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Info Edge Concall: JustDial vs Zomato, 99Acres Doing Well, Mobile Traffic Rising

Given that Naukri.com still accounts for a significant majority of the Info Edge’s revenues, most of the company’s earnings conference call was focused on two of its (relatively) smaller businesses: 99Acres and Zomato:

Zomato: Zomato is going to close a round of funding before the end of the year, and by the looks of it, it’s going to be a big one. Info Edge owns a majority share in Zomato, and in response to a question on why Info Edge isn’t investing the money, as opposed to bringing an external investor in, Info Edge Vice-Chairman Sanjeev Bikhchandani said that getting an new investor in depends “on the size of the raise, and the size of our balance sheet. If the raise is going to be large, we would like to get someone alongside us. We will be probably diluted from our stake, but this is still under negotiation, but we are likely to stay majority.”

Bikhchandani said that during the last round of investment, when Info Edge acquired a majority share in the Zomato, it was valued “significantly less than Rs 500 crore”, and Info Edge gave it a higher valuation that it was getting outside, because of the transition to majority stake. A minor fraction of the funding was given as a controlling premium stake. The current fund-raising round is still being negotiated.

Zomato plans to add more countries, and the burn is expected to grow. “Six months ago, we could not have said that this would be our strategy, but the results have been encouraging,” Bikhchandani said. On being asked about JustDial vs Zomato: “Our sense is that ratings don’t matter as regular reviews. Zomato is doing well in ratings. The management team of Zomato tells us that their traffic is several times higher than JustDial for that segment. The management team doesn’t view JustDial as a threat, and we would agree with that.”

99Acres: 99Acres had “a very good quarter”, according to Info Edge MD Hitesh Oberoi. Topline grew by 57% year on year to Rs 18.5 crores, and the company made a loss of Rs 1 crore on account of brand building, and growing the team and the product development. 99Acres is now in 14-15 cities, and over the next couple of years, will expand to 35-40 cities. Paid listings for the business grew to 5.6 lakhs during the quarter, versus 4 lakhs last year. “99Acres, we continue to invest in sales, brand building and product development. Several new projects were rolled out in the last few months, and many more being planned.”

Later in the call, Oberoi added that “The market for real estate continues to be tight: there aren’t enough houses being made, or sold. However, we continue to grow as a result of our team’s execution: we’ve expanded our sales operation, invested in product development and brand building. It’s also a function of the fact that the offline market for real estate is huge. More than Rs 2000 crores a year is spent on real estate advertising offline, and this has to migrate online. Our estimate is that less than 10% of this money is spent online today. Online is more efficient for advertising and lead generation. There’s been a surge in our growth because we’ve been hiring and opening new sales offices. We’ve added new customers because we have more sales people on the ground.”

Oberoi doesn’t expect any serious profit from 99Acres in the next 12 months, as the company continues in investment mode. “The focus wil be product development, design, brand building, opening new offices and expanding the team. If the growth slows down a bit, we could go into losses.”

Other notes from the concall

Naukri: “Naukri has weathered the slowdown well, partly because the IT sector was stable, and possibly because of taking share away from competition,” Oberoi said. The IT sector, a largest contributor to Info Edge revenues, and the focus of conversations on many an Info Edge concall in the past, “hasn’t changed a lot. They contribute around 25-26% of our revenue. Their market is a lot more stable than earlier, and a lot more stable than other sectors that we operate in.”

“Recruitment topline grew 7% to Rs 90 crores. EBITDA margins were at 50%, similar to Q1 last year.” Naukri EBITDA margin was 55%, similar to that of Q1. It added 10,900 resumes every day, and database is over 35 million CVs, with 135,000 daily CV modifications. Info Edge serviced 27000 unique customers during the quarter, up from 25000 in Q1. In the first half of the year, they serviced 35,500 unique customers in, versus 33,500 customers in H1 last year.

Some new products were rolled out last quarter: “We rolled out a Naukri recruiter profile product, improved our response management system. Over the next 6-12 months, more rollouts are planned, including a Naukri Android App (which will be out this month).”

Jeevansathi: Net sales grew 16% year on year. There was an EBIDTA loss of Rs 80 lakhs in Jeevansathi this year. Jeevansathi took a price hike, because of which realization rate has increased. It has cut advertising spends. “We are trying out new things, and experimenting. We are giving ourselves a few more quarters to figure out the market. We want to disrupt the market in some way.” Note that Jeevansathi is at number three in the matrimonial classifieds space online, and has been number three for may years.

Shiksha: Net sales grew by over 60% over last year. Info Edge has cut advertising spends. “It’s a seasonal business, and ad spend is up in Q4 and Q1, and is weak in Q2 and Q3.” (Note: an earlier version of this post mentioned that ad spend on education is weak in Q4, instead of Q2. Apologies for the error)

Mobile Plans: Percentage of traffic from mobile? “15-30%, depending on the category we’re in. In Shiksha, it’s high because we have young customers on our site. We are aggressively working on developing the next set of our apps for each of our sites. We’re launching a Naukri app this month, and we have submitted an iPhone app for Naukri Gulf. We have an app being developed for 99Acres. The traffic is growing fast month on month, and will grow after we launch our apps.”

Info Edge Financials: Deferred sales revenue decreased to Rs 121 crores, versus Rs 131 crores quarter on quarter. Operating EBITDA was Rs 44 crores, an increase of 20% year on year, and 35% operating EBITDA margin, versus 34% in Q2 last year. Operating PAT margin was at 21% versus 23% for the same Q last year.

Investments: Our goal is to be a strategic rather than a financial investor. If the promoter is comfortable, we like to go to a majority share in the company. Thus far, we have gone to a majority share in two companies – MeritNation and Zomato. They are early stage, and there is higher risk, and some might not work out. We have written off three of 9 that we have invested in. Some of the companies are doing well. We have invested Rs 285 crores in 9 companies. We wrote off in 3. There is no maximum limit or target. As long as we have enough money. We will be more circumspect if Naukri is not growing strong and internal cash accruals are required.”

More importantly, “It’s hard to predict where these will end up at. This is going to be a 5-7 years, over which we’ll expect return.”

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