In a quarter when Info Edge reported an all time high deferred sales revenue of Rs. 64 Crore (up 44% year on year and 5% QoQ), on the back of growth in its jobs classifieds (Naukri.com) and real estate classifieds (99Acres.com), the performance of its matrimonial business Jeevansathi.com was cause for concern. (ED: also read our previous story on the implications of deferred sales revenue for Info Edge)
Jeevansathi reported an increase in net sales of 7% for the quarter, 3% for the year, and revenues of Rs. 5.4 crore, reporting a loss of Rs. 3.5 crore loss on the back of increased advertising spends; the number of unique paying customers remain flat. In Q1 this year, it had registered no growth. Info Edge CEO Hitesh Oberoi said that the company’s strategy is to spend on market and brand building to gain marketshare in the segment. Yet, the business remains number three in the market (behind Shaadi.com and Bharatmatrimony.com). Oberoi also said on the call that the company has virtually vacated the South India market, and is focusing primarily on the Western and Northern markets. The business doesn’t appear to be scaling, with 3.9 million ever added profiles, has a database that regularly churns out (and is hence marketing spends dependent). Despite long gestation periods for the real estate and matrimonial businesses, recruitment still accounts for 83% of Info Edge topline (marginally less if you include All Check Deals, which has been hived off); Info Edge, at the core, is still mostly Naukri.com.
On the conference call, I asked Oberoi the rationale behind remaining invested in the matrimonial business. Citing Comscore Oberoi claimed 23% marketshare for Jeevansathi, behind BharatMatrimony (55%) in the Indian market, but ahead of Shaadi.com (23%) (ED: this doesn’t include the NRI market, where Shaadi.com is believed to be strong). Oberoi said that the matrimonial segment comprises of multiple markets, and strength in one segment, doesn’t necessarily make you strong in another. Info Edge has decided to focus on north and west, in which they have a chance of making it to the top spot, even if they are number three nationally. The first half was slow for Jeevansathi, after the company had cut investment in brand building. Jeevansathi’s profiles ever added increased from 3.3 million to 3.9 million year on year, but there’s no indication of how many profiles are active.
Oberoi also said that the share of recruitment stays at 83% also because Naukri.com is growing at a fast rate, at over 30%. “So it will take a while because these (other businesses) are starting off on a small base, but these are very, very big categories and these businesses have become big going forward. We obviously don’t want Naukri to slow down and these businesses to become big, so it’s okay for us, if Naukri continues to grow at 40%-50% and continues to be remain big as long as these businesses become big as well.”
On their offline centers, Oberoi said that that they’re investing more in their call center operations for assisted matrimony for expanding reach, as opposed to more offline centers. “We are not looking to open new centers at this point in time,” he said.
Sales for 99Acres.com during the quarter grew by 74%, and the loss reduced by half to Rs. 45 lakh for the quarter at the EBITDA level, with revenues of Rs. 5.4 crores. Oberoi said that the business reported around Rs. 5.6 crore of revenue for the quarter, and they’re nearing 50% the mark in terms of traffic share on Comscore. Oberoi said that they’re confident of this category going forward. However, readers keep in mind that real estate companies have upped advertising spends significantly during the quarter, as newspaper publishers have also reported, and this could be a sign of desperation to sell.
Note: The EBITDA losses for Other Verticals, during this quarter, doubled to about 6 crores, and for the first half of the year, were 8.4 crores versus 7.5 crores last year. It appears that the performance of Info Edge’s ‘Other Verticals’ is heavily dependent on advertising spends on Jeevansathi and 99Acres; perhaps it’s not right to look at them at a quarter on quarter level, since profitability for either vertical can be improved by staggering advertising spends. If they want to improve Jeevansathi’s performance, they’ll just pull advertising spends.
Info Edge’s next big bet, the education portal Shiksha.com, on a small base, grew by 130% year on year, and 116% for the first half of the year in comparison with the first half last year. Remember, though, that this is on a fairly small base of revenues. Oberoi did say that “We are getting better with the products and we are getting some traction in the marketplace. We are getting the renewals.”
Operating Performance for Info Edge:
– Operating Income grew 29% YoY and about 8% QoQ.
– Operating PAT also went up by about 55% on YoY basis at Rs. 13.3 crores; up 5% on QoQ basis. Operating PAT margin is up at 18.64% versus 15.48% in the same quarter last year.
– Operating EBITDA at Rs 21.3 crores is up 51% year on year. Operating EBITDA margin is at 30% versus 25.7% in Q2 last year.
– For H1 of this financial year, operating income was up 27% and operating PAT was up 63%.
– On ABC Consultants launching HeadHonchos.com: “Well it’s very early days, I don’t think the site has gone commercial as yet. We are watching the space. And we also have a few initiatives lined up in this area ourselves.” Info Edge Vice Chairman Sanjeev Bikhchandani also said that the fact that ABC Consultants is a client of Info Edge’s doesn’t have an impact because “in Naukri, no single client account accounts for more than 0.3% or 0.4% of Naukri revenue, so the dependency on any one client is very low.”
– Recruitment top line grew by 28% to Rs. 69 crores and Naukri top line grew by about 32% while Quadrangle grew by about 40%.
– The EBITDA margins in recruitment were at 46% versus 37% in Q2 last year.
– In Naukri, the EBITDA margin went up to 49% from 36% a year ago.
– Naukri Price Hike: Oberoi said that it will take a while for the full impact of the price hike in Naukri.com, because old contracts will have to be negotiated, and there are still old contracts at the old price running. But, “in general, the feedback in the market is that price hike has been received well. There was a discounting which is going down, and realizations are improving.”