Flipkart’s valuation has been marked down by 27% by one of its investors, on the back of a slowdown in funding for start-ups and Internet companies. In the listed space, shares of Just Dial Ltd have fallen by 40% in the past year.

It’s interesting to note, then, that shares of Info Edge (India) Ltd have corrected by only 7% in the past year, which is far better than the 12% fall in the Nifty 500 index. What sets it apart?

To start with, Info Edge’s flagship recruitment business, largely under Naukri.com, boasts of a steady performance. In the first three quarters of the current financial year, growth in the recruitment business averaged 19.6%. What’s more, pre-tax margin in the segment has been around 50%. And the business generates a decent amount of cash; apart from its high profit margins, Info Edge operates on negative working capital, thanks to stringent collection norms. The top 10% of its customers contribute to nearly 60% of total business, which lends a fair amount of stability to its revenue stream.

The profit of the recruitment business is large enough to absorb the losses in smaller businesses, such as the real estate classifieds business under 99acres.com and the matrimonial classifieds business. The real estate business has been under pressure owing to high competition and the slowdown in the real estate segment. The silver lining is that it continues to have leadership in the segment, and competition from later entrants, such as Housing.com and Commonfloor.com, has eased.

Info Edge has also been fortunate to have been an early stage investor in Zomato Media Pvt. Ltd, the restaurant search and review website. According to its disclosures, it has invested around $70 million in the company and now has a 47% stake in the company. In its last round of funding, Zomato was valued at $1 billion by Temasek last September. Of course, Zomato’s valuation estimates, too, may have toned down since then, although investors have so far ignored this.

But this seems to be because the value of the recruitment business itself, along with the cash on the company’s books, adds up to a substantial amount.

In contrast, in Just Dial’s case, growth in the core classifieds business has come down materially in the past two quarters. And unlike Naukri, Just Dial faces tough competition from some sector specialists such as Practo.com in the healthcare space.

Arya Sen, an analyst at Jefferies India Pvt. Ltd, pointed out in a 28 January note to clients: “Just Dial’s revenue growth decelerated to only 11% in 3Q (versus 20% in 2Q and 25-30% guided by management at the beginning of the year) and is a significant disappointment in our view. It points to a slowdown in the legacy search business and is likely a result of the high customer churn rate of 40%."

The drop in its valuation, therefore, is not only because of the disappointment with its e-commerce plans, but also because of a slowdown in the core business.

In Info Edge’s case, the prospects of the core business are pretty much intact. Of course, having said all this, if valuations in the space continue to take a hit, Info Edge may follow suit as well.

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