Info Edge India: Working Not On Jobs Alone

The rebound of Internet companies in India has been almost as
dramatic as their disappearance in the post dotcom crash days. Limited by the
lack of Internet penetration, leading to almost negligible e-commerce
transactions, the early stage dotcoms hardly had a chance to survive as the
venture funds decided to stop funding their losses. Most of them, like their
counterparts in other parts of the globe, had to close shop and disband. Like in
every crash, the survivors are now laughing all the way to the bank.

The surviving dotcom companies are now cashing on the surge in
Internet penetration, increasing advertising spends on the Web and the over 100%
growth in e-commerce transactions, led by airline companies who have engineered
a revolution in online credit card usage in India by offering tickets only on
the Web. This experience has helped Internet users to get over their initial
hesitation in e-commerce and helped other B2C businesses to expand their online
sales.

Among the survivors is Noida-based Info Edge Limited, which has
not only thrived in the post dotcom era but also expanded its business offerings
to emerge as a leading Internet company in India. With early mover advantage in
the online recruitment space and limited or no dependence on e-commerce
transactions, the company has built a huge base of users which it is now using
to expand into other lines of business such as matrimonials and real estate
classified. The company also has a strong offline presence in terms of sales
professionals who can be used to sell other services to an increasingly Internet
savvy market.

Online recruitment sites were among the first Internet companies
to appear in India led by the growth in Internet. This industry offered
advantages over traditional recruitment with higher level of accuracy and faster
recruitment. This business was not limited by the lack of Internet penetration
as most job seekers were from the Information Technology sector and had access
to the Web in their offices. Similarly, their prospective employers were well
connected to the Internet. Other sectors like BPO and even old economy sectors
soon joined the online bandwagon led by cost and time efficiencies.

Info Edge online recruitment and related services through its
site Naukri.com currently contributes 93% of its revenues. In this line of
business, the company faces competition from both Internet based and non
internet based recruitment agencies. The key competitors of Naukri include
Monster, Timesjob, Jobsahead, and the new entrants in this sector like
Myfirstjob.com, Resume Register and Dice-Cybermedia.

Info Edge was launched in March 1997 by Sanjeev Bikhchandani,
now MD and the CEO, along with other members. A management graduate from IIM
Ahmedabad, Sanjeev worked for companies including Lintas, GlaxoSmithKline and
Pioneer before founding Info Edge. The company now has presence in 30 cities
having 45 offices, which are engaged in sales, marketing, and payment
collection. Naukri has even gone international with an office in Dubai. It
acquired Quadrangle in 2000, an offline executive search engine. In 2004 it
acquired Jeevansathi.com, an online matrimonial classified division. The company
has a strategic alliance with careerbuilder.com an online recruitment service
provider in USA to cater to international markets. Naukri.com has a database of
over 6 mn registered job seekers, their resumes, and over 82,000 live job
listings from corporate customers. It has an employee strength of 951 as on June
30, 2006-an increase of 55 employees as compared to 896 as on March 2006.

Info Edge's current equity stands at Rs 21.83 crore with
promoters holding 54.60%, the public holding 19.50%, others 14.02%, and
Institutional Investors 11.88%.

For the year ended March 30, 2006 revenues stood at Rs 82.4
crore, an increase of 87% as compared to Rs 44 crore in the same period last
year. Net profit increased from Rs 0.3 crore in March 2005 to Rs 13.3 crore in
March 2006, an increase of 4,187%. During the Quarter ended June 30, 2006 the
revenue stood at Rs 27.2 crore and Net profit at Rs 5.2 crore. During the period
the company launched 99acres.com for advertising real estate online.

The company's IPO has been oversubscribed by 54.8 times. It
has received a total of about Rs 29.1 crore bids for its offer of 53.2 lakh
equity shares of Rs 10 each. Info Edge, plans to raise between Rs 154-174 crore,
based on the price band of Rs 290-320 per share.

From the proceeds of the IPO, the company intends to spend Rs 30
crore for acquisitions or strategic alliances and also proposes to deploy Rs 25
crore for the development of 99acres.com and Quadrangle. It will invest Rs 25
crore for cell phone-based delivery models and R&D. A sum of Rs 20 crore has
been set aside for entry into foreign markets-the Middle East and South Asia.
New office premises are expected to require Rs 30 crore to cater to the
increased size of the company.

Given strong results in the first quarter of the current fiscal
as well as the traction achieved in its matrimonial business we believe that the
company will be able to continue its stellar topline growth in the coming years
though increased advertising, and staffing spends will keep margins at similar
levels.

The shares of Info Edge are yet to be listed, however, at the
highest band of the IPO price of Rs 320, work out to 32 times their projected FY
'07 earnings which seems reasonable given the growth prospects both in the
online recruitment business as well as other areas the company has entered. It
would be a strong contender for outperforming its peers in the technology
sector. We also believe that the huge cash reserves the company has could be
used to acquire other strategically attractive businesses providing further
topline and bottomline growth. Outperformer.

Sushanto Mitra

The author is the director, Techcap India

sushanto@techcapIndia.com

The views reflected here are of the author and not of this publication. No
liability is accepted for losses based on the information presented here