Subdued IT demand remains a sore point for Info Edge
Info Edge (India) Ltd continues to feel the heat of weakness in the information technology (IT) sector. After all, the company’s key recruitment solutions segment, which includes Naukri.com, derives about 50-60% of revenue from the IT industry. Consequently, the lacklustre demand in IT has led to Info Edge’s year-on-year billing growth rates tapering with the measure up by a mere 1% in the September quarter.
Moreover, the ongoing December quarter is unlikely to throw up any positive surprises on this front. The Naukri JobSpeak index for October and November shows that IT hiring is down year-on-year by about 14% and 28%, respectively. The fall in November marks the eleventh consecutive drop in the metric.
As things stand, there is no clarity on whether the pain in IT demand has bottomed out yet. In fact, Accenture’s Q1FY24 earnings, often seen as an indicator for earnings performance of Indian IT giants, suggests a challenging macro environment.
Amid this, a silver lining for investors in Info Edge stock is that robust hiring trends in non-IT sectors such as healthcare, transport, infrastructure and real estate, are expected to offset the impact of muted IT hiring to some extent. Further, expectations are that a low base would aid growth rates in FY25. Moreover, Info Edge’s new job portals such as iimjobs.com and zwayam.com would add value.
“We believe the first leg of growth will be led by non-IT demand + no headwind from IT, followed by non-IT demand + demand for attrition backfilling given utilization is close to target range,” said analysts at Nuvama Research in a report on 15 December.
Meanwhile, Info Edge’s other businesses—real estate site 99acres.com, matrimony website Jeevansathi.com and education website Shiksha.com—continue to clock losses. Note that these businesses together formed about 23% of Info Edge’s revenue in the first half of FY24.
Meanwhile, the shares of Info Edge are up by 27% in 2023 so far. “Besides a near-term volatility in billings, the long-term growth potential of the recruitment segment is intact and that seems to be factored in by investors,” said Vivekanand Subbaraman, an analyst at Ambit Capital. Moreover, Info Edge’s investments in listed companies—about a 14% stake in Zomato Ltd and 13% stake in PB Fintech Ltd could have also had a positive bearing on investor sentiment. This comes on the back of an increase in the market capitalization of these companies this year.
