Info Edge’s near-term prospects tied to non-IT sector performancePersonal FinanceInfo Edge’s near-term prospects tied to non-IT sector performance

Info Edge’s near-term prospects tied to non-IT sector performance


Info Edge (India) Ltd was expected to be at the receiving end of the slowdown in the information technology (IT) sector in the March quarter. After all, the company’s recruitment solutions vertical, which includes Naukri.com, derives about half of its billing from IT. However, Info Edge has clocked a decent 14% increase in recruitment solutions billing last quarter.

The pain in the IT segment was offset by strong business from non-IT sectors such as banking, financial services, and insurance; hospitality and real estate. Further, losses in Info Edge’s other businesses – real estate site 99acres.com and matrimonial site Jeevansathi.com have contracted sequentially.

Graphic: Mint

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Graphic: Mint

Overall, standalone revenue rose by almost 24% year-on-year (y-o-y) to 564 crore, broadly in line with Street estimates. Ebitda margin was flat sequentially at 39.1%, but above estimates. Info Edge has delivered a sharp margin improvement over the last few quarters (Ebitda margin up 11 percentage point y-o-y in the March quarter) with lower dependency on advertisement and operating leverage, said analysts at Motilal Oswal Financial Services.

Investors were pleased, taking Info Edge’s shares up by nearly 8% on Friday in reaction to the results. Prior to this, the stock had fallen by about 1% in 2023.

In its earnings call, the company’s management said it expects hiring in the IT sector to be muted for a couple of quarters at least. The Naukri JobSpeak index for April shows that IT hiring was down 27% y-o-y.

For now, it is difficult to assess if the weakness in IT hiring has bottomed out. However, Info Edge expects that there would be a turnaround sometime in the second half of FY24. The company sees a challenge if there is a further slowdown in IT hiring.

Moreover, if the economy moves sideways, it would weigh on hiring in the non-IT segment as well. There are other risks, too. “Challenges with respect to investments made by Info Edge remain. The startup environment is tough, and one cannot rule out impairment losses,” said Vivekanand Subbaraman, an analyst at Ambit Capital.

For now, a good show by the non-IT segment should help in offsetting the subdued performance in IT in the near term.

Motilal Oswal’s analysts expect Info Edge to deliver 15% revenue compound annual growth rate over FY23-25, driven by good medium-term growth in recruitment. The analysts point out Info Edge’s current valuations fairly price in its growth outlook and that their sum-of-the-parts based target price is 4,010. Info Edge’s shares closed at 4197.75 apiece on Friday on the NSE.

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Updated: 28 May 2023, 10:39 PM IST

Disclaimer: Along with publishing our own news, we get news from various sources namely from news wires ANI, PTI, other reputed finance portals and individual journalists. We are not legally liable for any inaccuracies in the news and expect the reader to do their own due diligence.

http://ganesh@finplay.in

Finance enthusiast, Mutual fund expert.




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