Info Edge (India) · 26% IFIN Research IFCI Financial Services Info Edge (India) BUY 23 March 2010 6 group of 18-35 years. There is a significant increase

23 March 2010

Initiating Coverage

Info Edge (India)

BUY

Refer to disclaimer, analyst certification and ratings criteria on the last page prior to making any investment decision.

MID CAP

REVIVAL IN EMPLOYMENT TO BENEFIT “NAUKRI” Info Edge is a leading provider of online classifieds in India. Led by its

flagship job portal, naukri.com, the company is set to ride the up move

in the recruitment cycle and stage a comeback from the lows of the

year gone by.

Higher Ad spends- Better realizations: On a broader canvas, the

strong GDP growth and potential increase in ad spend across

companies augurs well for the overall media space, albeit a step further

for the online segment. Info edge will witness higher spend on brand

visibility from a “base essential” level to “higher recall” products. This

will tune up realizations with preference for higher value subscriptions.

“Jobs are Back”- So is the growth: For the first time after the last

three quarters of de-growth, the company witnessed flat revenues in

3QFY10 (6.7% QoQ) with hiring scenario recovering, especially in the IT

and infrastructure segments, both contributing ~45% of the revenues.

We believe that the recruitment business has started to recover and

will grow by ~24% in FY11-12.

Lower losses from other verticals: The company has reported lower

losses from its other businesses, with its matrimonial vertical,

jeevansathi breaking even in FY10. While other portals continue to be

in an investment mode, the losses are expected to decline further, thus

witnessing better margins and ROE (from 16% to 19%) in FY11E.

Surplus cash to drive growth: The company has a surplus of Rs 3.2

bn cash, which the company will invest in building their existing

businesses specifically its education vertical, which pans out as the

largest spender in the print media. Apart from this the company is also

planning to acquire new ventures to gain access into newer markets.

Valuation & Recommendation: At CMP of Rs 878, Info Edge trades at

41x FY10E and 31x FY11E EPS. We Initiating Coverage with a BUY rating

and a target price of Rs 1,120 based on DCF valuation (Page 11 of report).

Market Data

Bloomberg code

Sensex

Price (Rs)

Target Price (Rs)

Target upside

INFOE IN

17,411

878

1,120

28%

Equity shares o/s (mn)

Market Cap ($ mn)

Market Cap (Rs bn)

52 Wk H/L (Rs)

FII Limit

27.3

526

24

971/ 415

40%

Stock performance

(%) Absolute Relative

1 Month 10.8 (0.5)

6 Months 26.5 21.5

12 Months 93.5 4.3

Shareholding pattern

Promoter 54% FIIs 25%

Pub. & Oth. 18% DIIs 3%

Sensex Relative chart

Key financial highlights

Year end 31 Mar.(Rs mn) FY08 FY09 FY10E FY11E CAGR (09-11E)

Net Sales 2,189 2,458 2,291 2,811 6.9

EBITDA 645 662 637 869 14.6

PAT 554 582 579 784 16.0

EPS (Rs) 20.3 21.3 21.2 28.7 16.0

PE (x) 43.2 41.1 41.3 30.6 -

EV/EBITDA (x) 32.3 31.2 31.6 22.0 -

P/BV (x) 8.9 7.4 6.3 5.2 -

EBITDA % 29.5 26.9 27.8 30.9 -

PAT % 25.3 23.7 25.3 27.9 -

ROE % 23.0 19.6 16.4 18.7 -

ROCE% 33.0 29.3 24.9 28.2 -

Radhika Merwin Tel: +91-44-2830 6662 [email protected]

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Sensex INFO EDGE INDIA LTD

mailto:[email protected]

IFIN Research IFCI Financial Services

Info Edge (India) BUY

23 March 2010

2

Contents Page

Trigger Points 03

Business Model 04

Key Investment Criteria 05

Financial Analysis 09

Peer Value Comparison 10

Valuations 11

Business Background 12

Appendix- The job market Scenario from Apr 08 13

I-Fin Estimates 15

Disclaimer / Analyst Certification / Key Ratings 16



23 March 2010

3

Trigger points

Source: IFIN Research

Ove

rall

List

ing

and

Bra

nd

ing

Re

ven

ue

s

Nau

kri

India- Potential for rise in Ad spend

Increasing Share of Internet Advertising

Growing Internet Audience

Favorable Demographics

Popular Online Activities

Leading Traffic Share

Strong GDP Growth

Uptick in Job Market

Large Resume Database

Info Edge – Winning Edge

Online Classifieds

Overall Media Industry

Online Recruitment

market

Surplus Funds for Investments

Lead indicators

Trig

ger

Po

ints

Ne

w V

ert

ical

s



23 March 2010

4


Portals

Revenue Stream

Payments for Job Listings and

Employer Branding & Visibility

Payments from recruiters for resume

database access

Headhunting Business with

Success based Model

Recruitment (84%)

