Info Edge (India) Ltd

NSE:NAUKRI

Earnings Call Transcript 2023-Q4

[Vivek Aggarwal, executive]

Hi, everyone. Good evening. Our sincere apologies for being late on the call. We welcome everyone to Info Edge Q4 and Full Year financial year '23 results conference call. [Operator Instructions]

Please note that this call is being recorded.

From the management side, we have Mr. Sanjeev Bikhchandani, Founder and Vice Chairman; Mr. Hitesh Oberoi, Co-Promoter and Managing Director; and Mr. Chintan Thakkar, our CFO.

Before we begin today, I would like to remind you that some of the statements made in today's conference call may be forward-looking in nature and may involve some risk and uncertainties. Kindly refer to Slide #2 of investor presentation for detailed disclaimer. I would like to hand over the call to Mr. Hitesh for his opening remarks. Thanks and over to you Hitesh.

[Hitesh Oberoi, executive]

Thank you, Vivek, and apologies once again for starting a little late. Good evening, everyone, and welcome to our fourth quarter and full year earnings call. We will start with an update on stand-alone financials and then cover the financials of each business in more detail.

The audited financial statements and other schedules on segmental billing, revenues, et cetera, along with our data sheet have been uploaded on our website infoedge.in. Overall, billings in Q4 stood at INR 748.6 crores, a year-on-year growth of 15.3%. Our for FY '23 billings stood at INR 2,366.3 crores, a year-on-year growth of 26.8%. Revenue in Q4 stood at INR 564 crores, a year-on-year growth of 23.8%. For FY '23, revenue stood at INR 2,158.6 crores, a year-on-year growth of 38.2%. Billing and revenues along with acquired businesses, Zwayam and DoSelect, for the quarter stood at INR 770.4 crores and INR 586 crores, respectively. For FY '23, billing with acquired businesses stood at INR 2,433.4 crores, a year-on-year growth of 28.7%. Operating expenses for the quarter, excluding depreciation and amortization were INR 343.7 crores, a year-on-year growth of 5%. Our FY '23 operating expenses were INR 1,374.4 crores, a year-on-year growth of 25.1%.

Operating EBITDA for the quarter stood at INR 220.3 crores versus INR 128 crores reported last year, a year-on-year growth of 72% and for FY '23, operating EBITDA grew 69% year-on-year to INR 784 crores from INR 464.3 crores last year.

Operating EBITDA margins for the quarter stood at 39.1% compared to last year where -- when the margins were -- compared to last year. For FY '23, EBITDA margin stood at 36.3% compared to 29.7% for last year.

Operating EBITDA, including acquired businesses stood at INR 231.6 crores, a year-on-year growth of 70.9%. For FY '23 operating EBITDA, including acquired businesses stood at INR 807 crores, a year-on-year growth of 73.3%. During the quarter, we impaired an amount of INR 12 crores granted as ICD to 4B Networks Limited. Cash from operations -- cash generation from operations for the quarter stood at INR 412.9 crores compared to INR 374.3 crores in Q4 FY '22, a year-on-year growth of 10%. For FY '23, cash generated from operations stood at INR 1,038.5 crores, a year-on-year growth of 14.5%. Deferred sales revenue stood at INR 1,018.5 crores as of 31 March '23 versus INR 819.6 crores as of 31 March 2022, a year-on-year growth of 24.3%. The cash balance of Info Edge, including the wholly owned subsidiary stands at INR 3,490 crores as of 31st March '23.

In the recruitment market, we are witnessing a period of cautious spending from customers in IT. The Q4 JobSpeak reported a nominal growth of 1%, primarily due to degrowth in the IT space. On the other hand, positive hiring patterns in merchants, sectors like BFSI, real estate, auto ancillary travel and hospitality segments during the quarter. The Indian real estate market continues to be stable, and certain micro markets are very, very hot. Though the price increases have stabilized in the last quarter, the inventory levels are still lowest in the last decade, and we're expecting a series of new launches -- new launches in both the residential and commercial space.

In the education space, we are seeing stability return to colleges and universities and the number of students going overseas for education also continues to go up. Moving on to the financials of the recruitment business. In Q4 of '23, the recruitment segment billings were INR 583.5 crores, a year-on-year growth of 13.7%, while revenues were INR 437.6 crores, a year-on-year growth of 27.1%. For FY '23, billings stood at INR 1,858.7 crores, a year-on-year growth of 29.54%, while revenue stood at INR 1,679.6 crores, a year-on-year growth of 45.5%.

Operating EBITDA for the recruitment business stood at INR 271.5 crores, a year-on-year growth of 31.3% from -- and margins stood at 62.1%, against 60.1% in Q4 of last year. For FY '23 operating EBITDA stood at INR 1,030.9 crores, a year-on-year growth of 51.6% and operating EBITDA margin was 61.4%, up from 58.9% last year. Cash generated from operations for the recruitment in the recruitment business during the quarter stood at INR 447.3 crores, up from INR 412.1 crores in Q4 of last year. The business generated INR 1,245 crores of cash from operations in -- the recruitment business generated INR 1,245 crores of cash from operations in FY '23, a year-on-year growth of 21.8%.

Billings for Naukri India corporate business for the quarter stood at INR 494.3 crores, a year-on-year growth of 12.4%, while revenues for the quarter from Naukri India corporate business stood at INR 367.8 crores, a year-on-year growth of 27.3%. Billings for Naukri India for FY '23 stood at INR 1,567.2 crores, a year-on-year growth of 31%. Recruitment segment billing, including acquired businesses for the quarter stood at INR 605.3 crores, a year-on-year growth of 14.3%. For FY '23 recruitment segment billing with acquired businesses stood at INR 1,925.8 crores, a year-on-year growth of 31.7%.

