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Info Edge Earnings Call: Naukri’s sales rejig, demonetization impact & more

Info Edge is rejigging the sales process for its recruitment business Naukri.com, the company said on its earnings conference call. The process was put into place in the middle of Q1, and sales reps are being told to “hold on the negotiation piece” and continue “with the negotiation but we are not really doing that at the cost of the existing relationship that we have.” This is mostly happening in key accounts and large accounts, and mostly for annual deals. Essentially, sales reps aren’t being pushed to close, but are being pushed to upgrade clients or to get more money from regular, large clients. “…there are cases where sometimes negotiations go on for three months because with many of these customers we have very old relationships. So we let them use the site, but we keep negotiating.”

These are clients, according to Info Edge CEO Hitesh Oberoi, who have “a lot of money or the average billing part was much higher than the average for the business as a whole.”

This allows the company to reduce discounting, and bill more from larger customers, but it also leads to the deferment of sales for Info Edge. “So it is very possible that in Q4 this change in policy would impact our collection growth by maybe Rs.15-20 crores in Naukri but we could get that revenue back in terms of additional growth in Q1 and Q2 of next financial year.”

“So it depends how the negotiation will end at the end of the quarter. Why we are saying that Q4 will have a bigger impact is that there are maximum number of large customers who come for renewal in Q4. So what the total impact would be, is hard to really kind of forecast but it is quite likely that it could be much larger than what we would have seen in Q1, Q2 and Q3.”

Q4 is typically Info Edge’s largest quarter.

Sanjeev Bikhchandani, Executive Vice Chairman and Info Edge said that “I think it will take 5 quarters for the whole cycle to play out, not 4 maybe even 6, because if they have stuff that you would have collected end of Q1, which would be accounted in Q2, their’s stuff that you would have collected end of Q2 which would be accounted in Q3 and so on. So therefore, it will take more than one full year to play out.”

The company expects ARPU (average revenue per user/customer) to be much higher in Q1 and Q2 of the next financial year.


Performance of the recruitment business, including Naukri (well, mostly Naukri)

– Top line grew 14% to Rs.147 crores. EBITDA margins in Recruitment were flat at 55%, versus 52% in Q3 last year.
– In Q3, Naukri added an average of Rs.12,900 fresh CVs everyday and the database grew to about 49.8 million CVs.
– Average CV modifications were at 11,000 per day in Q3 versus 163,000 per day in Q3 of last year.
– It serviced 38,800 unique customers with 33,900 unique customers in Q3 of last financial year. In the first nine months of this year, Naukri serviced 56,900 unique customers versus 52,400 customers in the first nine months of last year.
– SME’s were hit more than large enterprises, and there was the company noted a”slight slowdown” in IT. “However, we service over 10,000 IT Services and BPO companies and that sort of mitigates the impact. Many of these are back offices, captives and development centers and they are likely to be less impacted versus companies which depend mainly on outsourcing work. BPO, Insurance and Banking along with a few other services sectors were better in Q3 and compensated for some of the slowdown in IT.”

Demonetization Impact

Overall demonetization impact was around Rs 20-25 crores, as compared to Info Edge internal targets. Info Edge “lost about Rs 8 to 10 crores of business in Naukri and maybe we lost about a crore maybe in Jeevansathi and Shiksha.”

In case of Merination (education): “Demonetization has not helped because at least for the home sales team which was the field sales team, some of that collection used to be in cash and that has been impacted but hopefully it should recover next month or two.”

For Jeevansathi (matrimonial classifieds): “In Jeevansathi also, our sales were impacted for about a month due to demonetization though not to the extent they were impacted in some of the other businesses and even in JeevanSathi we have recovered in terms of traffic and in terms of sales growth since then.”

On Canvera (wedding photography): “Demonetization did have an impact out here because a lot of wedding expenses would be impacted and it has not fully recovered yet and we are hoping that by next month or a month after it should recover and then it will be on track to pursue breakeven. But both these we are still figuring it out.”

Meritnation to focus on profitable growth

– “The company did invest substantially in sales and marketing and therefore that means headcount and ad expense and that drove burn up”
– “We have now asked them to pivot to let us get a profitable growth kind of model, so the company is doing that.”
– “6000-8000 free registrations in a day, it has tremendous engagement.”

– net sales grew 19% YoY in Q3 and reached Rs.14 crores Vs Rs.11 crores in Q3 of last year.
– EBITDA loss of about Rs 2 crores in Jeevansathi.

Shiksha, Diro Labs, Applect
– In Q3, sales of the Shiksha grew 6% to Rs 7 crores and we lost Rs 3 crores at the EBITDA level vs Rs.2 crores in Q3 of last year.
– Rs 1 crore investment in Diro Labs during the quarter.
– “Over the last 11 months we have advanced a total of Rs 23 crores to Applect by way of a loan and the total gross amount now invested in external ventures including the loan to Applect is Rs 845 crores.”

– “The company has curtailed expenses very well in the last few months and therefore the burn has moved down a bit.”
– “Lot of sales process improvements taken place, lot of automation has been put into the sales effort.”

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