Naukri.com's EBITDA margin may rise further: Info Edge

Below is the verbatim transcript of Hitesh Oberoi’s interview with CNBC-TV18’s Sonia Shenoy

Q: The quarter gone by saw a good performance from your end. Your profits were up about 35 percent year-on-year, the revenues were up about 5 percent or so. Since more than 70 percent of your business comes from the recruitment services division, tell us how are things progressing? We have heard of an economic revival, GDP revival, growth revival etc but what about the job situation, are things picking up?

A: Yes definitely the job market has been improving for the last two-three quarters now. The early improvement was mostly in the IT space, so we saw the IT companies picking up and doing well. Hiring specially in markets like Bangalore, Chennai, Hyderabad picked up as a result. Slowly and steadily we are seeing an improvement in the non IT space as well. The non IT market is actually more index to the domestic economy than the IT market which is actually more index to the global economy. But of late we have been seeing an improvement in the services space as well.

Q: How much could your recruitment services revenues grow in the second half of the year? First half you had almost 12-15 percent growth but that is overall by the end of FY14 but what about in FY15, what could the growth look like?

A: A lot would depend on what happens to GDP growth. We are much indexed to now the Indian economy. So if the Indian economy starts to pick up from here on and the GDP starts growing at 5.5-6 percent per annum, up from 4.5 percent last year then we expect to grow in the high teens but it depends on the economy.

Q: What about the margin picture because even in the quarter gone by your margins had improved to about 34 percent versus 30 percent earlier, what are the margins that you enjoy in the recruitment services business itself and how much can the blended margins go up because of the pickup that you are seeing?

A: I would not read too much into the margin improvement in Q1 of this year that is partly because we spent a little less in advertising than we normally do. So as advertising picks up way forward the blended margins will come down a little bit. But for Naukri as a business our EBITDA margins are very high. The Naukri EBITDA margin is as high as 50 percent and in good years we have hit 55-57 percent as well. Chances are that if the economy picks up and the job markets improve from here on. If we end up growing in the high teens then the Naukri EBITDA margins could improve from here.

Q: What is happening with 99acres because I was reading a report which suggested that 99acres could become the next Naukri for you in terms of generating revenues? Since we have seen things pickup on the ground in the real estate market, specifically in places like Mumbai, how is that business shaping up?

A: 99acres business is growing well for us, we grew 50 percent last year, we grew at 50 percent the year before that, we grew 40 percent in the first quarter of this year. So we have been rowing at a very healthy rate in the 99acres business. However, the space is very competitive but yes the long-term trend is positive.

The truth is that a lot of the offline spend will move online over the next few years. We are a leader in this space, we may not be as dominant as we are in the Naukri business, but we are a leader in this category. Chances are that we will invest a lot more in this category going forward. It will be a while before we start making money in this category. We are bullish that in the long run this business will be as big as Naukri.

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Q: What could that do to your overall revenues? You are sitting on a base of around Rs 500 crore revenues that you did in FY14 and about Rs 130 crore of profit. How much could you grow that to by the end of FY15 and FY16 given that both your businesses now are doing quite well?

A: On the revenues side it is a little easier to predict because the economy recovers and Naukri starts growing in high teens and 99 acres continues to grow at 35-40 percent per annum then the company should grow at 20 percent plus in terms of revenues.

The bottom-line is harder to predict because a lot would depend on how much we decide to invest in 99 acres as a business. This space is competitive, there is a lot of activity. We want to maintain our leadership status, infact we want to improve our market share in this segment which may mean investing substantial amounts of money in 99 acres over the last two-three years.

So on one hand the Naukri business will continue to be profitable and it will continue to grow and generate a lot of profit for the company but part of that profit will be invested in 99 acres so that we are able to maintain our leadership and build this business going forward.

Q: Can you give me some numbers, what is the exact market share that 99 acres enjoys at this point and how much in terms of investments are you going to pump into this business, how much of it is going to come out of the qualified institutional placement (QIP) money that will be raised?

A: In terms of traffic share depending on which source you believe, we have been oscillating between 35-40 percent in a market which has five-six players. And that has been the state of affairs for the last one year. In terms of investment it is very hard to say how much we will invest in this business, but what we have been saying is we will do whatever it takes to maintain our leadership status.

A lot of the investment will be determined by competitive activity so if there is a lot of spend from our competitors we will be forced to up our spent even if it means losing a lot of money in the short-term. But if the market is sane and if the competitors remain rationale then the investment will be a lot less but it is hard to say at this point in time.

Of course we are well capitalized, we have Rs 550 crore on our balance sheet and we have got an approval to raise up to Rs 750 crore by way of QIP. A lot of this is for investment in the real estate space. But we are looking at it as a war chest and we will invest only if required.

Q: Are you in talks with any PE players, any investors that are looking to buy stake in Info Edge?

A: We keep meeting investors from time to time, we are a public company so investors keep talking to us but we are not looking at a preferential allotment to any PE player at this point in time. That speculation was put at rest when the board said listen we will go for a QIP and not with a PE player. So it is very clear now that we are a public listed company, we won\\'t be widely held and when we hit the market for our QIP, we will try and raise as many players as possible. Of course in that fund raise if some PE players want to invest they are most welcome.