able to invest in further e-commerce companies depending upon valuations that we get. But this bubble is limited to may be less than dozen companies and few other dozen investors”
Notes from the concall: all comparisons year on year unless specified otherwise.
Stand-alone net sales: Rs 91 crores versus Rs. 71 crores for same quarter last year, up 28%, up 5% over last quarter.
Operating EBITDA: Rs 33 crores, up 55% year-on-year and 4.6% quarter-on-quarter.
Operating EBITDA margins: 36.3% versus 30% in Q2 in last year.
Other income: up, on on account of better returns from financial investments because of higher interest rates.
Profit after tax: Rs 28.2 crores versus 17.9 crores in Q2 last year, an increase of 58%.
Operating PAT: was at Rs 21 crores was up 62% year-on-year
Operating PAT margin: was at 23.5% was significantly higher at 18.6% in the same quarter last year.
Vertical Specific Results:
Recruitment Solutions(Include Naukri.com, Naukri Gulf, Job Seeker Services, FirstNaukri, Quadrangle) :
– Net Sales Up 27% to Rs. 75 crores
– Naukri corporate sales & profit grew by about 32%
– Quadrangle sales declined by 22%
– EBITDA margins in recruitment were at 48.6% versus 46%
– Naukri EBITDA margin was at 54% up from 49%
– Naukri added 12,100 fresh CVs every day, total database at 27 million.
– Naukri CV modifications were average 98,000 per day
– In H1 of this year we have served 31,700 unique clients versus 28,500 clients in H1of last year
– IT as a contribution to our sales continues to be in the 25 to 26%
Other Verticals ( Jeevansathi, 99Acres, AllcheckDeals) :
– net sales grew 18%
– “Jeevansathi we are still a distant number three, of course our revenue has been growing at about 15 to 18% year-on-year but we still have not figured out a way to grow a 30 to 40% year-on-year because that is what we want to do, so still a challenge so we are still trying sort of figure out how we can become a leader in some communities at least”…”We are not
a very strong player in South any more so our business has declined while in the south while we’re gaining share in the North.”
– Offline Stores: “Well it is status quo so we still about 13 to 14 outlets we have not expanded the number of outlets. We are working more on the call centre sort of model, so no change on that front.”
– top-line was up 41%
– Small loss because of TV advertising campaign
– “real estate sector constitutes to be impacted because of higher interest rates and on account of recent court decisions especially in the NCR region”…”
– close to about 200 people in sales in 99acres. “Clearly transactions are lower than what they were”…”Yes, like Naukri the concern is on macro that if the underlying market continues to be weak for at two or three or four quarters going forward what sort of impact it may have on our performance but otherwise I think 99acres is okay.”
– net sales grew by about 78%.
– 370 transactions in Q2 versus 309 in Q1