Naukri's EBITDA margins to remain healthy: Info Edge

Ekta: While your revenue on a year-on-year (Y-o-Y) basis has met estimates, there is a steep downtick which has come into the operating margins of the company which has come in at 28.6 percent versus expectations of maybe a sustaining 35 percent in your margins. What led to the downtick in your margins in particular?

A: We had a good quarter in the recruitment space, naukri sales grew by about 20 percent this quarter. So we were on track as far as recruitment sales are concerned and our EBITDA margins in naukri continue to be healthy. What has led to this decline in margins is the investment we are now beginning to make in 99acres, the real estate business. So as you are aware, we raised Rs 750 crore by way of a qualified institutional placement (QIP) recently with the intention of investing more in 99acres to consolidate and strengthen our leadership position and this decline in margins is on account of these investments, which we are making in 99acres.

Nigel: We are looking at your advertising and promotion and that shot up to around Rs 220 crore and your other expenditure as well is at around Rs 180 crore, could you take us through both these two figures and can we see the same run rate being maintained or was this a one-of that we saw in the last quarter?

A: The advertising expenditure will continue to stay higher from hereon like I said, we are investing aggressively in a building our 99acres brand and most of this increase that you have seen in advertising is on account of increasing expenditure in 99acres. We plan to sort of continue to maintain this maybe even increase this going forward as far as 99acres business is concerned.

As far as other expenses go, they are more indexed to our headcount and our headcount has also gone up substantially primarily in the 99acres business and that is why you have seen increase in other expenses.

Ekta: Can you tell us how exactly the two portals did specifically in terms of numbers for you this quarter?

A: The recruitment business grew by about 19 percent Y-o-Y and I think the margins in the recruitment space was maintained. So overall profit in the recruitment space also grew by about 18-19 percent. In 99acres, our topline grew by about 32.5 percent this quarter over last year and we lost about Rs 9-10 crore in this business in this quarter.

Nigel: So the EBITDA loss would be around Rs 9-10 crore?

A: Yes but these are the business wise numbers I am giving you unaudited. They are just management estimates.

Nigel: You have told us that for the next 12-18 months you are likely to see a loss at the EBITDA level, so you are maintaining that guidance?

A: Definitely what we have been saying is that we will do whatever it takes to consolidate and strengthen our leadership position in 99acres. Given the increase in comparative activity and the interest in this space, it means investing a lot more in the business for the next maybe 4-6 quarters.

Ekta: Which one would you assume would be the biggest growth driver for you in terms of revenues for the remaining part of the fiscal and when do you expect 99acres to possibly breakeven any sort of specific guidance on a timeline on that?

A: Both naukri and 99acres are index to the economy in some sense. As the economy started recovering, the naukri business has started growing well. The same time last year we were growing at maybe 5-7 percent in naukri, now our growth rate is up to 19 percent. So if the economy continues to improve from hereon, naukri growth should move up even more going forward. Let us see what happens there.

As far as breakeven of 99acres is concerned, we are currently in investment mode and we are likely to be in investment mode for the next four-six quarters at least in 99acres. So we want to continue to grow our topline aggressively but this may mean heavy losses in the medium-term.

Nigel: You have seen a good traction in your naukri business, 19 percent is what you gave us in the last quarter, for FY15 what it is looking like because I have a couple of brokerage reports and they are saying 16 percent but looks like you are going to surpass that?

A: That is what it looks like right now. The first half has been good for naukri and if the economy continues to get better and better, the second half should be like the first half, if not better.