Robust growth prospects make Info Edge a good long-term bet: Analysts

Besides Zomato, in which Info Edge owns 26% stake, naukri.com is also likely to report robust growth leading to improved cash flows

The stock of Info Edge has rallied over 15 per cent in October so far, in an otherwise bearish market in which leading indices such as BSE Sensex and Nifty 50 have shed around three per cent during the same period. Improvement in growth and profitability of one of its investee companies – Zomato – suggesting potential for better shareholders’ return, has revived investor sentiment for Info Edge’s stock. Zomato was under pressure in the first half of September (6.3 per cent down) amid factors such as layoff and its issues with restaurants.

Info Edge is an online classified company, which owns major online players such as naukri.com and 99acres, among others.

Recently, Zomato, in which Info Edge holds around 26 per cent, reported a strong set of numbers for the April-September 2019 period (H1FY20). While Zomato's top line in H1FY20 grew over three fold year-on-year to $205 million, its monthly EBITDA (earnings before interest, tax, depreciation and amortisation) losses in September were 40 per cent lower than in March 2019. Notably, though a lower base too has helped, Zomato’s strong growth cannot be ignored as it comes at a time when most other consumer companies are expected to report a moderation in growth during H1FY20 due to the overall feeble economy.

In fact, recent reports on fund raising by Zomato, which Info Edge has denied, underlines the growth potential of the online food aggregator. An analyst at a domestic broking house believes the fresh investments in Zomato point to higher valuation for Info Edge too.

Besides, Info Edge’s key recruitment business (naukri.com), which made up over 70 per cent of its revenues in FY19, is also likely to report a good performance, improving the company’s cash flow outlook. As per Info Edge’s FY19 annual report, naukri.com's impressive performance over the years has helped the firm build solid cash reserves. Though there are growth worries for Info Edge’s real estate business (99acres.com) due to weak sentiment in the sector, given the better performance of these standalone businesses (naukri.com and 99acres.com), analysts aren’t too worried.

“We remain positive on Info Edge, as the company has delivered superior growth and better margins even when market conditions for recruitment and real estate businesses have been poor,” analysts at JM Financial said in their recent note.

Further growth levers include increasing internet penetration in rural and urban areas and rising preference for digitisation. Overall, many analysts believe Info Edge is a good bet for long-term investors.