The quarter witnessed a strong sales effort with judicious use of discount reduction and price increases. Growth drivers in non-IT sectors helped drive billing growth in this quarter and are likely to continue the growth momentum. Global concerns impacting prospects of clients in the IT services -- are likely to impact prospects of clients in the IT services companies in India, but we are optimistic of hiring by captives and global GCCs.

The Naukri site got around 20,000 new CVs per day -- new registrations per day during the quarter, year-on-year growth of 2%. Daily active user count is up 10% year-on-year as well. We increased our marketing spend by 150% during the year with the view to enhance our brand salience amongst existing users and focus on increasing reach of our digital-led engagement and social media campaigns targeting the Gen Z audience.

Traffic on AmbitionBox also continued to grow at a healthy rate during the year. Moving on to the 99acres business. Billings in Q4 in 99acres grew 30.8% year-on-year and stood at INR 103.7 crores, while revenue grew from INR 61.3 crores in Q4 of '22 to INR 75.5 crores in Q4 of '23, a year-on-year growth of 23.1%. For FY '23 billings stood at INR 311.6 crores, a year-on-year growth of 35%, while revenue stood at INR 284.5 crores, a year-on-year growth of 31%.

The operating loss for the quarter for 99acres stood at INR 19.1 crores as against a loss of INR 33.8 crores in Q4 of last year. For full year '23, operating loss stood at INR 107 crores against a loss of INR 78 crores last year. In Q4, the 99acres business reported a cash inflow from operations of INR 13.5 crores for the quarter against an inflow of INR 3.6 crores in the same quarter of last year. For the full year, the business reported a cash outflow of INR 72.2 crores.

The 99acres business witnessed a broad-based growth across all categories in this vertical resale, rental, commercial and new homes. A healthy demand environment increased traffic on the platform and multiple initiatives by the business teams to improve content quality led to significant increase in inquiries and leads on the platform for our clients. Stronger sales rigor and comprehensive go-to-market catered to launch marketing stages was a key highlight of the quarter. We will continue to invest in platform content, plant delivery and marketing in the months to come.

Moving on to the education business. In Q4, in Shiksha, billings stood at INR 40.9 crores, a year-on-year growth of 42.4%, while revenue stood at INR 32 crores, a year-on-year -- Y-o-Y growth of 31.1%. For FY '23, billings stood at INR 123.9 crores, a year-on-year growth of 28.4%, while revenue stood at INR 116.9 crores, a year-on-year growth of 29%. The business made an EBITDA of INR 2.3 crores against -- in the quarter against EBITDA of INR 4.8 crores in Q4 of last year. For full year '23, EBITDA stood at INR 7.8 crores, down from INR 19.5 crores reported last year.

Cash inflow from operations for the quarter in the Shiksha business stood at INR 15 crores against an inflow of INR 10.2 crores in Q4 of last year. For full year '23 cash inflow from operations stood at INR 21.1 crores. The rebound in the Shiksha domestic business helped drive growth for this quarter, with many more sort of private universities and colleges in India being established, we expect this growth pattern to continue.

Moving on to the Jeevansathi business. Billings in Q4 in Jeevansathi declined by 27% year-on-year to INR 20.5 crores and revenue declined by 26% year-on-year to INR 18.8 crores. For FY '23 billings stood at INR 72.1 crores, a year-on-year decline of 29%, while revenues stood at INR 77.6 crores, a year-on-year decline of 22.5%. The operating EBITDA losses for the quarter stood at INR 21.9 crores for the quarter against a loss of INR 38.8 crores in Q4 of last year. Operating loss for FY '23 stood at INR 101.4 crores against an operating loss of INR 120.4 crores reported last year.

Cash outflow from operations for the quarter stood at INR 19.4 crores against an outflow of INR 29.3 crores in Q4 of last year. Cash outflow from -- for FY '23 stood at INR 126.2 crores. The free chat model in Jeevansathi continues to drive profile growth and engagement on the platform. New paid products launched in December resulted in some sequential sales growth. The team continues to explore ways and means to monetize the increase in traffic on the platform. In continuing with our stated strategy, we're reducing our advertising and promotion spends during the quarter. We continue to reduce our advertising and promotion spend during the quarter. The spend was down -- advertising spends were down 51% year-on-year and 6.6% sequentially.

Moving on to the consolidated financials. At the consolidated level, the net sales of the company stood at INR 604.8 crores versus INR 472.9 crores in Q4 of last year. For the consolidated entity at the total comprehensive income level, there is a loss of INR 414.8 crores versus a loss of INR 6,420 crores for the corresponding previous last year. And adjusted for the exceptional items, PBT stood at -- stood at a loss of INR 3.95 crores in Q4 versus a profit of INR 285.7 crores in Q4 of last year. Thank you. That's all from us, and we are now happy to take questions.

[Vivek Aggarwal, executive]

[Operator Instructions]

[Anand Bansal, executive]

The first question is from Vivekanand, AMBIT Capital.

