The slowdown in the technology sector has been telling on the Info Edge stock for some time. Now the weakening momentum in the Indian economy is also beginning to hurt the stock, which has lost over 50 per cent since the start of 2008 and about 19 per cent in the last two weeks.
Analysts believe Info Edge’s 30 per cent-plus y-o-y growth in recruitment revenues seen in the June 2008 quarter, could slow down sharply to below 20 per cent for the rest of the year.
Recruitment-related services, including the online portal naukri.com, account for 87 per cent of the company’s revenues. Just over a fourth of this comes from the IT services space, which now looks even more vulnerable given the financial market crisis in the US. Including the share of recruitment agencies, the overall exposure to the IT sector, would be higher at close to 40 per cent of recruitment revenues.
So far, hiring by the non-IT sectors has been fairly robust, but it now appears that these sectors too could see a slump in hiring. Info Edge’s matrimonial site Jeevansathi.com, which accounts for around 8 per cent of the top line, should continue to do well. However, the real estate portal, 99acres.com, is likely to see fewer classified advertisements coming in from real estate firms. The volume of transactions in the real estate sector has come off sharply and business could remain dull for some time.
The management has been aware of the slowdown in the economy but revenues could grow by 30 -50 per cent in the current year. However, that seems unlikely now. Info Edge will possibly end the current year with revenues in the region of Rs 270 crore and a net profit of close to Rs 60 crore. Unless it betters these estimates, the growth in the earnings per share (eps), would be in single digits. That cannot justify the high FY09 price-earnings multiple of 32 times that the stock commands at the current price of Rs 695.
