Pure-play internet and classifieds company Info Edge on January 13 said it sees challenges in the next few quarters if demand from the information technology (IT) sector does not pick up, which is witnessing a “serious slowdown.”
The double whammy of soft demand in the IT industry and extra manpower held by them is negatively affecting the recruitment and consulting business of Info Edge, the company's MD and CEO Hitesh Oberoi said.
“If IT companies’ demand doesn't pick up, then there will be a challenge,” Oberoi said while speaking to analysts after declaring the December quarter results. “We didn't see any recovery in Q3… what we've been seeing for the last three quarters now is a serious slowdown in IT hiring and also in our consulting business.”
These comments by the management assume significance as Info Edge, which operates Naukri.com, draws over 75 percent of its revenue from recruitment solutions, including real estate. The company generates over a third of its revenue from the IT/ITES industry.
Info Edge’s revenue contribution from Naukri.com’s IT/ITES services decreased 3.5 percentage points to 30.7 percent year-on-year (YoY), for the December quarter.
Oberoi said if IT services grow by even 10 percent in January-March, then it “would be a different story but right now IT growth is negative.”
“So, a lot will depend on what happens to IT hiring… if IT companies bounce back, if they start hiring like they used to even pre-COVID, that's very good news for us,” Oberoi said.
During the pandemic, demand for IT-related services increased manifold and companies rushed to fill in employees to cater to the exponential demand. IT companies added around 2,50,000 employees in the financial year 2022-23, which resulted in over-hiring, the management said.
On global capability centres (GCC), he said while the number is increasing, albeit, only the smaller ones are growing. Oberoi said platforms such as the ones offered by Info Edge become relevant only when the headcount of these GCCs reaches around 300-500.
GCCs gain traction among foreign SMBs seeking Indian tech talent
“Bigger GCCs did not grow this year… these are large US companies, US retailers, BFSI giants… and they have not been hiring aggressively,” Oberoi said while implying that the macroeconomic slowdown in the North American continent impacted even the GCC business.
He further said the IT and non-IT recruitment markets are connected as the talent pool is often interchangeable at junior levels. When IT hiring is slow, candidates take up non-IT jobs more easily, he said. Lower attrition rates in IT companies currently do not benefit Info Edge, but a spike in attrition could boost hiring demand.
Nonetheless, the company is back in the black in the December quarter, posting a year-on-year profit of Rs 151.1 crore. In the same quarter of last year, it had reported a loss of Rs 116.5 crore.
The company’s consolidated revenue increased by 6.4 percent to Rs 627.1 crore in Q3.
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