[Vivekanand Subbaraman, analyst]

I have two questions. The first one being on the recruitment business. So Hitesh, in your opening comments, you mentioned that there is obviously some pain or perhaps caution as far as IT companies are concerned. So heading into FY '24, how are you thinking about the billing trends given that JobSpeak has been fairly muted year-to-date. That's question one. Secondly, on 99acres, thanks for the opening comments. So it's clear that all segments of the markets are growing, so my question here is, is the market growing much faster than what we reported as a result, given that we have slipped on traffic when I look at similar web data, and if you could give us some sense on what you are doing to mitigate this decline in traffic? Or am I looking at it wrongly?

[Hitesh Oberoi, executive]

Yes. So to answer your first question, IT hiring. So we expect IT hiring to continue to be slow for at least a couple of quarters. IT hiring, IT jobs on the platform moved into negative territory sometime back. And we -- from what we are sort of seeing around us, what we hear from our customers, we don't expect -- we expect things to continue to be like they are for some more time. Of course, a lot will depend on what happens to the U.S. economy. And in the past, what we've seen is every time there's been a slowdown or -- while the Indian IT companies do get it for a few quarters. But after that, you always see a sharp bounce back because more and more jobs are outsourced to India because if companies won't look at cost in the U.S., they end up by outsourcing more jobs to India over time.

Whether that will happen this time around or not, it's hard to say. But, yes, I mean IT companies are sort of slow right now when it comes to hiring, and the non-IT market continues to be rock solid. Many sectors are doing very well, sectors like BFSI, sectors like travel, retail, hospitality, sectors like auto ancillary, sectors like construction, real estate. These sectors are sort of growing well, and they continue to hire a lot of people.

So could there be a further slowdown in IT hiring over the next few months, possible. 99acres, see we don't think we've lost share. We've lost -- we haven't seen a reduction in traffic. In fact, our traffic has grown over time. And we've done a lot of changes, made a lot of changes to the platform, which has resulted in the platform generating many more inquiries and many more deals for our clients than was the case earlier, and that's reflecting in our numbers as well. Q4 billing growth was 31%, full year billing growth was 35%. The business generated cash actually in Q4, we made a INR 13 crore cash profit in 99acres in Q4. And this has happened despite us reducing marketing spends in Q4 and despite heightened competitive activity as well. So it's not as if competition is not spending a lot of money. Some of our competitors are very aggressive in the market.

Are we growing at faster than the market? Well, the market -- some markets are -- some real estate markets are doing well, real estate very sort of local, and there's a lot of, for example, real estate is doing really well in Gurgaon and Noida, but maybe not in many parts of Delhi, so real estate is very local. So some hotspots are doing very well. And because there were very few launches during COVID, the amount of unsold inventory in the market has gone down, which has led to -- which is leading to higher prices. So a lot of the growth that we are seeing in real estate is price-driven while we didn't really aggressively take up prices last year. Our growth is mostly volume driven in 99acres.

[Vivekanand Subbaraman, analyst]

Okay. This is helpful. Just one clarification on the outlook as far as IT hiring and your monetization is concerned, so understand that IT hiring, there could be more slowdown. But are you taking any initiatives maybe on the product side or on the pricing side or any other such initiative that is helping you perhaps buck the trend as far as your billing trends versus, say, perhaps the headcount addition by IT services companies?

[Hitesh Oberoi, executive]

See, there's little that we can do on IT hiring right now because see hiring has slowed down. So -- and of course, we are trying to sell more and more new products to our customers. But what we are working on actually a little more right now is the non-IT side because that's where the opportunity is. So we are seeing -- we are fine-tuning our product offering for non-IT customers because they are still hiring, and they are hiring in large numbers, and there is scope to monetize them better. So that's likely the focus for the next few months.

On the IT hiring side, we are -- it's a wait-and-watch game. We, of course, continue to work on our product. We continue to improve our platform. We continue to invest in some of the long-term projects that we've been pursuing. But it's unlikely that we can do anything in the short term, which will move the needle on IT monetization for us.

[Vivek Aggarwal, executive]

Next question is from Abhishek Bhandari from Nomura.

[Abhishek Bhandari, analyst]

Hitesh, Chintan, despite sounding cautious on IT hiring for last 2, 3 quarters, consistently, we have been able to do a billing growth in double digit. And given the momentum ex of IT, do you think we could still look at these kind of numbers, notwithstanding the problem, what you're seeing in IT at least in FY '24?

[Hitesh Oberoi, executive]

See 50% of our billing comes from non-IT and about 50% is IT at a very macro level. Now if the non-IT -- if the economy does well, if the economy starts to grow at 6%, 7% per annum, for example, the non-IT hiring piece could grow at 25%, 30% per annum, right? On the other hand, if the economy were to slow down, then even non-IT could take a hit. IT hiring has been very, very slow for about 3, 4, 5 months now, and could continue to be slow for the next 3, 4, 5 months. We don't know when the IT hiring market will turn. And have we hit the bottom? I don't know, right? We will know only in a couple of months.

So we are hoping and banking on the fact that IT hiring will turn around by H2 -- in H2 sometime. And the non-IT market will continue to be solid. And if the non-IT market continues to be solid and if IT hiring turns around in the second half of this year, then we may still end up a bit growth -- with Naukri growing in the teens somewhere. But if IT hiring were to slow down further and the economy were to also sort of move sideways then there it could be a challenge.

[Abhishek Bhandari, analyst]

Got it. That's helpful, Hitesh. Hitesh, my second and last question is, any thinking around now lifting the dividend payout for the shareholders. We are generating such a handsome amount of cash from our core business, the business does not need too much of investments. We have almost INR 3,500 crore cash lying, but yet our dividend payouts are like fairly low. We're just paying INR 9 in Q4. So do you think you would want to increase the payout ratios from the current level?

