Shares of Info Edge (India) Ltd rallied 5% for no particular reason on Tuesday, and shrugged off reports of a large fund-raise by a competitor on Wednesday. The company has been one of the many beneficiaries of the broad market rally—in the past three months, its shares have risen by more than 35%.

This is despite flagging fortunes of its mainstay recruitment business, largely under Naukri.com. Growth rates in this segment have fallen from around 20% a year ago to single digits this year.

Growth of the real estate classifieds business under 99acres.com has been muted for several quarters now, with the implementation of new regulations in the sector slowing down business further.

“Info Edge’s stock price is already pricing in a recovery for both Naukri and 99acres in our view, despite limited visibility on improvement in prospects in either," analysts at Jefferies India Pvt. Ltd said in a note to clients last week.

While some analysts are hailing the improvement in profitability and cash flows of the above-mentioned businesses, Jefferies’ analysts say this could also be seen as a sign that growth prospects are weak. “Info Edge’s reported earnings have surprised positively in recent quarters despite disappointment on growth, helped to a large extent by lower losses in 99acres. However, we note that this reflects weak growth prospects for the business which has led to lower competition and lower investment by management rather than any structural improvement in profitability and should not be rewarded in our view."

The silver lining for Info Edge has been an improvement in the business momentum at Zomato, where online ordering has picked up pace. At the same time, cash burn has fallen—the company indicated to analysts that Zomato has achieved Ebitda (earnings before interest, tax, depreciation and amortization) break-even in the September quarter. Having said that, competition remains high in the online food delivery space.

While Info Edge shares were busy rallying, news reports suggested Swiggy is in talks to raise $200-250 million from SoftBank. A large funding round by its chief competitor will put pressure on profits and cash flows.

All told, Info Edge’s business doesn’t reflect the optimism the rally in its shares suggests. But as the saying goes, “A rising tide lifts all boats."

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