Info Edge (Naukri) posts net income of Rs 15.67 crore for 2Q 2008-09
24 October, 2008
Info Edge India (Naukri.com) has reported a net income of Rs 15.67 crore for the second quarter ended September 2008, a 3.5 per cent growth over the corresponding quarter of the previous fiscal year. Total income increased by 24 per cent to Rs 72.32 crore in the second quarter of the current fiscal year, as compared to Rs 58.50 crore a year ago.
Ambarish Raghuvanshi, CFO and Director, Info Edge India, has said, “The company's results are good considering the difficult operating environment. We have continued to grow, albeit slowly despite the downturn in hiring levels. Other businesses, especially 99acres.com grew very appreciably. We therefore have engines of growth for the future which we are continuing to invest in.”
According to the company, its real estate portal 99acres.com and matrimony site Jeevansathi.com have achieved a robust growth in revenues at 98.9 per cent and 40.3 per cent respectively during the second quarter of the current fiscal year.
“The EBITDA (earnings before interest, taxes, depreciation and amortization) margins on Naukri increased to 45 per cent in July-Sept 2008 from 43 per cent in July-Sept 2007. This is a very good achievement given the current economic environment,” Sanjeev Bikhchandani, founder and CEO of Info Edge India, has said in an email to AlooTechie.
“At first glance it appears that profits were stagnant. This is true at the company level. However if you look at more granular data, we invested Rs 8.6 crore at the EBITDA level in our new businesses (Jeevansathi, 99acres, Shiksha, Brijj and AllCheckDeals) in July-Sept 2008. This number was at Rs 2.9 crore in the same period the last year. This represents an increase of Rs 5.7 crore in investments in new businesses. If we had maintained investments in new businesses at the same level as last year then operating EBITDA in July–Sept this year would have been Rs 21.4 crore as compared to Rs 16.4 crore the previous year - a growth of 30 per cent. It is important to look at our profit performance with this degree of granularity,” suggests Bikhchandani.
“99acres continues to fire well with a growth of 98 per cent in July-Sept 2008 over the same quarter the previous year. Overall our non recruitment businesses grew at 71 per cent in July-Sept 2008 over the same quarter the previous year. Once again a good performance,” Sanjeev Bikhchandani has added.
Info Edge India owns and manages job site Naukri.com, matrimonial portal Jeevansathi.com, real estate portal 99acres.com, education portal Shiksha.com, an online brokerage service for residential real estate AllCheckDeals.com, an offline executive search firm Quadrangle, and Naukri Gulf – its foray into the Middle East market. Info Edge also owns AskNaukri.com, a career guidance site and Brijj.com, a professional networking site.
With its headquarters in Noida (NCR), the company employs over 1790 people and operates through 66 offices in 42 cities in India and overseas offices in Dubai and Bahrain catering to the Middle East market.
"
One can’t keep on doing the same stuff over and over again across all kinds of brands. Every brand has a unique feature and this needs to be attributed through innovative marketing initiatives. Unless the people working in this medium can innovate, spends will not grow on internet. "
Watch out Naukri, your profits are further gonna dip. Clickjobs is back with a bang. This time with a new strategy, you guys are going to run for your share of market.
Lack of focus is a valid concern. In fact in earlier analyst calls the Info Edge management has addressed this issue.
They believe that if they can get quality talent at several levels in the organisation and empower people - this will not be a concern.
In fact one of the reasons they have given for external investments is team extension.
Clearly barring Jeevansathi where even the other two major players are making losses their other two major plays 99acres and Shiksha seem to be making good progress. Perhaps the management is right in its approach. Only time will tell.
As far as sitting on cash and waiting the Info Edge management right from day one - even before the IPO in the media, in analys calls has been saying - no rash expensive acquisitions, we will wait for a downturn - the right acquisitions at the right price at the right time.
All retail investors are free to dial in on analyst calls. The analyst call transcripts are avaiable on the corporate website and a good analysis of the last analyst call hs been written up by Nikhil Pahwa on Medianama.
But then you have to be data driven to take the effort to do this.
The big problem that all investors should be concerned about is the LACK OF FOCUS of Info Edge. They have already stuck their nose in too many areas none of which have any meaningful size even after 4 YEARS but they continue to say "we are in the first phase" (Jeevansathi, 99acres, Shiksha, asknaukri, allcheckdeals, 2 new useless acquisitions, 2 planned new job sites etc). This will drain their profitability and will continue to weaken Naukri as it happened in the last 2 years.
