Until the job market starts looking up, revenues could continue to be under pressure.
With IT companies still somewhat cautious about recruitments, it’s not surprising that Info Edge India’s revenues for the June 2009 quarter were weak. In fact, this has been the trend for a couple of quarters now and the company, which owns the naukri.com job portal, saw revenues drop 8 per cent sequentially and 16 per cent year-on-year to Rs 53 crore. Since the job market is likely to start looking up only six-eight months down the line once the economy turns around, Info Edge’s revenues could remain under pressure for some more time.
Business has been hurt mainly because around 35 per cent of the company’s revenues are from the IT sector, which is just starting to recover from the effects of the global financial crisis. The company’s matrimonial portal, jeevansaathi.com, which unlike naukri.com is not the market leader in its space, is understood to be close to breaking even. However, the real estate site, 99 acres, could take a while to make money.
While the company has been attempting to cut costs, the weak top line resulted in a drop in EBITDA (earnings before interest, tax and depreciation) margin of 200 basis points to 25 per cent. The ebitda thus came off by about 22 per cent to Rs 13.3 crore, though higher other income helped increase the net profit, which came in at Rs 13.3 crore.
For the current year, analysts are estimating a slight fall in revenues over the Rs 245.2 crore reported in 2008-09. As a result, there could be a small drop in net profit over the Rs 59.7 crore posted last year. At the current price of Rs 627, the stock trades at around 33.5 times estimated 2009-10 earnings and 30 times estimated 2010-11 earnings, which analysts point out is a significant premium to valuations commanded by mid-cap IT firms.