Matrimonial (8%) Real Estate Educational

Naukri

Quadrangle

NaukriGulf

AskNaukri

Brijj

FirstNaukri

Jeevansathi 99acres

Allcheckdeals

Shiksha

Subscription for Posting Profile

Property Listings, builder or broker

branding

Buyer Database access

Under Developme

nt

7%

Property Broking with a success based revenue model

Business Model



23 March 2010

5

Key Investment Criteria

India - low advertising spend % to GDP

Advertising to GDP ratio in India is still at a low of

0.47 %, vis a vis developed economies like the U.S.,

where it is as high as 0.9 percent. Thus the potential

for further rise in advertising spends remains

strong. According to Federation of Indian Chambers

of Commerce and Industry (FICCI) and PWC, ad

spending in India will grow by 17% pa from 2008 to

2012. Ad-spend as a % of GDP will reach 0.55% of

India GDP.

Source: KPMG Analysis

Internet Advertising has been one of the fastest

growing segments in the Indian Entertainment &

Media industry. It grew by 85.2% from 2007 to

reach Rs. 5 bn in 2008. This growth has been a

result of increase in the internet user base and

broadband penetration. Internet advertising is 2.3%

of the ad pie in 2008, up from 1.4% in 2007.

Internet advertising is one of the few segments that

had a low impact of the slowdown, as compared to

the loss of other more expensive advertising

platforms. Internet advertising is expected to grow

at a healthy CAGR of 32% for the next five years to

reach Rs 20.0 billion in 2013. Its share in the total

advertising pie is expected to double from 2.3% in

2008 to 5.5% in 2013.

Advertising Industry

(Rs Bn)

CAGR %

(2006-08)

CAGR %

(2009-13E)

Television 12.8 13.3

Print 15.2 8.1

Radio 28.8 18.0

Out-of-home 22.5 11.8

Online Advertising 76.8 27.8

Total 15.7 11.6

Growing Internet Audience In September, India had 35.8 mn Internet users

(excluding visits from net cafes and handhelds), up

17% YoY, according to web metrics firm comScore.

India’s growth rate is the third highest in the Asia

Pacific region, China and Japan surpassing the

country both in absolute number of users and in

growth rates.

Total Unique Visitors (‘000)

Region Sept'08 Sept'09 % Change

Asia Pacific 396,000 484,245 22%

China 168,258 220,834 31%

Japan 57,933 68,319 18%

India 30,719 35,810 17%

South korea 26,656 29,197 10%

Australia 11,369 12,746 12%

Taiwan 10,619 12,060 14%

Malaysia 8,680 9,401 8%

Hong Kong 3,762 3,939 5%

Singapore 2,388 2,725 14%

New Zealand 2,277 2,618 15%

Source: comScore World Metrix

Favorable Demographics Info Edge’s business focuses on “regular internet

users”- internet users who use the internet ‘at least

once a month’. This base has grown by 10% in 2008

as per The Juxtconsult ‘India Online Survey 2009’.

Since the adoption of new technologies and

services is high among young generation, most of

the content over the Internet is focused on the age

0.00

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2004 2005 2006 2007 2008 2009 2010 2011 2012

%

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India AdSpend/GDP

AdSpend Rs Bn AdSpend/GDP% (RHS)

0

0.2

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0.8

1

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1.4

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US UK China India

Size of Advertisement Industry as a Percent of GDP

http://www.comscore.com/Press_Events/Press_Releases/2009/11/China_India_Japan_Fuel_Rapid_Growth_in_Asia_Pacific_Internet_Audience



23 March 2010

6

group of 18-35 years. There is a significant increase

in the percentage of college-going students in the

Active Internet user base compared to the other

demographic segments. Such an increase could be

due to various information searches required for

academic, entertainment or employment purposes.

Source: iCube 2008 ; Base: Active Internet Users (Urban)

Source: reffsters.com

Popular Activities - Driving up visibility In terms of activities, Job Search and Matrimonial

search constitute Top 10 online activities

undertaken by Indians, with Job Search ranking

second garnering 71% of the activities undertaken.

