Expect Zomato to break even in 4-6 quarters: Info Edge

The flux in the real estate sector and increased competition from rivals has resulted in slowing growth for real estate portal 99acres.com, even as business continues to be vibrant for jobs portal Naukri.com, says Hitesh Oberoi, CEO and MD, Info Edge.In an interview with CNBC-TV18, the chief of Info Edge, which runs a boutique of Internet services websites in India, was discussing the state of business for each of its verticals."Naukri has seen average growth of 18-19 percent in the last few quarters, and this is expected to sustain. Its EBITDA margins may improve if growth picks up further," he said.Referring to restaurants-listing website Zomato, in which Info Edge acquired a majority stake a few years back, Oberoi said it had now shifted its focus from expansion to profitability."We expect Zomato to break even in four-six months," he said.Below is the verbatim transcript of Hitesh Oberoi’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Just take us through your position in naukri.com first? It has been a subdued market for jobs but have your margins or revenues from that segment improved?A: You are right the market for job has been subdued but thankfully we have done well for the last three or four quarters now our growth rate has picked up. For the last three or four quarters now naukri.com has been averaging about 18-19 percent growth and this is partly the result of a lot of changes we made to our platform. The gain in share that you seen from our competitors and also some of the new product that we have launched in the market so, on the whole naukri.com is tracking 18-19 percent growth. We expect this to sort of sustain at least for a while unless the economy changes.Sonia: It is margins that have been a bit of a concern because even in the quarter gone by your margins fell to about 22 percent versus 25 percent earlier. You made a comment that the upside for the margins could be limited because of aggressive investments. What were those investments be and when you talk about the upside limited what about the downside could the margins fall further from these levels?A: When you look at Info Edge you have to look at it Info Edge as sum –1:55story. So, we are in very different vertical. In naukri.com the margins are very high, so EBIDTA in naukri.com often average around 53-54 percent. They are not falling so they have been stable and what we have been saying is that if the naukri.com business grows at 18-20 percent per annum we may be able to improve the margins from here on. That below 15 percent is hard to sort of maintain this margin but above 20 percent it should be possible to improve the margins in naukri.com.Why the margins in Info Edge have been volatile over the last three quarters is because of the investments we have been making in the 99acres business. The real estate market went through a lot of competitive activity for the last four or five quarters. They were lot of venture capital (VC) fund companies who aggressively spent over the last one year and we were forced to respond and that resulted in our sort of margins as a whole dipping. However, even in the real estate space while the market continuous to be very tight and not enough people are buying real estate at least the competitive intensity has gone down. So, what you should see going forward is a our margins even in the real estate or at least the losses in the real estate business will sort of hopefully begin to subside unless of course competitive activity picks up once again.Sonia: Would you at some point look to either sell off the real estate business or perhaps close it down just because it has not been performing as well and it is dragging your blended margins down overall? A: Not really, we see a huge opportunity in the real estate space. We are a leader we may not be as dominant as naukri.com where we have 70 percent share on the market. In real estate also we have about 40-42 percent share and our share been improving. Long-term we see this as being opportunity because real estate market for advertising if you know if you have been tracking it in the offline space it is bigger than job advertising. So, it is a big category we are leader. Market is a big tight right now which is dragging down margins for everybody and impacting profitability and growth. However, hopefully the market will come back if not today may in one year from now and we will be ready and prepared when that happens. Latha: When is Zomato likely to breakeven?A: Zomato of course was in an expansion mode till the time capital was freely available. Now of course capital is not as freely available as it was six months ago so the company has pivoted and changed focus. It is now focusing on profitability and on growth. I am happy to tell you that they have actually done a very good job over the last couple of quarters. What the management is now saying is that they should break even in four to six quarters. Of course these things are unpredictable, one doesn’t know what is going to happen going forward but they seem to be on track.