Infoedge Q4FY17 Concall Summary

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 Company Highlights

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  • The company has a free cash of Rs.1,295 crore and recommends a dividend of Rs.4.5/share for whole year ▪ Consolidated Net Revenue in FY17 for the Company stood at Rs.888 crore vs Rs.743 crore in FY16
  • Consolidated PAT in FY17 stood at a loss of Rs.21 crore vs Rs.143 crore in FY16
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RECRUITMENT BUSINESS

Financial Highlights

  • Revenue for Q4 was Rs.163 crore with 9% y-o-y growth, while Revenue for FY17 was at Rs.600 crore with a 13% y-o-y growth
  • Billings for Q4 were at Rs.198 crore with a 13% y-o-y growth, while billings for FY17 were at Rs.633 crore with a 14% y-o-y growth
  • In FY17 on an y-o-y basis, Naukri India Sales grew by 12.6% with a 15% increase in billings; Naukri Gulf Sales were flat with 4% increase in billings; Naukri Fast Sales grew by 20% and Quadrangle Sales declined by 4%
  • EBITDA margin for Q4 improved to 60% from 54% in Q4 FY16, while the EBITDA margin for FY17 improved to 56% from 54% in FY16. The improvement in margin was primarily due to decline in operating expenses by 2% with economies of scale playing out
  • For Naukri India business, EBITDA margin improved to 63% from 57% in Q4FY16, while the EBITDA margin for FY17 improved to 59% from 56% in FY16
  • In Q4, there were 39,000 unique customers vs 36,300 in Q4 FY16, with the total number of unique customers for FY17 at 65,500 vs 61,000 in FY16
  • In Naukri India, there was an average addition of 16,000 fresh CVs everyday in Q4 vs 13,000 in Q4 FY16 and the CV database grew to 51 million CVs
  • Average CV modifications per day stood at 245,000 in Q4 vs 195,000 in Q4 FY16
  • Total number of IT Clients grew to 14,400 in FY17 vs 13,700 in FY16 with IT revenue growing from Rs.128 crore to Rs.145 crore

Market Scenario

  • FY17 had been a good year for Recruitment business and Naukri continues to be a very strong competitor in the market with new products and site improvements yielding very good results
  • The company plans to invest more in areas like product development, machine learning to improve matching algorithms and mobile user experience

Impact of new sales and incentive policy

  • With the introduction of new policy, the average realization, which has been low for the past 5 quarters has improved to 74 from 70
  • Due to the ongoing alignment process of sales quarter with financial quarter, some of the accounts have moved into next quarter which has impacted the deferred sales in Q4 most and the growth is expected to accelerate in the Q1 and Q2 of FY18

Impact of IT industry slowdown

  • The company has 40% business coming from IT companies at a gross level, but it also includes many domestic MSE back offices and internet companies apart from IT exporters reducing the dependence on IT exporters
  • Because of the ongoing problems in IT, companies are cutting down on campus hiring and preferring lateral hiring which is benefitting Naukri as around 50% companies from major IT hubs like Chennai, Hyderabad and Pune are dependent on Naukri.As a result, there was not much impact on Naukri due to the IT industry slowdown
  • The company has made 3 value-adding acquisitions in the last 4 years in this space – TooStep, MakeSense Technologies and Ambition box - and are open for new acquisitions to build the capabilities

Pricing

  • There has been a price increase for few products and the full impact of price increase, whether positive or negative, is to be seen in the upcoming year
  • The company has launched a career site manager pro version for recruitment firms at a price of 3.5 times to the basic version and has acquired almost 400-450 customers already. It is also looking to launch an enterprise version targeted at medium to large corporates soon

Other Key Information

  • Revenue from database products vs Non-database products has been hovering around 57-60% for the last few quarters ▪ Traffic share for Naukri stands at 60-62%

99 ACRES BUSINESS

  • Revenue for Q4 was Rs.34 crore with 6% y-o-y growth, while Revenue for FY17 was at Rs.123 crore with a 11% y-o-y growth
  • Deferred Sales Revenue at the end of Q4 was Rs.20.4 crore with 17% y-o-y growth and 39% q-o-q growt
  • Billings for Q4 were at Rs.39 crore with a 9% y-o-y growth, while billings for FY17 were at Rs.126 crore with a 10% y-o-y growth
  • EBITDA loss for Q4 was Rs.3.5 crore compared to Rs.11 crore in Q4 FY16, however on a billing basis, EBITDA for Q4 FY17 stands at a profit of Rs.2 crore. EBITDA loss for FY17 Rs.41 crore compared to Rs.91 crore in FY16.

Market Share

  • The real estate market has been weak for quite sometime in most of the cities due to demonetization and RERA which is expected to unfold over the next 6-12 months
  • RERA would be positive for the business in the long term, but in the short term, there could be negative impact due to uncertainty around the rules
  • With reduction in competitive intensity, 99 Acres has been able to increase its share(45-46% of full traffic in FY17) in such a weak market and is committed to invest more in future
  • The company had been able to attract traffic despite lower marketing expense. In the resale and rental segment, the company has always been ahead of Facebook and Google and in the builders segment, with improvement in offerings, the company expects to gain significant share in future post market recovery

Post demonetization status

  • Post-demonetization, there was a slump in Q3 with 40% overnight drop in traffic which recovered in Q4
  • In terms of billing, pre-demonetization, the growth was 25% and in Q4 it dropped to -4%. There was a good recovery again with 9% growth in billing

Impact of RERA

  • RERA is creating a confusion in builders on whether to advertise or not due to uncertainty around the rules which is impacting the business
  • By September, everything is expected to be sorted out bringing back confidence in the real estate market

Costs

  • Costs have gone down in the past one year despite revenue growth due to reduction in employee costs by increase in technology usage in terms of CRM and cost reduction by movement of servers from US to India. Also, increase in efficiency of employees due to experience is helping in improving margins further

JEEVANSATHI BUSINESS

Financial HIghlights

  • Revenue for Q4 was Rs.16 crore with 20% y-o-y growth, while Revenue for FY17 was at Rs.69 crore with a 26% y-o-y growth
  • Billings for Q4 were at Rs.18 crore with 25% y-o-y growth
  • EBITDA loss for FY17 was at Rs.4.3 crore compared to Rs.12.6 crore in FY16. Pre-marketing EBITDA margin in FY17 stood at 44%, however the company intends to invest aggressively in marketing to gain market share

SHIKSHA BUSINESS

Performance Overview

  • Revenue for FY17 was at Rs.38 crore with a 10% y-o-y growth
  • EBITDA for Q4 was at Rs.2.4 crore and for full FY17, the business was close to breakeven on EBITDA basis
  • The company is investing more in product and technology rather than on Sales to attract users in an efficient manner improving the margins

PAST INVESTMENTS

  •  The company has invested close to Rs.60 crore in the investee companies
  • Zomato, which is no more a subsidiary clocked revenues of close to Rs.323 crore and cash level EBITDA loss of Rs.91 crore

Update on Zomato

  • Zomato has nearly 50% coming from India, 20% from UAE and rest 30% distributed across markets
  • The company, while continuing to focus and invest in online ordering business, also plans to refocus on ad ales business by investing in sales teams
  • A small pilot project is going on cloud kitchen plans and the company is also evaluating the option of providing its own delivery for a small segment of restaurants without depending on restaurant’s infrastructure

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