Out of the four segments –in which Info Edge

operates, two segments namely recruitment and

matrimonial displays robust participation thus

signalling higher visibility. The Overall classifieds

market is valued at Rs 18 bn in 2008; Estimated to

reach Rs 41 bn in 2010. Classifieds market

comprises of print and online segments under

which the market is dominated by the online

segment.

Top 10 Online Activities %

Undertaking Change

from 2008

Search for Travel Products 84%

Job Search 71% -0.3%

Search for non-travel products 68%

Instant Messaging/chatting 67% -3%

Check General News 62% -1%

Dating/Friendship 55% 5%

Check cricket content/score 53% 3%

Check sports other than cricket 52%

Matrimonial search 49% 0.4%

English info search engine 49% 0.6%

Source: Juxtconsult ‘India Online Survey 2009’

Source: IMRB International/IAMAI

19% 16% 15% 12% 14% 12%

23% 27% 26% 26% 21% 27%

26% 26% 27% 32% 33% 30%

13% 15% 17% 15% 15% 14%9% 8% 7% 9% 11% 11%

10% 7% 8% 6% 6% 6%

0%

20%

40%

60%

80%

100%

120%

2001 2003 2004 2006 2007 2008

Youth Continues to Drive growth

School Going Kids College Going Young Men

Older men Working Women Non-working women

0100200300400500600700800900

172.8

849.7

209.3 186.463.6

E-Recruitment Users Segments (Mn Hrs per Week)

59%

59%

45%

45%

40%

38%

37%

37%

35%

34%

0% 20% 40% 60% 80%

Finance: Banking and Loans

Recruitment

Education & Training

Mobile telephony

Entertainment

IT:Computer, laptop, equip…

Matrimonial

Personal Products

Finance: Investment & …

Finance: Insurance

Category of Advertisements seen by users

Higher ad revenues through greater

visibiltiy

Operating in Business Segments that will drive robust activity

among users

Operating in Business Segments that will drive robust activity among users



23 March 2010

7

Recruitment Frenzy- “Naukri is Back “ Info Edge is all set to ride the economic recovery

with 2009-10 GDP growth pegged at 7.2% as against

6.7 % growth that was witnessed in 2008-2009. This

in turn augurs increased employment opportunities

with IT and Infrastructure bouncing back. Info Edge

which derives 86% of its revenues from the online

recruitment segment, is due for a smart comeback

after a year of de-growth. The stimulus packages

offered, has significantly turned around the job

creation activity of India Inc. by fuelling a growth of

19 % in employment generation during the October

– January period of this fiscal over the

corresponding period of last year, according to

ASSOCHAM Placement Pattern (APP) Study

Source: CSO

Source: ASSOCHAM Placement Pattern; IFIN research

Info Edge’s Growing Online recruitment business and share Recruitment solutions offered through its main

portal - naukri.com, has been the Company’s

primary business constituting 85% of its total

revenues currently. Leveraging on its first mover

advantage, the company has been able to build a

large database of resumes of 20 mn currently with

over 20,000 corporate clients under its kitty. A large

corporate clientele in turn drives larger traffic

through prospective job seekers and this in turn

leads to higher usage of the site by corporates.

Naukri is the no.1 job site in India commanding

dominant traffic share, consistently above 60% for 8

consecutive months as per Comscore data. This

kind of dominant traffic share not only results in

higher revenues but also commands a higher

margin vis-à-vis its peers.

Source: comScore

…..Naukri the clear leader in Recruitment

6.77.2

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%Y

oY

Bullish on Economic Growth

GDP

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300%

Apr-Jun08 July-Sept-08 Oct-Dec 08 Jan-Mar 09 Apr-Oct-09 Oct-Jan 10

Job Creation- Recovery on the Horizon

% Sequential % Corresponding Period

Stimulus Packages

Fuelling 19% growth

Gap Widening with slowdown as companies ideally cut down on other sites and stick to the top of the pack.



23 March 2010

8

Investments in Non-recruitment Business to yield results Apart from its core business of online recruitment,

the company has invested in online matrimonial

and online realestate businesses, which have

already become leading portals in the

corresponding market. The matrimonial business

being highly segmented, has focused on the North

and Western market and has continued to grow at

20-25% during the slowdown, the business per se

insulated from the economic vagaries. We believe

that this business will continue to grow at similar

rates and has the potential of growing more than

50% with additional investment made in the

business.

The realestate business has relatively under

performed with the slowdown in the reality sector.

However the company’s portal- 99acres, is a leading

portal, neck to neck with magicbricks.com in terms

of traffic share. We believe that this vertical will

recover post first half of FY11 .

