Uncertainty rises for Info Edge as 4B Network investment sours

It was just in Q2 that the company made an additional investment in 4B Network and in a few months Info Edge has written off the whole investment. “The market appears to be more concerned on the uncertainty arising from the impairment charge in Q3. This raises concerns on Info Edge’s existing and new investments,” said Vivekanand Subbaraman, analyst at Ambit Capital.

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For now, Info Edge does not expect to realize further impairment charges on other investments in its portfolio but the situation remains dynamic, it said in the earnings call. Apart from the numerous investments in unlisted companies, Info Edge also has a 14% stake in Zomato Ltd and nearly 13% stake in PB Fintech Ltd.

This comes at a time when Info Edge is seeing a slowdown in hiring from the information technology (IT) sector. The sector forms a large chunk of the recruitment vertical, which primarily comprises Naukri, Info Edge’s flagship platform. The Naukri JobSpeak index for January shows that IT hiring was down 25% year-on-year (y-o-y).

In Q3, billings in the recruitment segment rose by almost 18% y-o-y in Q3 but the pace of growth has slowed down. For perspective, in the June and the September quarter, billings growth stood at about 65% and 41%, respectively.

This vertical’s Ebitda (earnings before interest, taxes, depreciation, and amortization) grew by almost 47% y-o-y but other segments such as 99acres and Jeevansathi continued to be in the red.

In the upcoming quarters, Info Edge is likely to face some pressure from the IT slowdown. However, it helps that the non-IT hiring has been strong. But that may not be enough to fully offset the adverse impact owing to the slowdown in the IT sector.

After considering today’s drop, shares of Info Edge are down by nearly 25% in the last one year. The near-term pressures may keep meaningful upsides at bay.

“Following the slowdown in IT hiring and post-covid tech boom behind, growth levels should normalize,” said analysts at Nuvama Research in a report on 11 February.