Naukri.com the online Recruitment Portal with very little innovation is putting its promoter company InfoEdge India Ltd under the bear grip as Indian Industry Freezes Recruitment on the back of Total Failure in Economic Reforms and Policies by the Corrupt UPA Government.
As India’s real GDP growth has remained weak at sub 5% for the last two quarters, in this environment, we believe client spend on online hiring activity could remain subdued, and revenue growth in the recruitment business could remain weak for the second consecutive year. Collections in the flagship Naukri grew 30% yoy in 1Q but management indicated it to be a quarterly phenomenon and believes that there is no significant improvement on the ground. They further said that if revenues grow at 20% or less, it could result in lower margins yoy in FY14.
Management said that in 99acres, the market continues to be uncertain, but 99acres continues to grow, and the company plans to continue to invest in this business. Info Edge has scaled-up its sales operation and plans to continue to invest in marketing and brand building. In Shiksha, the business is seasonal, so there is a seasonality element to this advertising.
InfoEdge continues to make investments in its investee companies, dragging its consolidated profitability. We expect these investments to continue, and losses from these to result in lower profitability in FY14. Finally, the street expects FY14 margins to fall 350bps YoY, on: a) 100bps margin decline in the recruitment business, b) losses in non-recruitment rising 40% YoY, and c) flattish YoY losses from investee companies. On the back of this, the stock is likely to be an Under-performer.