Founded in 1995 by Sanjeev Bhikchandani, Info Edge is a leader in online classified space in India with internet properties across verticals.
Info Edge’s businesses can be dissected into three broad categories:
1. Core recruitment business (Naukri.com) - the largest segment for Info Edge which contributes 67% of revenue and over 100% of its EBITDA of company’s standalone EBITDA (Earnings before Interest, Tax, Depreciation and Amortization).
2. Internal portfolio of online classified businesses in various categories such as real-estate (99acres. com), matrimonial (Jeevansathi.com), education (Shiksha.com) etc.
3. Investee companies: Info Edge invests in internet start-ups to tap the growing internet market in India. Info Edge has invested Rs. 700 crore till date in internet start-ups. Zomato, a restaurant listing portal, Meritnation, an online K-12 education services provider, and Policybazaar are a few of the company’s most successful investments.
In an era where online businesses are given exorbitant valuations even when while incurring losses, Info Edge is a highly profitable internet business with a huge cash pile and exciting investments. Its online recruitment portal leads the industry with huge margin and other investments are in different phases of growth in their respective industries.
Core Recruitment Business to become stronger:
Naukri’s core business enjoys a natural moat as higher numbers of resumes/bio datas/CVs ensure higher number of employers. The company has the largest candidate database, with over 59 million CVs and this number is increasing with an average of 18k CVs being added daily. It has 52.6k unique clients with average job listings of 5 lakhs per day. Its share in traffic remained strong at 74% with 8-10 lakh resume searches daily.
The recruitment solutions business is a steady growth business with high operating leverage as the fixed costs are relatively stable. It also has negative working capital leading to strong cash accretion. Naukri will continue to enjoy a leadership position and the cash registers will keep ringing going forward.
99acres: Leadership in Real Estate will lead to better financial performance
99acres is well poised to reap the benefit of a revival in real-estate industry which was impacted heavily by economic slowdown and events such as demonetisation, Real Estate Regulatory Authority Act (RERA) implementation and Goods and Services Tax (GST) rollout. Despite the weak industry environment, 99 Acres continued to grow and cemented its position in the online listings market.
With the government crackdown on black money and the general slowdown of the real estate market, speculative demand in housing has considerably reduced and excesses have been neutralized. Going forward, we believe, genuine demand for real estate will drive the real estate industry. With the focus shifting to affordable housing, the mass market demand for housing will explode and 99 Acres will be one of the biggest beneficiaries of the same.
Other investments to add to the upside:
Info Edge’s investments in other promising businesses (including Zomato, policybazaar and jeevansathi) may lead to huge upside going forward. There are a host of possibilities with these investments as many of them are marquee brands and leaders in their respective industries. The company may get back multiple times its investments if it plans to sell any of its stakes or may reap benefits if any of these companies perform extraordinarily well.
The Indian digital classifieds industry is projected to grow three times to $1.2 billion by 2020, as reported by Google and KPMG. The next phase of growth of such ads will be driven by the rapid growth of e-services, real estate and automobiles.
The Indian ecosystem is ripe for the emergence of digital classifieds. Driven by increased smartphone penetration, online users are expected to grow to 65 crores by 2020, and with every second consumer willing to pay for value added services, the digital classified segment is expected to grow smartly going forward.
|Power & Fuel Cost||7.12||7.79||7.80||9.00||9.00||11.00|
|Employee Benefits Expenses||335.44||375.16||393.06||444.00||499.00||558.00|
|General & Administration Exp||73.34||66.32||62.27||70.00||78.00||87.00|
|Selling & Distribution Exp||131.84||88.05||116.37||131.00||148.00||166.00|
|Less: Expenses Capitalised||-||-||-||-||-||-|
|Profit before Tax (Before Exceptional Items)||193.00||266.00||373.00||420.00||469.00||523.00|
|Profit Before Tax||182.00||262.00||281.00||420.00||469.00||523.00|
|Profit After Tax||125.00||204.00||182.00||273.00||305.00||340.00|
|Share of Associates||0.00||0.00||0.00||-||-||-|
|Consolidated Net Profit||125.00||204.00||182.00||273.00||305.00||340.00|
|No of shares||12.08||12.11||12.16||12.20||12.20||12.20|
Info Edge derives its valuation from its core recruitment business and its investments in other assets including Zomato, 99acres etc. We value the company’s core recruitment business at an EV/EBITDA of 40x FY20E EBITDA. [EV is enterprise value].
|Business Segment||Per Share Value|
|Naukri (40x FY20E EV/EBITDA)||1,196.5|
|99Acres (14x EV/Revenue)||150.0|
|Jeevansathi (5x EV/Revenue)||50.0|
|Zomato (Valued at $1.1 bn)||204.0|
|Policybazaar (Valued at $1 bn)||80.0|
|Cash & Inv.||108.0|