In terms of profitability, both businesses are yet to

break even. While jeevansathi is expected to break

even in FY10, 99acres will break even by FY11.

………….neck to neck with magicbricks

…..Jeevansathi trailing second

Investments in existing and new business to drive earnings- Surplus cash Kitty The Company currently has Rs 3.2 bn cash surplus

to expend for various investment opportunities.

Currently the company’s online educational

segment which was initiated in May 2008, throws

up huge opportunities. The company’s portal

shiksha.com has already got more than 110000

listings and the company is investing in the product

and sales force to monetize the portal. Apart from

this the company also plans to acquire into the

automobile space or complementing matrimonial

space to gain entry into newer markets. With a well

established network in the existing verticals, the

company will be able to leverage its dominant

presence to gain footing into newer verticals.



23 March 2010

9

Financial Analysis

Growth in the offing

The company recorded high growth rate in the

initial years with lower penetration into the online

recruitment market and strong economy which saw

a buoyant job market. The other verticals like

jeevansathi and 99acres have also witnessed

tremendous growth with continual investment in

these businesses. In FY09, the slowdown has played

a dampener to the recruitment business, which has

grown by 7.7% reflecting lower listings and

customers moving from a higher to a lower

subscription value. The matrimonial business is

fairly insulated from the economic downturn and

continued to grow at a higher rate. However, the

real-estate vertical has also seen lower listings with

underperformance of the sector

With economic recovery and improved job market,

we expect the recruitment business to grow by 24%

in FY11E. With continued investment in the other

verticals we expect a growth of 15% in FY11E, the

real set to recover after 1HFY11E.


Profitability to improve with better

operational performance

The margins in the recruitment business has fallen

below the 40% level in FY10, mainly on account

lower realizations, a result of customers opting for

lower value products during the slowdown. The

company has cut down its advertising expense by

nearly 13% in FY10 to maintain margins within 38-

40%. In FY11E, we expect the margins in the

recruitment business to sail above 40% ranging

between 42-44% with improved realizations. In the

other verticals like jeevansathi and 99 acres which

are yet to break even, we expect the losses to

continue to decline in spite of investments in these

verticals. Jeevansathi is expected to breakeven in

FY10, though significant contribution to the overall

earnings is still a couple of quarters way. In case of

99acres, the segment is still reeling under the

underperformance of the sector and is expected to

break-even in FY11E. Overall we expect the margins

to improve to ~30% in FY11E, propelled by recovery

in the recruitment business. Greater operational

performance will drive the earnings upward, thus

seeing the ROE inch back to 18% level.


-20

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FY07 FY08 FY09 FY10E FY11E

Rs

Mn

Recovery on the Horizon

Recruitment Jeevansathi & 99acres

Slowdown taking toll on the recruitment market

Real-estate market slowdown; allcheckdeals hived off as a seperate

subsidary from 3QFY09

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%%

Cost Determinants

Network Cost Emp Cost Adv CostOther Exp EBITDA (RHS)

-140.0

-120.0

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EBITDA Recruitment Other Businesses

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Higher Returns in the Offing

ROE% Net margins%



23 March 2010

10

Cash from operations to improve with better

realizations

With a predominantly subscription based model,

the Revenue is recognized over the subscription /

advertising agreement, usually ranging between

one to twelve months. Till FY08, the trend of

customers opting for higher subscription or longer

duration products is evident in the ‘deferred sales

component’ under current liabilities, which clearly

records a steep decline in FY09, in turn reflecting

short term commitments by customers. This in turn

has resulted in lower cash from operations in FY09.

With spending coming back, we expect FY11, to

witness comeback in long term subscription

products thus improving the cash from operations.


