BackZomato, Policybazaar listings may be the next triggers for Info Edge
Info Edge already has a cash balance of around ₹3,600 crore, and its cash hoard will soar post the listings
PremiumInfo Edge (India) Ltd’s shares have risen by 9% in the past two trading days on the National Stock Exchange. The reason for the excitement is simple. Reports said online insurance marketplace Policybazaar plans to file its draft documents to go public in July. Policybazaar and Zomato Ltd are among the various investee firms of Info Edge.
Analysts expect the forthcoming listings of these firms to act as a trigger for the Info Edge stock depending on the valuations they fetch during their respective initial public offerings (IPOs).
A Moneycontrol report citing sources said Policybazaar will eventually list by November-December at a valuation of $4-5 billion. This valuation is higher than expected. For perspective, analysts at Ambit Capital Pvt. Ltd have assigned a value of $2.5 billion for Policybazaar, although it’s valued higher by some others.
“We value Zomato at $8 billion and Policybazaar at $3.5 billion and other investee companies at their last known valuation or invested capital," said analysts at Nomura Financial Advisory and Securities (India) Pvt. Ltd in a report on 22 June. During Info Edge’s March quarter earnings call, its management had said, “Policybazaar is preparing themselves for the IPO. Board has not really approved any plans. But we can certainly tell you that they are preparing for it." Another news report citing sources said Zomato is eyeing a listing valuation of $8.7 billion, which is at a premium to the Hong Kong-listed delivery platform Meituan.
Note that Ambit’s target price for Info Edge is ₹4,545 per share and, within this, Zomato and Policybazaar’s contribution to the target price stands at 13% and 5%, respectively, in the broker’s sum-of-the-parts valuation. Currently, Info Edge’s shares trade much higher at around ₹5,365 apiece. To be sure, many analysts reckon valuations of Info Edge are already steep. The Info Edge stock has more than doubled since 1 January 2020. This compares quite favourably with a nearly 30% increase seen in the Nifty 100 index.
Meanwhile, Info Edge’s March quarter results came in marginally below expectations, although the billing numbers have been encouraging. Total billings in the March quarter increased by 25% year-on-year. Here, the recruitment solutions business, which forms a big chunk for Info Edge, has done well, reporting a 22% increase in billings.
Going ahead, capital allocation remains key. Info Edge already has a cash balance of around ₹3,600 crore, and its cash hoard will soar post the listings. It has already announced a plan to monetize a fraction of its stake in Zomato and raise ₹750 crore, and could potentially sell shares in the Policybazaar IPO too.
“Sustained focus on capital allocation will be a key determinant of future value creation. The management is scouting for acquisition opportunities related to its core businesses, but we see high valuations as a key barrier," said analysts from Edelweiss Securities Ltd in a 21 June report.
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