After hiding all the "low valuation" businesses for 2 years, Info Edge finally gave data to investors as a "puzzle" which just shows that they don't want to share it but they are forced to by investors. At the very least, this type of transparency is not for retail investors who can't join all these dots.
Any good, transparent company would share full information by business to enable investors to make better investment decisions.
It is also nice to know that Data Driven knew 2 years ago that the market was going to be 20% of valuations prior to the collapse. I wonder why he didn't advise Info Edge management to mention in the IPO prospectus that their plan was to sit on the cash.
Actually sitting on cash and earning 8% per annum for two years makes a lot more sense than investing in a company you know will be valued at one fifth of what it is today a couple of years hence.
It is better for shareholders.
Maybe Info Edge knows clearly where it wants to invest but more importantly it also knows when it should invest and at what price.
To my mind Info Edge has given enough details in its analyst calls for anyone who is reasonably smart to figure out the various pieces to the puzzle. They have said that non recruitment businesses account for 14% of the operating revenue. They have also said how many paid clients Jeevansathi got and what the average bill size was. From this you can estimate the revenue of JS and 99acres.
They have also said in the past that more than 90% of the recruitment revenue comes from naukri. From this you can estimate what the size of quadrangle is.
They have also said that job fair revenue accounts for less than 2% of naukri revenue.
If you are data driven you can join the dots but only if you are data driven.
Perhaps the Naukri jobfairs were done merely with the objective of demonstrating to clients that Naukri has the ability to drive twice as much traffic into a jobfair as compared to TJ and I suspect they succeeded at doing that. So a half a dozen were done last year - one per major market merely in order to set a quality benchmark for clients and job seekers to judge the TJ jobfairs against. I understand TJ is now facing a much harder time in getting clients, traffic and revenue from jobfairs.
Data Driven rightly said that "it takes a lot of courage to sit on cash when the market is booming".
But what do you call a company that is sitting on cash in a bull market AND a bear market?
a) A company that can't figure out how to invest for growth
b) A short-term focused company that is scared of its next quarter profits getting impacted by 2 crores even as it boasts of 300crores in the bank
c) A company that is deploying shareholders money in the bank and exposing their investments to very high risks of a small cap company in the equity markets
Read the reports for data? Has Naukri done anything to transparently share their performance?
When interest income adds to growth, they talk about revenue growth including interest income. When interest income slows down, they talk about business income growth.
They issue press releases about a distant No.3 player like Jeevansathi becoming No.1, based on artificial means of jacking up traffic for 1 month.
For years, they have hidden the details of Quadrangle contribution and growth (as they know that investors will deduct that piece and attach their value only to the online part of the business).
They did job fairs out of desperation last year to bring in short-term revenue but they mix it up with online revenue (which is the real "value" that investors look for) but claim to analysts that Timesjobs revenue is a combination of online and jobfair revenue.
In the name of "competitive reasons", they never disclosed the break-up of their different businesses in terms of size. They highlight the growth of 99acres at 98% but they don't explicitly highlight the fact that the business that contributes over 85% is dropping sharply.
They misled the investors in terms of the growth estimates for the year which is either a reflection of their intent to keep the stock higher for a few more months or they don't know what they are talking about.
Data Driven should consider sharing some more data with the market transparently and not bluff through the blogs:)
Actually even Warren Buffet sat on cash or invested in debt for quite a while up until very recently as long as he felt markets were overvalued.
The worst kept secret about investing in equity is that you should buy when the price is low. The problem with people who have cash is that they cannot resist the temptation of investing Now!! It takes a lot of courage to sit on cash when the market is booming. You have to say no to some seemingly very good deals because you know they are overvalued.
The smartest investments are made in bear markets. When valuations are at their lowest.
And methinks there will be several distress sales in the next 6 to 12 months.
As far as Naukri revenues from the IT sector is concerned a cursory glance at analyst reports will reveal that naukri gets 24% from the IT sector directly and another 9% from the IT sector indirectly through placement consultants. Thats where the 35% comes from. But then you have to be data driven to read reports.
As per my estimates naukri gets over 16000 new resume's a day as compared to 10000 approximately for monster and 7000 approximately for Timesjobs.
Data Driven thinks sitting on cash is a great strategy. Warren Buffet thinks companies that don't know how to deploy their cash meaningfully in their business are as good as trash for investment.
If you are an investor, you have two options. (a) take the massive risk of Naukri share dropping by another 40 -50% to earn interest income on the cash they couldn't deploy for 2 years (b) put your money directly in a fixed deposit.
Make your choice.
