Traffic on our portals is close to pre-COVID levels: Chintan Thakkar, CFO, Info Edge
There is a need to understand some accounting issues to study our results. The revenue recognition of the billing is done over the tenure of the contract, .i.e. if the contract is of 3 months, 6 months or 12 months, then the revenue spreads out accordingly. So, the revenue of the contracts of January, February or December last year is coming in this quarter as well and this is why the revenue numbers are looking fine.
Chintan Thakkar, Chief Financial Officer (CFO), Info Edge India, talks about the Q1FY21 numbers and what led to such performance, traffic recovery, M&A plans, and Zomato among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: The numbers have been better than expectations in terms of PAT and margin, while there was a 13% drop in revenue. What were the key reasons for this kind of performance and gong forward what is your outlook?
A: There is a need to understand some accounting issues to study our results. The revenue recognition of the billing is done over the tenure of the contract, .i.e. if the contract is of 3 months, 6 months or 12 months, then the revenue spreads out accordingly. So, the revenue of the contracts of January, February or December last year is coming in this quarter as well and this is why the revenue numbers are looking fine. But if you have a loom on the billing number then the there is a downgrade of almost 44% but our number is just 10%, which means the full impact of the shortfall is yet to come and will be spread in the second and third quarters. Therefore, a margin is visible but the truth is that our billing has dropped by 44%. At the same time, we have reduced our cost by 17%, while the revenue has gone down by just 10%, so the profit seems high. But actually, in the quarter to come, if the revenue doesn’t increase a lot, then its impact will be seen in 2 and Q3. Having said that, going forward, it should be seen that there is a month-on-month improvement, which means the situation has improved in June when compared to April; July is better than June; August is better than July and so on. The traffic that comes on our website is a lead indicator and suggests that what will happen next and there is a gradual improvement in the traffic and it is coming close to the pre-COVID level. These are good signs. Restrictions on the discretionary cost are intact yet. Going forward, if there is some improvement in the business then the cost may go up and there will be an improvement in the business, as well.
Q: The traffic on the website is close to the pre-COVID levels. Can you provide an expected timeline by which you can recover completely? Also, tell the kind of bounce-back that is visible and is there any particular segment where speedy recovery is visible?
A: It also depends on how much the economy recovers, the impact that COVID will have in the future, is lockdown is implemented once more if there is a second phase. So, recovery should come when the business starts as usual. As far as recovery is concerned then we saw recovery was a bit fast and we saw a recovery in June and July. We were a bit concerned about the real estate, the segment where recovery was not visible in June and there was a huge fall of 80-85% in the traffic due to the COVID. But we saw that there is a quick bounce-back since July and we are a bit surprised from it. The good thing is that we are getting traffic even in the real estate segment. These are good signs and showing there is a movement in the economy, hopefully, September will be better. It seems that if the traffic turns normal by December or January then we can start growing at a normal rate.
Q: What is your M&A plans for this financial year considering you recently raised almost Rs 1,875 crore through QIP? How the proceeds of the QIP will be used and will we see any M&P activities by the company?
A: It is very clear that a cash balance of Rs 1,500 crore was present in our balance sheet and if you have a look on the Q1 results than there is a cash profit despite there was a complete lockdown in April and May. If COVID remains in the as usual business then I don’t think that we will need cash to run our core operating business. So, with this Rs 1,500 crore and the raised Rs 1,875 crore, we have a cash balance of Rs 3,700 crore. Obviously, it is for investment on something and we want to invest them on our four core operating businesses, namely recruitment, real estate, matrimony portal Jeevansathi.com and the education classified shiksha.com. And we want to invest in these businesses and the companies with which synergies are created or there is an improvement in our market position. It can be some large M&A or in taking stakes in small start-ups which are operating in these verticals or companies increase existing stakes in companies with which we have synergies. So, these are few things that we can do, i.e. it could be partial acquisition, acquisition of stake, strategic alliance or 100% acquisition. We are open to all these things and there is no hurry to do an M&A. We will have a look at the proposals that we get, we want to do and want to do only at the right price and which makes sense from long-term value creation for our stakeholders. And, if it feels that we can do this then we are ready to do so.
Q: You were supposed to get $ 100 million from China and financial investment in Zomato. What is an update their & have you received the required approval from the government on this?
A: Application for government’s approval has been made. We have a keen inbound interest, so it is not necessary to be dependent only on the Chinese investor for Zomato. The existing shareholders, who are not Chinese, are very interested in it. Even the outside investors are also interested. At the same time, their cash position which was shut had reduced drastically. So, the cash requirement has reduced and it looks that the inbound interest is very high and there is an improvement in business. So, a good situation is emerging for Zomato.
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Q: You have around 23% stakes in Zomato and its business has increased during the COVID and it is performing well at present. Do you have plans to reduce or increase your stakes in Zomato?
A: We are a passive investor at present. If you see, then we have not invested in the last two-three years and more investment is coming from outside, which is diluting us. We are happy about it. There is a fund requirement at their end and we already have 23% stakes in it and would not like to increase it further and we do not want to reduce it.
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