[Hitesh Oberoi, executive]

Chintan, do you want to take that?

[Chintan Thakkar, executive]

So this INR 9, first of all, it's more as of actual clarification. This INR 9 is the final dividend. We already gave INR 10 as an interim dividend as well. So it's INR 19 overall, but I understand the overall question that, look, it's -- in comparison to the amount of cash that we have this may look small. Our policy, if you look at dividend policy, which is there on our website as well that we, usually, we can distribute a certain portion of cash bed and that's what we have done. So if you look at it this year, it's like 35% of bed. So it's like 1/3 of the cash that we earn, we have kind at a high level, is that what we have given, right? Now if there's a case for any special dividend. I think that's a very separate consideration. We still think that, that could be an opportunity for us to invest this money, and investing, and we continue to look for good opportunities for the same.

So right now, we would like to hold on to the same. But should an opportunity arise, should that occasion arise where we think that this cash is in excess of what we think we require certainly, we can look at special dividend or buyback or something. But right now, there is no thinking on those.

[Sanjeev Bikhchandani, executive]

May I add to that, Sanjeev here. So look, I think we have customer advances, that money doesn't belong to us. So what is the amount of customer advances we have Chintan right now?

[Chintan Thakkar, executive]

Should be around INR 800 crores, I could be wrong, but I just...

[Vivek Aggarwal, executive]

Around INR 1,100 crores.

[Sanjeev Bikhchandani, executive]

INR 1,110. So that is not our money, right? So that is bank, tomorrow in case customers ask for it back, something was wrong and they got to get it back that goes back to customers. So you remove INR 1,100 crores from INR 3,400, INR 3,500 crore, you left INR 2,300 crores.

Right? You want to keep some [indiscernible] money. You want to get some money for acquisitions. You want to give some money in case there's a serious downturn and cash flows -- cash surpluses go down, right? So it's not that much money. But I'll give you a couple of examples of situations where this seemingly high cash balance has helped us the most latest point being COVID.

So in March 24, 2000, there was a lock down in force by the Government of India. April, June 2000, Naukri billing growth I think, was minus 44%. There was no -- nobody had a clue as to what was going to happen, how long lockdown will continue, how severe the pandemic is going to be. Is there a vaccine? Is there a cure, what is going to happen to hospital capacity? And everybody was at home, right? At that time, we asked Chintan and we gave them a simple sort of thing to solve, which is assuming sales revenue goes to 0 and marketing expenditure was to 0 and the increments go to 0, how long can we run on the current cash balance and it came back with the answer of 3 years, right? And that emboldened us to take a call that we will not sack anybody, right? There are very few companies in the digital space that did not sack people in India, right? We were one of them, and it is -- in our opinion, a time like when pandemic has just begun, people were anyway tense about their own lives and their health.

We -- if you start downsizing them, and they won't get job for many months, it'll get very, very tense for them. And we can't do that because this company has been built by people. And we were able to take that call simply because we had this cash balance, right? So -- and this has happened earlier as well when Lehman went down, we had the cash balance to not sack people, right? And so therefore, I personally believe that this is the right thing to do, and therefore, we do it.

[Vivek Aggarwal, executive]

Thanks, Abhishek. Next question is from [Parjeet Ganesh] from ICICI.

[Unknown Analyst]

Yes. This is Abhishek here. Sir, on the Jeevansathi business, right, there has been a lot of competitive action there. If you could give us some clarity on how the competitive landscape is looking there? And what is your outlook on monetization going forward?

[Hitesh Oberoi, executive]

In Jeevansathi?

[Unknown Analyst]

Yes, in Jeevansathi.

[Hitesh Oberoi, executive]

It's a very hotly contested market. So we have 2 big players in that market, Shaadi and Bharat Matrimony and they've been spending a ton of money on marketing. And the pricing has also been very aggressive. So we changed our strategy a while back. We moved to a freemium model, we went chat-free on the platform. So some of the stuff we are charging earlier is now free. And in line with that strategy, we've also fine-tuned our marketing sort of strategy.

We are not spending as much money on marketing as earlier because of proposition in itself, is helping us acquire users cheaper, winning proposition. So that's been our approach. So we've brought down our marketing spend substantially in the last 2 quarters. And despite that, our user growth is solid and there's a lot of engagement, and we are enabling many more matches on the platform than earlier.

Now of course, this has also resulted -- this strategy has also resulted in our revenue pressing. Our revenue is down 27% year-on-year. And now the team is sort of working on ways and means to monetize better. Now that is still work in process, still early stages of that. So we don't know how things will pan out. But traffic growth is healthy. Engagement is healthy. There's much more matchmaking happening than earlier. We are not -- we have cut marketing spend, and it still seems to be okay, okay? I don't know what -- how competition will react going forward. And yes, and at the same time, we're also seeing a lot more activity in the dating sort of space, right? So there are lots of players who are active in that space. But that's not a market at which Jeevansathi competes in. But we are, of course, seeing a lot more activity in that market as well compared to earlier.

[Unknown Analyst]

Understood. So in terms of market shares, would you say that you have gained there? I mean, how is your position vis-a-vis, say, 1 year back?

[Hitesh Oberoi, executive]

See, we have lost revenue share, okay? But we have gained traffic share. We've gained share -- user share vis-a-vis Shadi, for example, in the North and West, which is where we are sort of mostly present, so -- and we have, of course, cut burn.