Global Peers

Staffing Solutions CMP

Sales PAT OPM PAT ROE EPS P/E

(US$ mn) (%) (%) (%) FY10 FY11E FY10 FY11E

US

Monster Worldwide 17.3 905 18.9 1.0 2.1 1.7 -0.1 0.3 -183.9 49.7

Kforce Inc 15.0 910 12.9 2.6 1.4 6.0 0.4 0.7 35.9 22.4

Manpower Inc 58.4 16038 -9.2 0.6 -0.1 -0.4 1.1 2.5 51.5 23.3

Hudson Highland 5.32 691 -40.6 -4.3 -5.9 -44.1 -0.2 0.4 -32.6 14.3

Robert Half Intl 31.4 3036 37.3 2.2 1.2 4.0 0.5 1.0 65.0 31.6

On Assignment Inc 7.6 416 4.7 3.7 1.1 2.1 0.2 0.3 48.2 23.1

Dice Holdings Inc 7.7 110 13.5 24.1 12.3 9.9 0.2 0.3 35.8 23.2

China

51job Inc 18.2 119 16.5 na 13.8 na 0.9 1.1 19.3 15.9

Netease.com Inc 40.7 550 271.1 53.9 49.3 28.6 2.8 3.3 14.7 12.4

Hong Kong

Jobstreet Corp 2.0 92 26.8 38.5 29.0 22.7 0.1 0.1 22.4 16.8

US

Google Inc 566.0 23650 6520.5 35.2 27.6 20.3 27.4 31.3 20.6 18.1

Yahoo Inc 16.5 6460 598.0 8.0 9.3 5.0 0.6 0.7 26.5 23.1

China

Baidu 567.0 651 217.4 36.1 33.4 37.9 66.8 97.2 8.5 5.8

Sina Corp 41.0 358 411.9 10.4 44.7 1.4 1.9 28.6 21.8

Sohu.com Inc 53.4 515 147.8 39.7 28.7 29.7 3.9 4.7 13.6 11.4

Australia

Seek 8.0 208 55.3 40.2 26.5 25.7 0.2 0.3 34.7 23.8

India

Info Edge (in Rs) 890 2458 570 26.9 23.2 25.7 21.2 28.7 42 31.0

Source: Bloomberg Estimates

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Cash From operations to Improve

Cash From Operations Deferred Sales Revenue % of Sales



23 March 2010

11

Valuations

We have used DCF to arrive at an intrinsic value for Info Edge. We have assumed a weighted average cost of capital (WACC) of 13% and terminal growth rate of 5%. Based on DCF analysis we arrive at a target price of Rs 1120.

DCF Assumptions

Risk Free rate 8% Beta 1 Risk Premium 5% Cost of Equity 13% WACC 13%

Projections

(Rs mn) FY10E FY11E FY12E FY13E FY14E FY15E FY16E FY17E FY18E FY19E

Revenue 2,291 2,811 3,795 5,124 6,661 8,526 10,743 13,106 15,072 17,333

EBITDA 627 869 1,177 1,588 2,065 2,643 3,223 3,932 4,522 5,200

Tax 292 386 478 605 750 924 1,100 1,315 1,498 1,704

Chg in NWC -38 235 717 518 666 746 887 683 446 814

CFFO 297 719 1,415 1,501 1,981 2,465 3,009 3,300 3,469 4,310

CAPEX 44 69 70 70 60 60 50 50 50 51

FCF 254 650 1,345 1,431 1,921 2,405 2,959 3,250 3,419 4,259

Sensitivity Analysis

Since its listing in Nov 2006, the company has traded

at an average PER of 38x, subdued by the

underperformance in FY09. Otherwise the stock has

traded at an average of 44 pre-may 2008 before the

slowdown started in the job market. Pre-slowdown

the company witnessed high growth rates to the tune

of 50%+ aided by lower penetration in the online

classifieds market and buoyant job market. In FY10,

the recovery is visible from 3QFY10 and the company

will witness marginal decline in revenues for the full

year.

While the recovery is imminent, the growth is not likely to reach pre-slowdown levels, due to larger

penetration into the online recruitment classifieds market. However the new businesses like matrimonial and

real estate still have the scope of registering 25-30% growth, reaching up to 50% levels with increased

investments. We believe continued dominant market position and earnings recovery over the next year will

witness re-rating of the stock in the medium term.

At the current price of Rs 878 the stock is trading at 41 xFY10 and 31xFY11E EPS of Rs 21.2 and Rs 28.7

respectively.

Based on the DCF valuation target price of Rs 1120 it will trade at 39xFY11E earnings which is in line with its

long term average P/E multiple. We Initiate Coverage with a BUY rating and a target price of Rs 1120.

Fair Value

PV of cash flow (Rs Mn) 9,329

PV of terminal value (Rs Mn) 17,406

Value 26,735

Net Debt (Rs mn) -3831

Equity shares (mn) 27.3

Value of Equity (Rs mn) 30,566

Fair Value, Rs/share 1120

WACC Terminal growth rate (%)

4.0% 4.5% 5.0% 5.5%

12.5 1106 1148 1195 1249

13.0 1041 1077 1120 1163

13.5 983 1014 1048 1087



23 March 2010

12

Company Background Info Edge, a leading provider of online recruitment,

matrimonial, real estate and educational classifieds

and related services in India was incorporated on

May 1, 1995 under the Companies Act, 1956 as Info

Edge (India) Private Limited and converted into

Public Limited on April 27, 2006.

