Home >Markets >Mark To Market >As coronavirus takes a toll on growth, outlook turns hazy for Info Edge

Covid-19 has accentuated the growth slowdown of online classifieds company Info Edge (India) Ltd. Standalone revenue during the March quarter grew 10.3% from the year ago, the slowest in two years. Operating profit margin dipped 3.1 percentage points to 28%, Info Edge said in a business update to the stock exchanges.

The stock lost 1.8% on Thursday. Note that the quarter reflects only two weeks of covid-19-led disruption to the business. Indications are the performance will deteriorate significantly in the current quarter.

Graphic: paras Jain/Mint
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Graphic: paras Jain/Mint

Motilal Oswal Financial Services Ltd’s calculations show a steep fall of more than half in collections from customers. “For Q4 FY20, pre-covid-19 growth was 13%, the lockdown had slowed down the growth to 0%, leading to a shortfall of collection of 40-44 crore," Info Edge said in a statement on its recruitment business Naukri (India). The shortfall is calculated assuming the business had grown at pre-covid-19 growth rate for the whole quarter.

Similarly collections at the real estate portal were adversely impacted. Comparatively, matrimonial portal saw a nominal impact on collections. But recruitment and real estate portals are major revenue drivers for the company.

Growth has been slowing at the company. Revenue growth slowed from 19.5% in September to 14% in December quarter, reflecting the slowdown in hiring and industry headwinds in real estate.

With covid-19 now impacting the economy and large cities still under restrictions, business at recruitment and real estate portals may languish for some time.

“We believe this trend (in the recruitment business) may not change for the next 2-3 months as businesses freeze hiring and/or retrench employees. It is thus logical that there may be loss of customers as well as pricing pressure for Naukri. Naukri’s job speak index also suggests a significant decline in job postings and queries," analysts at Kotak Institutional Equities said in a note. The slowdown in business and the subsequent fall in revenue and profit margins will adversely impact earnings. “We foresee a halt in near-term momentum, led by expectation of billing decline in the recruitment and real estate segments for 1HFY21," add analysts at Motilal Oswal Financial Services.

On the positive side, the increasing adaptation of digital services will benefit Info Edge in the long run. Analysts see a recovery from the second half of the current fiscal on resumption of business activities.

The company has 1,530 crore in liquid investments. The cash position and cost rationalisation measures should help it withstand the current slowdown.

The stock has corrected by about 18% from its highs in February. But at 68 times FY22 earnings estimates, it is still one of the more expensive stocks to own in the country.

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