[Unknown Analyst]

Got it. Got it. And sir, would you give us some flavor of what you are thinking about in terms of investment opportunities, what kind of businesses you are looking at, whether it is B2C or B2B? Because B2B has started to become a very hot space. So I would like to hear your thought process on what would be the best investment opportunities that you are trying to...

[Hitesh Oberoi, executive]

Financial or strategic, which ones are you...

[Unknown Analyst]

Financial.

[Hitesh Oberoi, executive]

Financial, okay. Sanjeev, you want to take that?

[Sanjeev Bikhchandani, executive]

Sorry, could you repeat that?

[Hitesh Oberoi, executive]

Which spaces are we looking at for financial...

[Sanjeev Bikhchandani, executive]

No, look, we -- so in financial investment, we look at every sort of tech space other than jobs and careers, education, classifieds, and matrimony and dating , okay? And real estate, right? Other than that, all is open in the tech space. So we've done a whole wide range. We typically don't do it top down. We do it bottom up. We access about 1,000 starts a quarter, either through meetings or through -- on phone calls or even just looking at the deck that come to us. And then maybe you invest in a few, so it's bottom up, good founders chasing good ideas or seemingly good ideas. We might go in.

[Vivek Aggarwal, executive]

Next question is from Ankur Rudra from JPMorgan.

[Ankur Rudra, analyst]

So the first one is on IT. Did you say that the mix is still 50%, IT versus non-IT on a billing basis?

[Hitesh Oberoi, executive]

Approximately .

[Ankur Rudra, analyst]

Okay. So given the difference in growth rates and the difference in how the growth is trending out, do you think that the balance of growth, whatever you see the weakness in IT will be more than made up by the strong momentum you're seeing, the movement in non-IT over the course of this year?

[Hitesh Oberoi, executive]

It will depend on how much the Indian economy grows at going forward and it will depend on when IT recovers. So right now, it looks okay, because the non-IT companies are doing well. And of course, if the Indian economy starts growing faster than they may do even better. In the past, we've seen that when growth starts to hit 6%, 7%, domestic growth, it's possible to grow 25%, 30% at least in the non-IT space. As far as the IT hiring piece goes, a lot will depend on when IT starts to recover. So -- and how bad the slowdown is, right? So -- have we hit rock bottom, I don't know. Okay. Will things get better from here on. I don't know. It's hard for me to predict at this stage.

[Ankur Rudra, analyst]

Sure. Can you give us some more color, Hitesh, on the IT billings trajectory? I think you said it hit negative on a billings basis a few months ago. Was that in the March quarter? Or is that in the current quarter?

[Hitesh Oberoi, executive]

In this -- so it's been trending south over the last few months. The job index, I said, negative territory -- has been in negative territory for the last at least 2, 3, 4 months now. I'm -- I don't have the exact -- it was minus 27% for software services, the JobSpeak index we publish, right? Which basically captures volume more than anything else. So in April, -- and it's not as May is looking any better. So the IT hiring has been sort of very, very slow for at least 4, 5 months, 6 months.

[Ankur Rudra, analyst]

On a billing basis, could you give us a sense how is IT billing growth momentum right now? And if that trajectory has gotten worse because you've obviously seen 2 more months of the current quarter, how is that trending in the June versus the March quarter?

[Hitesh Oberoi, executive]

Very good. This way, it's not getting any better.

[Ankur Rudra, analyst]

Okay. And is it already negative on a billings basis also is what we're seeing on JobSpeak representative?

[Hitesh Oberoi, executive]

Chintan did we give out data? I mean...

[Chintan Thakkar, executive]

Start for us in [indiscernible] quarter is still going on. And most of the billing also happens in the third -- in the last month of the quarter. So it would probably be wrong and also even if you have to give some estimate to you.

[Ankur Rudra, analyst]

Okay. But you can clarify that it didn't hit negative on a billings basis, at least in the March quarter, right, IT part of the whole.

[Chintan Thakkar, executive]

No, I think we are talking about Q4, I guess. Yes. So Q4, even Q3 in that sense, actually, it was -- the growth rate was more reflected because of the non-IT rather than IT. So our original question, whether it's non-IT growth will compensate for IT. So far, the trend has been that in Q3 as well as in Q4, now what it is saying is that will it happen? Will it remain the same in Q1 or not, I think we have yet to see and have to see till we complete the quarter and come out with the results.

[Ankur Rudra, analyst]

No, I totally understand. I was wondering if you can share us -- share with us any color for if IT hiring -- not hiring, sorry, IT billings hit a negative trajectory for any of the months of the March quarter?

[Chintan Thakkar, executive]

I don't have the exact number right now. But as I said that, look, I think it's the growth trajectory of non-IT was more than enough to compensate for the reduction in the IT.

[Ankur Rudra, analyst]

Okay. Maybe changing tracks a little bit. Fourth quarter has always been our strongest quarter and many deals closed. Has there been any increase in discounts given out this time given the weakness in half of your portfolio?

[Hitesh Oberoi, executive]

I'm sure, see this is always the case whenever the market slows down, you end up getting more discount because that's the nature of the beast. So I'm sure that's happened in a lot of cases with a lot of clients in IT. That must have happened.

[Ankur Rudra, analyst]

Would this -- is it something you're concerned about from a pricing perspective for the next year?

[Hitesh Oberoi, executive]

This is a standard stuff here. This is what happens in every slowdown. And once the market starts to recover, then prices will go back to normal.

[Ankur Rudra, analyst]

Okay. Last question on this side. Do you think there's ability to sustain margins given where the momentum is right now?

