Jeevansathi was the only business which did well in Q1: Info EdgeSharvari Joshi
Update on the Indian Equity Market:
On Wednesday, NIFTY closed in the red at 11,278 (-0.3%). The top gainers in NIFTY50 were Tata Steel (+3.6%), Zee (+3.1%) and Cipla (+2.7%). The top losers were SBI (-4.1%), GAIL (-3.4%), and Bajaj FInserv (-2.9%). The top sectoral gainers were PHARMA (+1.9%), MEDIA (+1.2%) and METAL (+0.9%) and Top sectoral losers were PSU BANK (-2.9%), BANK (-2.1%), and PVT BANK (-1.8%)
Excerpts of an interview with Mr Hitesh oberoi, MD and CEO, Info Edge with ET now dated 8th September 2020:
• They were impacted by the lockdown in April and May and that resulted in billing stopping by 44% but revenue was down only 10% because we benefited from deferred revenue of previous quarters.
• The billing growth of the previous quarters helped them and resulted in revenue decline of only 10%. Cost declined by about 17% and therefore EBITDA went up. But yes this billing growth will impact revenue growth in the coming quarters.
• Q1 was very badly impacted by both 99acres and Naukri. Requirement billings were down 44% and real estate billings were down 71%. But they have seen a recovery of some sorts in the last couple of months.
• Traffic on all their portals is back to near base level and they are back to where they were at the same time last year. On some metrics they are showing healthy growth.
• In July and August, their billings were tracking at 80% of what it was last year. So there has been a handsome recovery in July and August
• September is their biggest month in this quarter, almost half of the collections happen in September. So if September is good, that will give them much more confidence going forward.
• In July and August they have seen job seekers come back with a bang. So job seeker activity on the site is at an all-time high. They are seeing more app downloads. They are seeing more applications, more resumes being modified, more people registering
• Recruiter activity which had slowed down considerably in April, May and June, has also started inching up. They are back to 65-70% levels in Naukri
• They have seen a handsome recovery in IT. They are seeing reasonable sort of activity in sectors like healthcare, education, pharmaceuticals, insurance. But sectors like travel, hospitality, tourism, retailing, apparels all these sectors continue to be impacted by the slowdown. They are yet to show any signs of recovery.
• Jeevansathi was actually the only business in their portfolio which did well in Q1. It kept growing through the lockdown as well. Jeevansathi billings grew by 13% in Q1 and in the month of July and August the billings growth has been even better. In August, they grew billings by 23% in Jeevansathi.
• They are constantly on the lookout for investing in or acquiring both for strategic and financial purposes. They have an AI of sorts through which they make their financial investments.
• They just finished raising $250 million through their QIP. So they are now sitting on close to Rs 3,300 crore of cash.
• The purpose of this QIP was to look around for acquisitions and inorganic sort of opportunities in the spaces they operate. Their preference would be to do a deal at some point in time in the next 12 to 18 months in either matrimony or real estate or education.
• Zomato also had a terrible Q1 but business has come back strongly in Q2. The dining out part of the business has been more impacted because many of the restaurants are still shut but delivery is picking up. The company has done a very good job of cutting burn.
• Burn is now down to maybe $2-3 million a month from maybe $30-40 million a month a year ago. So, they have done a fantastic job on that front where unit economics is improved. They are making a profit per order now where they were losing maybe 35-40 cents to an order earlier.
• Covid has told us is that the world is all about essential services and clearly some of the services they offer are essential in nature to more middle class Indians.
• On the whole, you will see a more aggressive Info Edge. Of course, a lot will depend on what happens to India as a whole. At the end of the day, their businesses are index to GDP growth.
• They are very well positioned. Their Naukri business is very profitable and the two other categories they operate in are matrimony and real estate.
• Covid crisis is likely to throw up opportunities because a lot of companies have been very negatively impacted by it and hopefully there will be many more opportunities going forward than there were in the last three years.
Consensus Estimate: (Source: market screener and investing.com websites)
● The closing price of Info Edge was ₹ 3,270/- as of 09-September-2020. It traded at 128x/ 93x/ 69x the consensus earnings estimate of ₹ 25.6/ 35.2/ 47.5 for FY21E/22E/FY23E respectively.
● The consensus price target is ₹ 2599/- which trades at 55x the earnings estimate for FY23E of ₹ 47.5/-
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