Info Edge (India) Ltd and Just Dial Ltd provide a rare opportunity for investors in the Indian markets to ride the Internet wave. But results of the two companies were a mixed bag, and disappointed investors. Shares of Info Edge have fallen 7.4%, while those of Just Dial dropped 5% in the past two trading sessions.

In the case of Info Edge, growth in the recruitment business under Naukri.com was steady at 20% year-on-year (y-o-y), and operating margins were also stable at 53%. But the real estate business under 99acres.com was hit by increased competition and the general slowdown in the Indian real estate market.

Pre-tax loss of this division rose to 36.1 crore from 7.6 crore in the March quarter. Analysts at Nomura Research wrote in a note to clients, “In 99acres, we trim our revenue growth expectations to a CAGR (compound annual growth rate) of 18% (versus 28% earlier) over FY15-17F and raise our Ebitda (earnings before interest, tax, depreciation and amortization) loss expectations to 1.0/0.7 billion (versus 0.6/0.5 billion earlier) over FY16/17F." On the positive side, Zomato.com, in which the company owns a 50% stake, is doing fairly well and valuation estimates have risen.

Just Dial reported another quarter of steady growth—revenues in the core search business grew 25% y-o-y and margins expanded on a quarter-on-quarter basis by 170 basis points.

But, as pointed in this column earlier, a key trigger for Just Dial’s valuations is the awaited launch of its Search Plus business. The Search Plus business is Just Dial’s attempt at capturing the growth of e-commerce in the Indian market, and the service was expected to be commercially launched in April 2015. This was later pushed to July-August, according to analysts, and now the company has said that it may take a few more months.

According to analysts at Motilal Oswal Securities Ltd, the firm said on a post-results conference call that the delay in the launch of Search Plus was because of a quality upgrade required to be done on the platform, involving user experience and user interface, and that the company is confident of no further delays in launch (beyond September). The delay is evidently hurting valuations, as is evident from the 37% drop in the company’s shares in the past one year.

In sum, while the Internet space may seem exciting as far as growth opportunities go, in the listed space, the story is a bit less euphoric.

The writer does not have positions in the companies discussed here.

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