[Hitesh Oberoi, executive]

So in Naukri, see we continue to invest in many areas, which are, we think, important for the long run. We are hoping that this slowdown will not last for more than a couple of quarters. And -- so if we are able to grow billings at even 14, 15 -- at 14%, 15% this year, there I don't think our margins will be impacted.

On the other hand, if billing growth slows down and we start growing in low single digits, then, of course, margins will be active this year in Naukri because we don't want to cut our investments in areas like data science and the blue collar job what we're working on, some of the other stuff that we're doing, which we think is strategic and important from a long-term standpoint. Can we maintain margins? We want to, we can, but I don't think it's necessary at this stage. And we are hopeful and confident that -- we are hopefully hoping that the market will come back. IT hiring market will also come back by Q3 or Q4 of this year.

[Ankur Rudra, analyst]

Okay. One question on 99acres. Any changes in thought process about monetization besides a classified model that you've thought about over the last 1 year? I know you've written off 4B, but in general for 99acres.

[Hitesh Oberoi, executive]

So see, we have -- see the resale -- in the resale business and the rental market, we sort of have a classified model at work but increasingly for some of the large customers in the new home sort of category, we run a lot of CPL cost per lead campaigns. And so our billing is indexed to how many leads we are able to generate for them. And it's not just a listing fee, which we charge them. So the business has slowly been moving in that direction as far as new homes -- as far as new home monetization goes. We currently follow this model with a lot of large clients. More customers, we listing model.

[Ankur Rudra, analyst]

Understood. How big could this be in terms of volumes or revenues, Hitesh, could this be a significant part going forward?

[Hitesh Oberoi, executive]

It will -- it could be a significant part of the new home business going forward.

[Vivek Aggarwal, executive]

Next question is from Vijit Jain from Citi.

[Vijit Jain, analyst]

Hitesh, my question is just going back to the recruitment side. You mentioned earlier that in the non-IT side, you see scope to monetize better and you also single out certain sectors where you're seeing good growth. So I guess I'm just wondering, in the non-IT space are all sectors looking similar broadly in terms of how you monetize them? Or are you further ahead in certain sectors still lagging in certain other sectors? If you can just throw more color on non-IT segment-wise? It will be great.

[Hitesh Oberoi, executive]

So let me just rewind to about 15 years ago, 15 years ago, when infrastructure was hot, clutch of sectors like infrastructure, construction, real estate, heavy engineering, auto, these -- energy, these sectors together were almost 25% to 27% of our business. And till last year, they pay per account -- these sectors were -- revenue from these sort of segments were down to 14%, 15% of our business.

So because these sectors didn't grow for a long time. After a long time, we've seen a lot of action in real estate. We're seeing a lot of action in construction. We are seeing a lot of action in similar sectors, these sort of infra sectors. Now if this action continues for a long time then there is no reason why we should not be able to build a lot more from companies in these sort of spaces going forward. So that's one thing we are seeing in non-IT.

The services piece continues to be solid. Banking, financial services, insurance companies, travel, hospitality, retail sectors, they are impacted by COVID, they are bouncing back. So there's a lot more action in these sectors when it comes to hiring. We have -- we are seeing a slight slowdown in sectors like consumer durables, in sectors like fast-moving consumer goods, in sectors like health care and education which were super-hot till some time back.

There's been a slight slowdown, which we've seen in some of these sectors in some -- in these sectors in the last few months. But by and large, the non-IT market continues to be strong, hiring market continues to be strong.

Now at our end, see our product works reasonably well for non-IT companies also. So a lot of companies, higher sales people, customer service professionals, finance professional, HR professionals, marketing folks through Naukri. But there is an opportunity for us to sort of expand our business to most cities, for example. So right now, we operate in about 40, 45 cities, no reason why we can't take our business to over 100 cities in the next 2 or 3 years, right, the markets are supportive because we are seeing a lot more growth in small towns than earlier.

Of course, it will not result in a lot of revenue in the short term, but long term, these can become interesting markets for us to operate. Again, and they are mostly all non-IT driven, services-led and so on. We are fine-tuning our search and recommendation engines so that they were better for non-IT hiring. A lot of our focus for the last few years or 2, 3 years was on IT hiring because that's where the IT hiring market was very hot. And -- but now that we're seeing a bigger opportunity in non-IT. We are going to fine -- we're going to fine-tune our sort of search and recommendation engines to ensure that companies are able to have more people through our platform, in some of these segments as well.

So that's just to sort of help you understand the nature, see where we are seeing the biggest slowdown right now is in the -- in our recruitment consultants business, right? Because -- about 30% of our business comes from recruitment firms. And these recruitment firms hire -- a lot of them hire for IT companies. And they are the ones which are hit first because they are in some ways a more expensive way to hire. And when companies cut sort of budgets, they are the ones who get impacted first. And therefore, their spend on Naukri gets impacted as well. So that's just to give you a sense of how the market is panning for right now. I hope I was able to answer your question.

[Vijit Jain, analyst]

Yes, Hitesh that was super helpful. My second question is just on the 99acres business, the property segment. You mentioned some of your competitors have been super aggressive spending on marketing and everything. And in revenue terms as well, it does look like some of them at least, especially, say, housing.com which [RERA] has already disclosed numbers, [indiscernible] has grown faster than you guys. Is that something that is happening, you think, because there are more products on their end, which is still work in progress at your side? Because you monetize a little bit differently? Do you think that is driving that difference? Or is it something else?

