Info Edge India Ltd. is an Indian internet company that was founded by Sanjeev Bikhchandani in 1995. Info Edge is the only owner of Naukri.com.
Some other Companies owned by Info Edge:
- The company runs the online job portal Naukri.com.
- A matrimony website called Jeevansathi.com.
- A real estate classified platform India real estate property Site 99Acres.com
- An educational website Shiksha.com.
If you had invested 1 Lakh in March of this year 2020 at the price of than it will now more than 2.60 Lakh. 3.5x returns in just 9 months.
Also if you had invested 1 lakh in 2010 than it will be now more than 17.50 Crores excluding dividends.
Company’s Overview:
- The company’s total market capitalization is 56,376.42 Crores which puts it in the category of Mid Cap Companies.
- Company’s dividend yield is 0.37%
- PE: 213.51
- Industry PE: 62.46
- EPS: 20.53
Fundamental Analysis Of Info Edge India Ltd.
1. Economic Moat:
- The company works in internet and aggregation service Industry where market dominance comes through user base, infrastructure, branding and reach.
- In case of Naukri.com the company has around 50+ million registered job seekers and an average of about 15,000 resumes are added daily while about 250,000+ resumes were modified each day. This gives the company a market lead in the business.
- In case of Jeevansathi.com, the company has 10+ million profiles (ever loaded) on their site and the revenue model is such that it is free to list, search and express interest, but have to pay to get contact information.
- In case of 99acres.com, the number of property listings on the site reached 6+ million by FY 2019, with paid listings accounting for 0.5+ million.
This overall gives a considerable economic moat across all diverse lines of business for the company.
2. Business Model and Management:
- The business model of the company is such that it is a market leader in recruitment classifieds and other related services.
- It also holds a stake in other online companies including two unicorns—the food delivery company Zomato (25.13% stake, as of January 2020) and the insurance aggregator PolicyBazaar (19% stake, as of November 2019).
- Also, more than 70% of the company’s revenue comes from the job portal Naukri.com.
- In 2020, the company set up a venture capital fund, Info Edge Venture Fund, to invest in online startup companies.
- Jeevansathi.com was acquired by Info Edge in September 2004.
- The sizeable opportunity in this space is still restricted largely to arranged marriages with parental consent.
- Given the challenges, Jeevansathi.com has successfully managed to establish a leadership position among selected communities in north and west India.
While focusing on gaining market share, there is emphasis on maximizing the flow of paid customers to its social network. This overall shows a well diversified business model for the company.
Overall the management has been able to lead the company in a direction of strategic growth and has shown interest in shareholder’s wealth creation.
3. Growth:
- The revenue has shown a growth of 19.19% CAGR over the last 10 years.
- The operating income and net income has also grown at 14.43% and 31% CAGR respectively.
- This shows improving efficiency and profitability for the company.
- The working capital is also positive and has shown a linear growth.
- Capital expenditure has remained flat even with an increased scale.
Overall growth valuation is seen increasing but in an uneven rate.
4. Profitability Ratios:
- The gross margin has been stable over the years even with wage inflation and increased cost of services delivered.
- The other margins along with return on assets have declined but has shown signs of recovery.
- his is a nature of the aggregation business where certain costs decline with increase with increased scale and improves profitability.
Overall profitability valuation is seen increasing.
5. Cash Flow Ratios:
- The net income margin has seen a good improvement over the years as opposite to the Cap-Ex as a percentage of sales.
- This also shows that growth is driven majorly by organic means without any new acquisitions.
- The free cash flow as a percentage of net income has been positive and stable over the years.
- The free and operating cash flow growth has been fluctuating but this is the nature of the business.
Overall the company has shown a solid cashflow position.
6. Liquidity and Solvency Ratios:
- Company is almost debt free.
- The profitability margins have improved over the years hence there is no significant concern to the solvency of the company.
The current and quick ratio has been stable over the years and still way above the minimum threshold which shows a good liquidity position.
7. Efficiency Ratios:
Note: The table in the excel model is colour formatted so the worst performance over the period is highlighted in red colour and the best performance is highlighted by green.
- Overall the business efficiency has not seen any significant changes over the years and this is because of the nature of the business.
- The payables period has increased from 912 to 844 days and the receivables days have declined.
- The cash conversion cycle has only seen a small increase from -895 days to -841 days and it is still negative.
Payable Cycle and Cash conversion cycle is declined a little bit and can decline more which is also a good sign of business efficiency.
8. Valuation Ratios:
- The company traded at a higher valuation since the 2012 period.
- It was due to the bull rally in the Indian Technology sector which was led by the digitalization and internet boom in the economy.
- The company has managed to sustain the multiples over the years due to prudent cash generation and deployment along with expansion into new businesses.
The multiples, however, are likely to increase in the coming years, which is a good sign.
9. Return On Equity ( ROE ):
- The leverage ratio along with asset turnover has seen a slight decline over the recent years.
- The interest burden ratio has remained at 100% due to no interest-bearing debt in the capital structure of the company.
- The operating margin has seen a great improvement and the tax efficiency has improved.
Overall the Return on Equity has been stable even with declining asset turnover.
10. Future Prospects:
- Competitors:
- LinkedIn and Indeed are the major competitors.
- Even though, LinkedIn has better technology, it has not been able to eat much into Naukri’s market share due to strict privacy policies that restricts the platform from providing a candidate’s contact information without prior permission.
- The management is also looking into premium hiring through its internal platforms namely bigshift and IIM Jobs. They are investing significantly to gain higher market share in this segment.
- 99Acres.com has also been doing well. Despite Covid-19 effects, long-term prospects outlook remains. The revenue split is such that Brokers contribute around 53% of the revenue, while share of builders and owners stands at 41% and 6%, respectively.
- Jeevansathi.com remains at 3rd position in its segment with an overall market share of less than 15%.Majority of revenue comes from South India, which is majorly dominated by Matrimony.com
CONS:
- Stock is trading at 12.63 times its book value
- Promoter holding has decreased by -1.92% over last quarter
- Company has a low return on equity of -0.11% for last 3 years.
- Earnings include an other income of Rs.666.47 Cr.
- Company’s cost of borrowing seems high.
Conclusion:
Overall the company has solid fundamentals, prudent cash allocation and good growth prospects in the coming future. The margins are also expected to improve along with efficiency in the coming years.
If we do not consider the chart patterns and just look at the company’s moat and its business then it seems to be a good company because Job placements will never die in India, Hence the company will survive until job placement are alive. Also same for Jeevansathi.com. If you liked this article, please do share share it (Whatsapp, Twitter) with other Traders/Investors.
The above detailed analysis was done by Mr. Apurva Jain, Stock Analyst, https://www.quora.com/q/beginnerguidein