Info Edge may take a while to see traction as hiring slowdown in tech continues
Shares of Info Edge (India) Ltd have not recovered from the sharp drop of 9% seen on 13 February post the December quarter (Q3FY23) results. Recall that an unexpected impairment charge on its investment in 4B Network Pvt. Ltd had hurt investor sentiments as it raised concerns about Info Edge’s new and existing investments.
Moreover, the outlook in its largest segment, recruitment, is not very encouraging. This vertical includes Info Edge’s flagship platform, Naukri. The company was hosted at Nomura’s virtual India Corporate Day where the former said that hiring slowdown in tech related sectors, which started in the September quarter, continued. Note that the information technology (IT) sector forms a significant portion of the recruitment revenue.
However, demand was strong in non-tech sectors such as healthcare, education and infrastructure. The Info Edge management also said that the March quarter (Q4FY23) is an important one as the current month sees maximum business in Naukri. As such, the year-on-year increase in Q4 billings holds key as the pace of growth in this metric had slowed down in Q3.
Further, in the real estate segment, 99acres, an increase in competitive intensity is a headwind. The company sees MagicBricks, Housing.com, Facebook and Google as its key competitors and believes it will be a while before a real consolidation happens. 99acres was in the red at the Ebitda (earnings before interest, tax, depreciation and amortization) level in Q3 and there appears to be no respite, at least in the near-term with step-up in the advertisement spends.
Info Edge’s matchmaking vertical, Jeevansathi also reported loss in Q3. The company’s strategy of offering paid services free of cost is leading to an increase in traffic but it would take time before the segment starts making profits.
Nevertheless, “We think InfoEdge has a strong business model with distinct leadership in the cash generating, online recruitment classified vertical,” said analysts at Nomura Financial Advisory and Securities (India) in a report dated 16 March.
To be sure, given the dull outlook in hiring trends in the IT sector, sentiments of investors in the Info Edge stock are likely to be muted in the near-term. Shares of the company are down by 29% from their 52-week highs of Rs4917.55 apiece seen in April.
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