Info Edge shares nosedive 10% on report of net loss in Oct-Dec

Shares of Info Edge (India) nosedived 10 percent on February 13 after the company posted a net loss of Rs 116.5 crore in the quarter ended December.

The net loss in the third quarter were on account of concerns around the uncertainty of the funding environment for 4B Network which resulted in an impairment of Rs 276 crore during Oct-Dec.

Info Edge has written off its entire investment in 4B Network, a venture of Rahul Yadav, co-founder and former chief executive officer of real estate search platform Housing.com . As the investment was written off, it resulted in an impairment during the Oct-Dec quarter for Info Edge .

At 11.41 am, Info Edge (India) was trading 10.35 percent lower at Rs 3,419.25 on the National Stock Exchange. The sharp decline in the stock was also triggered by strong volumes that were higher than the 20-day average daily trading volumes.

Despite posting a quarterly net loss due to exceptional items, revenue rose 39.9 percent to Rs 589.5 crore during the quarter under review. Nonetheless, revenue growth was the slowest in five quarters which added to the concerns.

Meanwhile, lower advertising costs and operating leverage aided the company's EBIDTA margin as it expanded to 32 percent in Oct-Dec from 27.7 percent a year ago.

Moreover, the management gave an uncertain outlook for the forthcoming quarters. Hitesh Oberoi, Managing Director, and Chief Executive Officer, Info Edge said, "While we are seeing a slowdown in the IT hiring, the non-IT hiring market continues to be strong."

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Brokerage views

"We are mindful of the management’s hazy near-term commentary. So, while we assume a slowdown in recruitment billings over the next 1-2 quarters, we also expect a quick rebound supported by India's stable GDP growth and increase in offshored jobs demand," brokerage firm JM Financial said in a report.

The brokerage has a 'buy' rating for the stock with a target price of Rs 4,650.

Another brokerage, YES Securities also holds a bullish stance on Info Edge and believes positive operating leverage should support margins in the medium term. "The company is also expected to continue to make tech-related investments to drive business growth and maintain its leadership position across segments. Info Edge is also best placed to benefit from growing digitalization of Indian economy," YES Securities said in its report.

YES Securities also gave a 'buy' call for Info Edge, with a price target of Rs 5,215.

Adding to the list of brokerages that are bullish on Info Edge is HDFC Securities. The brokerage firm expects growth to be led by Naukri, 99 acres
and Shiksha for Info Edge going ahead. "The margin for recruitment will also be in the range of 60-61 percent," the brokerage firm said.

With a Buy rating, HDFC Securities assigned a target price of Rs 4,600 for Info Edge.

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