Info Edge slumps 10% on Rs 116 cr Q3 loss; writes-off invst in 4B Network

Shares of Info Edge India, which owns online platforms including Naukri, 99acres, Jeevansaathi and Shiksha, tumbled 10 per cent intra-day to a low of Rs 3,430 on the BSE on Monday after the company reported a net loss of Rs 116.5 crore in Q3FY23 versus a profit of Rs 4,601.87 crore last year. 

The losses in the recent quarter mainly accrued as the company wrote off its investment in property tech start-up 4B Networks. It had invested Rs 276 crore in the start-up as of September 2022.

On a standalone basis, it charged an impairment of Rs 276 crore as an exceptional item owing to concerns around the uncertainty of the funding environment for 4B Network. 

As per its result filing, on a consolidated basis, it impaired an exposure of nearly Rs 520 crore (including goodwill and net assets) in 4B Networks “considering the current state of affairs and other relevant factors including excessive cash burn, prevailing liquidity issues and significant uncertainty towards funding options”. 

Info Edge is an early-stage investor who backed startups such as Zomato, Delhivery and Policybazaar.

“While we are seeing a slowdown in the IT hiring, the non IT hiring market continues to be strong,” said the company’s CEO Hitesh Oberoi.

During the quarter under review, the consolidated revenue rose about 40 per cent to Rs 589.51 crore from Rs 421.41 crore a year ago.

“Despite fears of high competitive intensity in Real Estate and Matrimonial verticals affecting the standalone margin, the rising revenue share of Recruitment has only lifted the company’s margin profile. In fact, following delivery of 39.1 per cent EBITDA margin in Q3 we believe it’s safe to forecast that the standalone EBITDA margin for FY23 will exceed 35% and may also sustain over FY24-25 versus 32 per cent in FY20,” said analysts at JM Financial. 

Concerns of IT hiring slowdown affecting the recruitment vertical have only aggravated each passing quarter over the last 12 months or so. However, defying expectations the company has continued to report better-than-expected billings, they say. 

The brokerage also attributed the recent stock price weakness to ‘market penalising the scrip’ factoring in the given uncertainty while ‘ignoring strong underlying results’.

“We also note that even in an uncertain environment during FY16-20 (due to multiple headwinds such as IT slowdown, demonetisation, GST launch and NBFC crisis), recruitment billings had grown at a CAGR of 14 per cent. That said, we are mindful of the management’s hazy near-term commentary. While we assume a slowdown in recruitment billings over the next 1-2 quarters, we also expect a quick rebound supported by stable GDP growth and increase in offshored jobs demand,” it said.