Data driven has thrown a lot of data but the problem is he doesn't know what that data means. Info Edge itself admitted to the flaws in sources such as comscore & alexa. If their traffic share is so high, why does Naukri get so few resumes compared to TJ? Is it because they spend too much money in buying clicks that don't convert to meaningful traffic or is it because Naukri website sucks or is it because they are struggling for 3 years to pull off a decent ad campaign?
Can Data Driven also take some pains to explain how Jeevansathi became No.1 in March with some 200 million pageviews, as per their press release?
Long tail? Timesjobs has been acquiring thousands of clients through its newspaper reach. Monster has been doing Telesales for years to cover small customers. Naukri couldn't either. Now, they are getting squeezed at the bottom-end of the market and they weren't allowed to cross the reception in the big customers anyways. So, this "long tail" is just a nice story for the investors
Claiming that Naukri has only 35% exposure to IT is a deliberate attempt to mislead. Naukri get 45% of its sales from placement agencies and most of them live on IT sector hiring. So, Naukri's real exposure to IT sector is over 80% and the revenue growth in the coming year will confirm this :)
Naukri recently acquired a fresher job portal called FirstNaukri. News can be read here
http://www.alootechie.com/content/info-edge-naukri-plans-launch-job-site...
Given their pile of hot cash, we can expect more big ticket acquisitions from them.
Actually September Comscore data gives naukri traffic share at 53%, Monsterindia at 29% and Timesjobs at 13%. Perusal of the data for six months preceding September (read this financial year) says this is is consistent across the months. In fact it shows that the gap is widening with time.
Alexa data over the last six months shows Naukri traffic share steady at 60% or thereabouts.
Google trends shows similar shares with Naukri widening the gap.
As far as revenue share is concerned - what is happening in the market is that IT clients are under serious pressure (more than non IT) and Monster gets more than 75% of its revenue from IT clients in India. Naukri dependence on IT is lower (around 35% as claimed by the management and the analysts). TImesjobs has a different problem - many clients use it as the third job site. When times are tough and clients have to cut hiring and the recruitment budget either they either drop Timesjobs or else they force such a drastic price reduction that there is a loss of revenue share anyway.
What is also working if favour of naukri is that it seems to have penetrated the long tail of companies a lot more than its competition. Last year Naukri disclosed that around 32000 organisations had used naukri to recruit people. The corresponding numbers for Monster and Timesjobs will be around 25% of that. What this means is that Monster and Times have done what is sensible for them to do - go after the big clients first.
However in a down market the big client segment is growing slower. Naukri is getting good growth from the small and mis sized clients.
All these underlying trends are leading to increases in the Naukri revenue share with possible negative growth this year for some of its competitors.
Actually the naukri management revised the Q2 estimated down in Mid Sept. not after the quarter was over.
Sometimes sitting on 300 crs and doing nothing is a really good strategy. You get terrific opportunities to buy or invest in good companies and managements cheap a little later should you be on the cusp of a downturn.
Methinks the Info Edge management got that one very very right. A very very good call by the management.
Cash will seperate the winners from the losers in the next three years.
I understand that there are several down rounds doing the circuit currently.
I don't think wasting the cash behind acquisitions is the issue. On the contrary, they have been sitting on 300crores cash and doing nothing with it. Let us not forget that they wanted to raise additional 500 crores cash in December 07 to make acquisitions even without spending this 300crores.
This means that they believe that a fixed deposit in bank will generate better returns for shareholders than investing in their own business. Shareholders should seriously consider putting the money directly in fixed deposits.
This also means that they wanted to raise 500crores additional cash not because they had any acquisition plans but simply because they felt that their stock was overpriced and it was better to convert into cash and earn interest income.
I wonder where "Data driven" got the data from. If you go and speak with a few people in the industry, you will realize that Naukri lost market share in revenue terms quite substantially in the last 6 months. Some small players may shut down but the big players like Timesjobs and Monster will continue to gain share from Naukri.
The less Info Edge talks about "traffic share", the better. Just 6 months ago, they issued a PRESS RELEASE saying that Jeevansathi became No.1 in traffic when they barely have a 10% share in the category. These days, when convenient, they say that the methods of calculating market share are not reliable. Then why bother talking about it? They should simply accept that they are a distant No.3
Naukri has 300crores cash. It is no good as they couldn't spend that cash to win market share in this situation and they won't be able to because investors will dump the stock. This cash is good for acquisitions and they are in fact wasting this cash behind acquisitions of companies that nobody ever heard of.
You are data driven but you seem to forget the fact that in July, management maintained their estimate of 35 - 50% growth for the full year.
