Matrimonial vertical shows resilience but Info Edge’s prospects challenging2 min read . Updated: 17 Jul 2020, 01:56 PM IST
- While the recruitment business improved in June (from April and May), Q1 billings are down about 45% y-o-y
- The steep 71% fall in Info Edge’s real-estate listings shows the deep impact on business in the sector
MUMBAI: Matchmaking continues on the Info Edge (India) Ltd’s matrimony platform despite the covid-19 lockdown. But growth at its other verticals have slipped considerably, shows a Q1 update. The stock seems undeterred though. It gained about 1% in trade on Friday, and is quoting close to its pre-covid-19 highs.
While the matrimony business is standing tall, it may not provide much cushion in the post-pandemic down turn. Still, a revenue growth in this vertical of about 13.5% year-on-year in Q1 is encouraging. Overall, the segment contributes about 15% of its billings in Q1.
The bread and butter business of recruitment is in a slump though. While the recruitment business improved in June (from April and May), Q1 billings are down about 45% y-o-y. Importantly, the recruitment scenario is not bad in some sectors such as IT and healthcare. But manufacturing, construction, auto, travel and retail are some of the segments that have been shackled by the lockdown.
The signs of weakness in the recruitment business persist could spill over to the next quarter, as lockdowns continue to roil parts of India. “Moreover, since region-specific lockdowns can be enforced depending on the Covid-19 severity, the impact on business activity remains uncertain, leading to lesser visibility on 2Q trends," said JM Financial Institutional Equities in a note to clients.
Besides, the real estate segment is the weak spot. The steep 71% fall in Info Edge’s real-estate listings shows the deep impact on business in the sector. The business brought about 17% to billings in the corresponding year-ago period has now shrunk this year, contributing just about 9% to Q1 billings. The dip in business could continue for a while as enquiries in the real estate sector have slowed to a crawl. A recovery may be likely in the fourth quarter this year.
Note that the recruitment business contributes about 76% of total Q1 billings, followed by matrimony at 15%, and real estate at 9%.
There has also been some improvement in its investee entity, Zomato, lately with orders picking up. This may be further boosting the stock price.
Besides, investors have reposed confidence in the company’s ability to invest in niche companies. Nevertheless, the stock price may have shot ahead of fair valuations.
“Having a niche in key businesses along with two unicorns in the growing space (Zomato, PolicyBazaar) and leadership in Naukri with EBITDA margin of above 50% bode well for the company. However, in the near term, growth momentum is expected to slow down in two major segments of Naukri, 99 acres. Further, a run up in stock price leaves no room for upside in valuation," said ICICI Securities Ltd in a note to clients.