Business Segments

The company’s business encompasses broadly five

divisions-

1. Online recruitment classified division -

Naukri.com

2. Online matrimonial classified division -

Jeevansathi.com

3. Online real estate classified division -

99acres.com

4. Offline executive search division -

Quadranglesearch.com

5. Online educational classifieds division -

Shiksha.com

To cater to the Middle East job market the

company launched a Gulf version of the

recruitment site (www.Naukrigulf.com). The

company also launched career counselling and

guidance site (www.asknaukri.com), a professional

networking site (www.brijj.com), a real estate

brokerage business (www.allcheckdeals.com) and a

fresher hiring site (www.firstnaukri.com).

The company has also invested in start-up ventures

like Studyplaces Inc, USA (www.studyplaces.com).

In the year 2008-09 the company invested in

Applect Learning Systems Pvt Limited

(www.meritnation.com) and Etechaces Consulting

and Marketing Pvt Ltd (www.policybazaar.com).

Info Edge has established and currently maintains a

network of 60 offices located in 40 cities

throughout India. These offices primarily engage in

sales, marketing and payment collection activities

for its business divisions.

Recruitment (85% of revenues)

Info Edge derives close to 85% of its revenues from

Online Recruitment Classifieds and related services

which are offered through Naukri.com and

Quadrangle divisions. Recruitment classifieds and

related services constitute 86-88% of the

company’s recruitment business which includes

listings and database access. Through its

Quadrangle division, the company provides offline

executive search and placement services and

contributes 5-6% of the recruitment revenues. The

balance 7-8% is through other candidate services

like resume services.

Non-Recruitment Business (15% of rev.)

Apart from the recruitment business which is the

primary business of the company, matrimonial and

Real estate which are still in the investment phase

are set to log in higher growth than the recruitment

business. The matrimonial classifieds and related

services are offered through Jeevansathi.com and

the real-estate classifieds and related services are

offered through 99acres.com. An offline model in

the real estate vertical is allcheckdeals which is the

property broking business with a success based

revenue model. The matrimonial vertical nearly

constitutes 8% of the non-recruitment business.

In May 2008, the company launched shiksha.com in

order to tap online education advertising spend.

The website is designed to act as a trusted guide or

advisor to students in their endeavour to chalk out

a career path with a focus on higher education. The

Company is working on developing the site and

improving the product. This business is yet to take

shape and monetized.

New Businesses

Info Edge has further made investments in two

associate companies. It has invested ~Rs.29.6 mn as

of March 09 for stake in Applect Learning Systems

Private Limited. Applect has launched a site called

meritnation.com, which delivers assessment based

learning solutions for standard 6 to 12 students as

also solutions for CBSE curriculum. Info Edge has

also invested in Etechaces Marketing & Consulting

Private Limited an amount of ~Rs 50 mn as of

March 09. Its website Policybazaar.com helps

customers select insurance schemes and revenues

are generated primarily from lead generation and

fulfillment of sales.

http://www.brijj.com/

http://www.allcheckdeals.com/

http://www.firstnaukri.com/

http://www.policybazaar.com/



23 March 2010

13

Management

The company was promoted by Mr Sanjeev Bikhchnadani, Mr Hitesh Oberoi and Mr Ambarish Raghivanshi. Mr

Sanjeev Bikhchandani, is the Managing Director and Chief Executive Officer. His work experience includes an

advertising position at Lintas India Limited, a marketing position at HMM Limited (now known as Glaxo

SmithKline), and a senior management position at CMYK Printech Private Limited (owner of The Pioneer

newspaper). Mr. Bikhchandani was selected as a finalist for "Ernst and Young - Entrepreneur of the Year"

award in 2005. Mr Hitesh Oberoi, is the Whole Time Director and Chief Operating Officer. Mr. Oberoi has set

up the sales and marketing operations helped set up the Jeevansathi.com and 99acres.com businesses. Mr

Ambarish Raghuvanshi, is the Whole Time Director and Chief Financial Officer and Head, Legal &

Administration. Mr. Kapil Kapoor, is the Chairman and non-executive Director.