Their revised estimation of 25% growth came AFTER the Sept sales closed and giving a forecast after the quarter is over is hardly giving an outlook.
This company has failed to provide conservative guidance and always pushed to paint optimistic stories. It is time they came out and stated that they expect the sales and profit to decline, given the environment.
Actually the naukri management had given a guidance of 35% to 50% growth in April at the start of this financial year.
When the company clocked in at the bottom end of this band with 36% growth in Q1 the management had said that they were concerned about the softness in June sales but would observe the macro economic environment for a couple of months more before deciding whether or not to lower their guidance.
More than a month back they said that Q2 is going to be a 20% to 25% growth quarter and that the 35% to 50% guidance no longer stands.
As far as the rest of the year is concerned the management said on the analyst call that given the volatile environment it was going to be difficult to predict.
Analysts however are predicting 20% to 25% growth in sales for the company for the full year.
In H1 the company grew at slightly less than 29% in sales
Actually if you look at traffic share data among jobsites Naukri has been showing an upward trend over the last few months.
Market information seems to suggest that Naukri is gaining in revenue share too. If the grapevine is to be believed both the principal competitors of Naukri are showing negative growth in revenue over the previous year.
I dont think anyone can predict with any degree of certainty about how long this slowdown is going to last and how deep it is going to go.
However if it worsens to the extent that Naukri actually declines in revenue then rest assured many many dotcoms will shut down including perhaps some of its comnpetitors. It will be 2001 all over again.
Remember Naukri has 300 crores in the bank. Others dont have that kind of cushion to ride out the slowdown.
In the analyst call the management had indicated that the big accounts of Naukri were seeing soft growth but the mid sized accounts were seeing robust growth. They also indicated that the "nice to do stuff" branded solutions such as home page panels and links, microsites and banners, popups and campaigns are soft, but the need to do stuff such as resume database access and job listings were OK. Similarly they had said IT was badly hit but non IT was still OK.
In absolute terms the faster growth customer segments (Non II and mid sized accounts) and products (resume database access and job listings) are now larger than the slower growth segments in revenue and so over time growth should actually come back to more healthy levels.
Currently, the management had said on the call that, Naukri is growing at sub 20% levels.
Having said that if the recession gets a lot worse and if there are no jobs to be had (read under 4% growth in the economy) then the growth even in these customer segments and products will come under pressure.
The fate of other companies in the Internet space and those in other industries could however be a lot worse.
The other interesting piece in the analyst call was that the management indicated that if 99acres displays 100% growth (compared to the previous year) in H2 as it has in H1 then it should break even in Q4 of this financial year.
Now if the recession doesnt get really deep and Naukri is OK and at the same time 99acres, which is currently absorbing considerable investment, breaks even - then in Q4 the profits could actually climb.
However it is hard to predict given the volatility in the environment.
The question is not about encouraging them or not. It is also not about whether they are smart or not.
I just made the point that Info Edge management gave a full year revenue growth estimate of 35% to 50% after the 1st quarter and in just 3 months (in spite of all indicators pointing to slowing economy in July itself), churned out 24% revenue growth with negative profit growth. That's disappointing.
It is understandable that the market is slowing down but the hiring plans of companies don't swing with sensex and it was surprising that they couldn't see this coming (or were they just holding back giving the bad news to investors)
Realistically speaking, during the next 2 years, Info Edge will see a 20 -25% decline in revenue and a 70-75% drop in profit.
Guest,
Please index the growth to the turbulent economy. I believe Info Edge is a very smart company. They have invested in businesses smartly and have grown their brands well. I am sure they are one of the only internet companies, that have the capability, management and funds to sail through the tough times ahead.
Another Guest.
I think Infoedge is the only internet company from India which is profitable. And they have all there businesses around online classifieds model. Which may be effected in slowdown but will do very good in long run. And we should encourage companies like these.
Revenue growth 24%, Expenses growth 37%, Profit from operations actually declined by 9%. With further slow-down in revenue, the profit will certainly look a lot worse.
No surprise that their results disappointed. Just 3 months ago, this management was forecasting full year growth of 35% to 50%. Fooling the investors? Not for long!
They mentioned the growth of 99acres (90%) and Jeevansathi(40%) which have a small base. If you read between the lines, the growth rate of Naukri is essentially zero.
This won't get any better. Their costs will remain the same in the downturn and the profit growth (which was close to zero% during July-Sept) will soon become negative.
For the next 2 years, it is good to avoid these companies which have been overhyped.
If somebody can make profit in this market then they must be very good. Keep up the good work. We need companies like these to fight the slow down and continue the Indian Growth story.
Post new comment