Info Edge under pressure after Q4 miss; what should investors watch now?

Shares of Info Edge (India) Ltd came under pressure in early trade on Thursday. The stock fell after the company reported a softer-than-expected business update for the March quarter.

The stock slipped as much as 4 per cent to Rs 990 on the NSE during early deals. At around 9:55 AM, it was trading at Rs 991.55. This was down Rs 41.15, or 3.98 per cent for the day.

The fall reflects investor disappointment with the company’s billings growth. The numbers came below Street expectations across key segments.

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Overall billings growth misses estimates

Info Edge reported standalone billings of Rs 1,057.1 crore for Q4. This marks a growth of 7.45 per cent year-on-year.

The growth, however, was below market expectations. Analysts were expecting around 11 per cent growth for the quarter.

The miss at the overall level signals a slowdown in business momentum. It also raises concerns about near-term revenue growth, as billings typically translate into revenues with a lag.

Core recruitment business sees moderation

The company’s core recruitment platform, Naukri, reported billings of Rs 810.7 crore. This reflects a year-on-year growth of 9.5 per cent.

The growth is still healthy but slightly below expectations of around 10 per cent. More importantly, it indicates a gradual moderation trend.

In the previous quarters, recruitment billings had grown 9 per cent, 10.8 per cent, and 11 per cent, respectively. The latest number suggests that growth is stabilising at lower levels.

Analysts believe that the hiring environment remains stable but not very strong. Any slowdown in hiring demand can impact this segment further.

99acres disappoints with muted growth

The biggest disappointment came from the real estate platform 99acres.

The segment reported billings of Rs 162.8 crore. This translates into a growth of just 1.9 per cent year-on-year.

This is sharply below expectations. Analysts were building in double-digit growth of around 14 per cent.

The weak performance suggests slower activity in the real estate listings space. It also points to rising competition and uneven demand in the property market.

Other verticals remain flat

Other businesses, including education and matrimony, showed limited traction.

Billings in these segments remained largely flat on a year-on-year basis. This was again below expectations of meaningful growth.

The lack of growth in these verticals adds to the overall weak performance. It also limits diversification benefits for the company.

Brokerages remain divided on outlook

Brokerage firms have taken mixed views after the Q4 update.

Nomura has maintained a ‘buy’ rating on the stock. It has kept a target price of Rs 1,500. The brokerage said that recruitment billings growth remains within the expected range. It also noted that the trend is consistent with recent quarters.

However, Nomura flagged the weak performance in 99acres. It also pointed to the miss in overall billings growth.

HSBC has also retained a ‘buy’ rating. However, it has cut its target price to Rs 1,525 from Rs 1,625. This reflects some moderation in growth expectations.

In contrast, Citi has maintained a ‘sell’ rating on the stock. It has set a target price of Rs 1,120.

Citi said that billings growth slowdown can impact revenue growth with a lag of one to two quarters. It expects around 12.1 per cent year-on-year revenue growth in Q4.

The brokerage also expects some pressure on margins. It sees a 50 basis points decline in EBITDA margins on a sequential basis to around 42 per cent.

Margins and external risks in focus

Citi highlighted that EBITDA growth may still remain strong. It expects around 25 per cent year-on-year growth in EBITDA to Rs 3.2 billion.

This growth is likely to be supported by lower advertising spends. However, margin compression in the recruitment segment may offset some of the gains.

The brokerage also pointed to external risks. It said geopolitical tensions have impacted the company’s Gulf business under Naukri.

There has also been some spillover impact on the India recruitment business. This adds another layer of uncertainty to growth outlook.