Appendix- The job market Scenario from Apr 08

Sectors Share in Total Job

Creation (2008 )(%) Growth In Oct- Dec

2008 % APP Outlook For

2009

IT 34.5 -46.4 Bleak

Banking 5.6 -12.1 Stable

Insurance 5.1 -37.5 Bleak

Financial Services 3.5 -21.6 Bleak

Hospitality 2.8 -43.1 Bleak

Construction 2.7 12.6 Stable

Jan-march09- the APP Composite Index has shown a steep fall of 49 per cent and has came down to 509.72 from 1000 during the period January to March 2009. Top Five APP Sectoral Indices with maximum decline in value (Base period: September – December 2008)

Sectoral Indices Share %

(Base Period) Share

(Jan-Mar-09) Rate of decline APP Education Index 5% 3.0% -74.6%

APP Hospitality Index 3% 2.1% -64.0%

APP Real Estate index 1% 0.8% -54.0%

APP IT Index 41% 34.1% -50.8%

APP Banking Index 7% 6.2% -42.5%

238%

124%

-38%

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

Apr-Jun08 July-Sept-08 Oct-Dec 08

%

Employement Scenario -Apr-Dec 2008

Job Creation relected healthy

growth in employment

creation in almost all sectors

Effect of Slowdown Visible in

Employement

Generation

Almost all sectors witnessed fall

in job vacancies.



23 March 2010

14

Apr-Dec 09-During the year of crises, steps taken by the Indian Government played a major role in boosting

the economic sentiment in the country. However, sectors that mainly depend upon the export and

manufacturing activities are found to be remained in red. On the other hand, banking and financial services

sector registered growth in job creation. The stimulus packages actually helped India Inc. to get back on track.

Top 10 highest Job generating sectors (April-October 2009-10)

Sector

Share

(%)

Growth %

compared to 2008-09

IT/Enabled 30.02 -7.84

Academics 8.94 31.56

Banking 5.38 20.51

Other Manufacturing 4.96 -13.71

Insurance 4.83 2.92

Advertising/Event Mgt 3.69 115.03

Financial Services 3.65 37.48

Engineering 3.31 -18.89

FMCG 3.16 3.11

Telecom 3.15 27.61

The stimulus packages offered, has significantly turned around the job creation activity of India Inc. by fuelling

a growth of 19 per cent in employment generation during the October – January period of this fiscal over the

corresponding period of last year, according to ASSOCHAM Placement Pattern (APP) Study.

Top five sectors which recorded major Growth/Decline in job creation

Sector Growth % Sector Decline%

Academics 137 Logistics 33

Advertising/Event Mgt 111 Printing & Packaging 28

IT/Hardware 105 Biotechnology/Pharmaceutical 22

Reasearch & Consultancy 65 Construction 12

Engineering 63 Energy 10



23 March 2010

15

Income Statement (Rs mn) Cash Flow Statement (Rs mn)

Year end 31 March FY08 FY09E FY10E FY11E Year end 31 March FY08 FY09E FY10E FY11E

Net Sa les 2,189 2,458 2,291 2,811 Oper.profit before w.cap.changes 675 748 637 869

Expenditure 1,544 1,796 1,664 1,942 Change in current assets (41) (37) 12 (42)

Operating Profit 645 662 627 869 Change in current l iabi l i ties 312 (270) (50) 277

Other Operating Income - - 10 - Others activi ties (209) (252) (294) (386)

EBITDA 645 662 637 869 Cash flow from operation (a) 736 188 305 719

Other Income 207 279 310 390 Capita l expenditure (331) (74) (41) (79)

Depreciation 56 71 66 80 Investments (473) 2,471 - -

EBIT 797 870 881 1,180 Dividend received 144 60 60 60

Interest 11 17 10 10 Interest received 34 133 250 330

PBT (before non-recurring) 786 853 871 1,169 Others - 12 12 12

Non Recurring - - - - Cash flow from investing (b) (627) 2,602 281 323

Tax on non recurring - - - - Free cash Flow (a+b) 109 2,791 586 1,042

PBT (after non-recurring) 786 853 871 1,169 Equity capita l + share premium - - - -

Tota l Tax 231 270 292 386 Debt 1 (1) (1) -

Reported PAT 554 582 579 784 Interest pa id (11) (17) (10) (10)

Adjusted PAT 554 582 579 784 Dividend paid (24) (24) (24) (24)

Prior period i tems - - - - Others (5) (1) (1) (1)

Minori ty interest - (12) (12) (12) Cash flow from financing (c) (40) (55) (48) (47)

Preference dividend - - - - Net change in cash (a+b+c) 70 2,736 538 994

Net Income 554 570 567 772 Cash and equivalents at the end 485 3,221 3,759 4,754

Key ratios Balance Sheet (Rs mn)