[Hitesh Oberoi, executive]

Well, you have to sort of lift the veil. So we are -- we still believe that we are the largest in this space, and we are growing reasonably well. Q4 was great. And we think we are sort of -- in some sort of markets, we have gained share. And we don't do a lot of stuff which other companies do. So we don't do any butters. We don't do combo deals with newspapers. We don't have any pass-through revenue through our platform. We don't monetize other services, we sell only real estate advertising.

So we don't make money from packers and movers. We don't make money from home loans. We don't make money from a lot of other ancillary services, which a lot of these companies do. We don't have any transaction revenue which all of these companies have. So we are relatively speaking, a purer-play than some of our competitors. So it's important to compare apples to apples.

[Anand Bansal, executive]

Next question is from Nikhil Choudhary, he is from Nuvama.

[Nikhil Choudhary, analyst]

First question is regarding your comment on discount and pricing. You mentioned that you have cut some discount and there is some increase in pricing. So just wanted to understand how much of the bidding growth basically came from this initiative? And how much further tail room you have to increase it further going ahead?

[Hitesh Oberoi, executive]

See, it's unlikely that we will up pricing in IT, given that the IT hiring market is very slow, where we may be able to realize more is in the non-IT sort of -- from non-IT customers going forward because they are large numbers. So we'll have to -- going forward, see last year, first 6 months, we were very aggressive on pricing. A lot of our revenue growth was pricing-led. Of course, there was a lot of volume growth as well because the market was really hot. But if you maybe in the second half, our growth was mostly pricing-led and not so much volume-led. Going forward, this year, in non-IT, our growth is likely to be volume-led to a large extent and also pricing-led. But in IT, we are unlikely to see any growth because of either volume or pricing.

[Nikhil Choudhary, analyst]

Sure, sure. Second question, Hitesh, is on the impairment of ShoeKonnect. Just if you can give color what happened in -- basically what led to the impairment and one of the thing which is mentioned in the filing about unspecified buyback liability. So just...

[Sanjeev Bikhchandani, executive]

Can I address that? You see in all our asset trails, we have a waterfall drag-along clause, there are in 3 years' time, you will exit or 5 years' time you will exit, the exit could be a listing. It could be a strategic, it could be a buyback. If you fail to do that, we have the right to impose a buyback, all the investors together. If you fail to order that, then we can drag you along for a sense, right? You have standard clauses in VC investment agreements, all VCs do it.

Now this clause was construed to be a liability, not a contingent liability, right? Now if there is a liability in FMV. I mean, FMV of business is what it is given the last round of valuation. Then it was construed that the company may not have enough money to pay off the investors, should they ask for the money, right?

And therefore, we were supposed to write it off. It's a technical write-off in my view. It does not reflect the business prospects of the company. But it has to be done for principle conservative, and that's what it is.

[Nikhil Choudhary, analyst]

Sure. Sanjeev, just one follow-up here. Do you see any possibility of such scenario happening in any other portfolio companies? Any large portfolio companies?

[Sanjeev Bikhchandani, executive]

I don't think so as you are asking [indiscernible] here but Chintan, any observation there?

[Chintan Thakkar, executive]

I think every case is a bit different because the agreement and the language of the agreement would be different. The investors insistence on whether they want it or they can dilute this also is different. I'll tell you the one of the big difference is that because we have listed entity, we are expected to follow NDS while some of the other PNVC firms may not be under obligation to follow that.

So that's why there are certain standards that the auditors want to apply on how the assets are being valued for us could be very different than what the standards that might get followed by some of the PNVC firms. So like Sanjeev said that this is not a reflection on what their growth and what the potential or the business model of that company. But this is more arising because of how the shareholders' agreement is being interpreted.

[Sanjeev Bikhchandani, executive]

Let me explain. If this had been construed to be a contingent liability, there would be no problem. But because it was construed to be a liability, not continue liability, there we had to write it off. That's a big difference.

[Anand Bansal, executive]

Thanks, Nikhil. Next question we have [Zainya Garv] from [Nibhat] investment.

[Unknown Analyst]

Sir, I just have one question, which is considering the current slowdown in the start-up funding and the decline in valuations of many start-ups. What are your perspectives on when the start-up funding pipeline is likely to be normalized?

[Hitesh Oberoi, executive]

Sanjeev, you want to take that?

[Sanjeev Bikhchandani, executive]

Sorry, could you repeat that? I'm really sorry about that.

[Unknown Analyst]

No problem, sir. Sir, like considering the current slowdown in the startup funding, and there are many decline in valuations of many start-ups. What are your perspectives of the funding pipeline, is likely to normalize?

[Sanjeev Bikhchandani, executive]

Look, it's hard to predict. But in general, we are finding that there is still enough fund activity. There are a lot of number of start-ups, it's actually a good time to invest. If you look back -- if I look back and our best investments Policybazaar and Zomato were made in -- just around the global financial crisis or just after it or just maybe just before it, right? And these are actually good times to invest if you have a 7-, 8-, 10-year perspective, which is what we do have. So for us, actually, it's quite good.

[Vivek Aggarwal, executive]

There's one question in the chat box for Hitesh. The question is from Sanjay Ladha. I'll just -- I'll read the question for you. How should we think the business can move going forward? Which business to drive growth going forward? What is your focused area in each of the business segment? And how should we think business growth in next 2 to 3 years?

[Hitesh Oberoi, executive]

So I mean, see, the business -- I mean, the Naukri business has done very well in the last -- for the last 2 years. I mean, we more than -- I think we managed to almost triple our cash flows from operation, we've almost more than doubled our revenue in the last 2 years.

