UBS has given a buy call on Info Edge, with a 12 month price target of Rs 475. Its stock price has de-rated due to a slowdown in hiring activity. The company gets around 80 percent of its revenue from the recruitment business, primarily from naukri.com.
Ambarish Raghuvanshi, CFO of Info Edge told CNBC-TV18 that LinkedIn can be a medium-term threat for Naukari. Thus, the company is planning to go for two types of investments. One is to supplement and strengthen Naukri and second is to improve external investment position, he said.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: What is the rate of hiring and therefore the rate of usage of naukri.com. If your finger is on the pulse of the economy in terms of jobs, do you think there is any improvement?
A: I think any news is good news, however small it might be. The Naukri Job Speak Index for February is definitely positive. For the three months in succession, it has looked up. So, that is a good signs because when the index is looking up for three months in a row means there seems to be a bit of a trend. How meaningful that trend is and how long that sustains is a moot question.
However, there seems to be a minor revival. This could be because the few months prior there was a little bit of a bounce back or companies genuinely believed that demand is bouncing back. I think it is still too early to call that. Over the next month or two we will get some more clarity on that front.
Q: You are saying that hiring was more in Q4 than in Q3, by how much?
A: The Naukri Job Speak Index around 1,400 is at an all time high. It is up about 10-15 percent over. December, January and February were all up month-on-month and year-on-year. Therefore, there is a trend there maybe about 10-15 percent over the last three months.
Q: Would you require increasing your investments in Naukri on the back of higher competition from other players link LinkedIn? How do you expect margins to pan out, are they likely to remain under pressure because of this competition and increased investments?
A: Our margin in Naukri had peaked at the end of last financial year, in Q4 of ’11-12 at around 59-60 percent. So, it was already extremely high figure and we have treated the current sort of slowdown or deceleration as a period to invest in our business.
So, it is meant that margins have come off, some of it maybe because of lower growth. However, lot of it is deliberate because we believe that strategically, it is important to invest in our business.
Talking about LinkedIn yes, part of our investments especially in product, technology, user experience is to counter a potential threat from LinkedIn. I must state here that we are facing no pressure from LinkedIn in the current scenario. We are seeing it as a medium-term threat and are investing accordingly.
Q: You have done a few recent acquisitions, would you require doing some more in FY14?
A: We have made two kinds of acquisitions, if I can distinguish between the two. 1) Two small businesses we have acquired for internal for Naukri, a company called TooStep based in Bangalore and another company called MakeSense Technology. Therefore, two businesses to help, supplement Naukri in various forms.
2) We have made two-three external investments where we supplemented our current investments in Zomato. We have gone over 50 percent and in Meritnation, we have gone over 50 percent.
So, there are two kinds of investments. 1) To supplement Naukri and strengthen Naukri. 2) To improve our external investment position especially with two businesses, which look very attractive.
Q: You had indicated that you will be writing off your entire investment in 99labels. That is close to about Rs 29 crore odd. What would that mean in terms of profit figure that you will report for Q4? Is it likely to be absolutely flat?
A: I think so. This is a big hole but the right approach to inform the market in advance and to take a hit. As far as the business is concerned that is the right position we believe. Ecommerce businesses are under pressure. They are facing trouble in terms of being able to raise capital and that is putting further pressure on the businesses. Yes, it will be a big hole in Q4.
There is nothing more right now to announce. Most of our other businesses are still looking pretty stable. So, we are not seeing any pressure on our other investment portfolio at this moment.