Year end 31 March FY08 FY09E FY10E FY11E Year end 31 March FY08 FY09E FY10E FY11E

Growth rates (%) Share Capita l 273 273 273 273

Net sales 56.9 12.3 -6.8 22.7 Reserves & Surplus 2,408 2,980 3,534 4,292

EBITDA 73.4 2.6 -3.8 36.6 Shareholder's funds 2,681 3,253 3,807 4,565

APAT 104.8 5.0 -0.5 35.3 Minori ties Interest - - - -

Margins (%) Short term debt - - - -

EBITDA 29.5 26.9 27.8 30.9 Long term debt 4 4 3 3

EBIT 36.4 35.4 38.5 42.0 Total Debt 4 4 3 3

PBT 35.9 34.7 38.0 41.6 Creditors 248 158 144 177

APAT 25.3 23.7 25.3 27.9 Other current l iab & provn 773 609 570 814

Valuation ratios (x) Other non-current l iabi l i ties - - - -

EPS (Rs ) 20.3 21.3 21.2 28.7 Total Liabilities 3,706 4,023 4,524 5,560

EPS Growth (%) 79.6 5.0 -0.5 35.3

PER (x) 43.2 41.2 41.4 30.6 F.Assets (net) incl . Cap WIP 382 385 360 360

Price / Cash EPS (PCEPS) (x) 39.3 37.4 37.9 28.2 Investments 2,654 183 183 183

Price /Book Value (P/BV) (x) 8.9 7.4 6.3 5.2 Cash & Bank 485 3,221 3,759 4,754

EV/Net Sa les (x) 9.5 8.4 8.8 6.8 Inventory - - - -

EV/EBITDA (x) 32.3 31.2 31.6 22.0 Debtors 36 35 33 40

DuPont Other current assets 126 164 154 188

ROE (%) 23.0 19.6 16.4 18.7 Total current assets 646 3,419 3,945 4,982

Net Margin (%) 25.3 23.7 25.3 27.9 Other non-current assets 25 35 35 35

Asset Turnover (x) 0.7 0.6 0.5 0.6 Total Assets 3,706 4,023 4,524 5,560

Leverage (x) 1.4 1.3 1.2 1.2 Key Balance Sheet parameters (Rs mn)

Other key ratios Capita l Employed 2,686 3,256 3,810 4,568

ROCE (%) 33.0 29.3 24.9 28.2 Net Current Assets (374) 2,653 3,231 3,991

Net Debt / Equity (x) -1.2 -1.0 -1.0 -1.1 Book Value ( Net Worth ) 2,681 3,253 3,807 4,565

Dividend Payout (%) 4.3 4.1 4.1 3.1 Working Capita l (860) (568) (528) (763)



23 March 2010

16

Disclaimer:

I-Fin Disclaimer:

All information/opinion contained/expressed herein above by I-Fin has been based upon information available to the

public and the sources, we believe, to be reliable, but we do not make any representation or warranty as to its accuracy,

completeness or correctness. Neither I-Fin nor any of its employees shall be in any way responsible for the contents.

Opinions expressed are subject to change without notice. This document does not have regard to the specific investment

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Analyst declaration

I, Radhika Merwin, hereby certify that the views expressed in this report are purely my views taken in an unbiased

manner out of information available to the public and believing it to be reliable. No part of my compensation is or was or

in future will be linked to specific view/s or recommendation(s) expressed by me in this research report. All the views

expressed herewith are my personal views on all the aspects covered in this report.

I-Fin Investment Rating

The ratings below have been prescribed on a potential returns basis with a timeline of up to 12 months. At times, the

same may fall out of the price range due to market price movements and/or volatility in the short term. The same shall be

reviewed from time to time by I-Fin. The addressee(s) decision to buy or sell a security should be based upon his/her

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associated risks.

Key ratings:

Rating LARGE CAP MID CAP SMALL CAP

Market Cap > Rs 100 bn Market Cap Rs 25 – Rs 100 bn Market Cap < Rs 25 bn

BUY (B) > 20% >30%

Overweight (OW) 5% to +20% 10% to +30%

Neutral (N) -5% to +5% -10% to+10%

Underweight (UW) -5% to -20% -10% to -30%

SELL (S) < (20)% < (30)%

Not Rated (NR) Not initiated coverage on the stock / Not enough assurance to give a rating on the stock

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Info Edge (India) · 26% IFIN Research IFCI Financial Services Info Edge (India) BUY 23 March 2010 6 group of 18-35 years. There is a significant increase