Shares of Info Edge (India) Ltd have not been able to recover from a sharp 9% fall seen on February 13, post December quarter (Q3FY23) results. Recall that a windfall charge on its investment in 4B Networks Pvt. Ltd. had hurt investor sentiments as it raised concerns about new and existing investments by Info Edge.
Also, the outlook in its biggest 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 Nomura said that the hiring slowdown in tech-related sectors that started in the September quarter continues. Note that the Information Technology (IT) sector accounts for a significant portion of recruitment revenue.
However, demand was strong in non-tech sectors such as healthcare, education and infrastructure. Info Edge management also said that the March quarter (Q4FY23) is an important one as the current month sees maximum job turnover. Therefore, the year-over-year increase in Q4 billings is significant as the pace of growth in this metric slowed in Q3.
Moreover, in the real estate segment, 99 acres, the increase in competitive intensity is a headwind. The company sees Magicbricks, Housing.com, Facebook and Google as its major competitors and believes that true consolidation will take some time to happen. 99 acres was in the red at the EBITDA (earnings before interest, taxes, depreciation and amortization) level in Q3 and there appears to be no respite in sight, at least in the near term, with a rise in ad spend.
Info Edge’s matchmaking vertical, Jeevansathi, also reported a loss for the third quarter. The company’s strategy of offering paid services for free is driving traffic growth, but it will take time for this segment to start turning a profit.
“We believe InfoEase has a strong business model with differentiated leadership in the cash generating, online recruitment classifieds vertical,” said analysts at Nomura Financial Advisory & Securities (India) in a report dated March 16.
To be sure, investor sentiments in Info Edge stock are likely to remain muted in the near term, given the sluggish outlook in the hiring trends in the IT sector. The company’s shares are down 29% from the 52-week high of Rs 4917.55 seen in April.
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