We are seeing hopefully a temporary slowdown in IT hiring. Hopefully, the AI boom will actually end up creating more sort of opportunities for Indian IT services going forward. That's what's always happened with at least in the past. And hopefully, India is part of the solution, if companies in the U.S. want to cut costs they'll outsource -- end up outsourcing more and more jobs to India.

And to me, it looks like infrastructure is back and government is investing a lot of money in infrastructure, and that is also going to lead to a lot of job creation in the short term and in the medium term. And in general, the economy seems to be in good shape. It's perhaps in better shape than it was when we went into COVID. So if the economy continues to sort of do well and IT hiring bounces back, then -- and we are able to grow at 6%, 7% per annum, then the Naukri business can grow very -- at a very healthy rate, at more than 20% and it's a very high margin business. It's not as if we need to -- we will have to invest a lot of money to get this growth, right? We already have offices. We already have sales people. The platform has already built.

Now we've also been acquisitive over the last 3, 4 years, we've acquired a few start-ups. And of course, it's also -- our plan is also to sort of grow these businesses that we acquired over time. Businesses like Zwayam, businesses like iimjobs, businesses like DoSelect. We are working, if I sort of -- so hopefully, these businesses which starts scaling once we put the Naukri behind them.

And there are, of course, some more opportunities we've identified, which I don't want to talk about right now, which like I mentioned small towns. So we will expand into more and more cities going forward. We've invested in the platform -- in our tech platform, Coding Ninja, right, we won 51% that company. And we intend to work closely with them to help them grow their business faster and to also get -- improve our offering for candidates for job seekers on Naukri.

So there are a bunch of things we are working on as a platform, which -- and these are -- we will continue to invest behind these sort of initiatives. Some of them are short term, some are more medium term. We have been working on a blue collar job board for the last 3, 4 years. We'll try and start monetizing this sort of product sometime this year. But this is more a long-term play. We don't expect any significant revenue from this business over the next 2, 3 years.

But long term, it's -- we think it's a good bet. And it's important that we sort of have a foothold in this space. So these are all the things you're doing in Naukri, which will hopefully drive growth going forward. Similarly, in 99acres, we've done well in the resale and rental categories. If you ask me, that part of the business has done quite well. Commercial part of the business has also done well. But we see a lot of opportunity in new home monetization, there are lots of new developments being constructed everywhere.

There are lots of satellite towns emerging. Our inventory is down to -- of existing homes is down to an all-time low. There is a lot of interest in real estate once again from buyers and investors. Now we need to crack open this market. It's not a done deal. We are a very small part of this market over a few thousand crores are invested in -- are spent on new home marketing. We've got to get a small fraction of that. So if we can somehow solve -- do a better job of executing in the new home space, then that can drive growth in 99acres over the next few years. Of course, the -- and if the team executes well, then of course, there's also -- there will also be an opportunity to gain more market share over time in 99acres, and that could again drive growth, even higher growth in 99acres going forward.

In Shiksha, we are investing, we have the domestic business, which is growing at 20%, 25% per annum. But about a few years ago, we had also entered the study abroad space. That is today a small business for us. But we spent -- we sent over 1,500 kids overseas last year. This year, we are targeting to send more than 2,000 overseas. And if we get a good handle on this business, and this business can also become a large business over time.

In Jeevansathi, we are working on the new model. And if we are able to get our act together in monetization, if we're able to cut burn, the Jeevansathi business could sort of get to a decent place. And we've also acquired a 76% stake in Aisle, which is a dating platform. Again, early days, but we are investing in that business. And if we see good traction, then we will double down on the dating category as well. These are some of the areas where we're investing. All of them are work in process. But hopefully, some will work out over the next 2 to 3 years for us.

[Anand Bansal, executive]

The next question is from Vivek from AMBIT Capital.

[Vivekanand Subbaraman, analyst]

How much of the committed AIS money has been deployed already. Sanjeev, if you could give us an update on the 4 AIF that we currently have.

[Sanjeev Bikhchandani, executive]

Well, there's Fund 1 and the follow-on fund. That has been -- a significant chunk of that has been deployed. Fund 2 and capital 2b, it's comparatively less because we've been going slow and careful and there's still enough time left to do our first fix. We typically -- we do not announce the exact numbers on this.

[Vivekanand Subbaraman, analyst]

Okay. And the reason why it's taking you longer to deploy in the Fund 2 and capital 2b is because you've discount for your name. Is it?

[Sanjeev Bikhchandani, executive]

No, no, no. So it's like this. Those are more recent funds. After the final close, typically, we have -- I think there's a rule. I think it's the final clause, I'm not sure. We've got 3 years to act the first checks, right? We want to take our time and be very, very selective given the state of the market, particularly careful about the valuation of the enterprise.

We want to be particularly careful about getting going after capital companies and entrepreneurs given the tight funding environment. So we're taking our time. That's all. And yes, we do not invest from Fund 2 into Fund 1 companies or from capital 2b into Fund 1 companies. Those are [indiscernible] compartments.

[Vivekanand Subbaraman, analyst]

Okay. My last question is on the financial investments that sit on the balance sheet, not included in the AIS. So did you make any major investments in the current fiscal year as follow-on rounds in Vistra or Shopkirana or some of the other...

[Sanjeev Bikhchandani, executive]

I'm not sure it's major, but we've done some. Chintan, can you...

[Chintan Thakkar, executive]

I don't have the numbers right now. But yes, we would have made some follow on rounds and some small investments even in company like the...

[Sanjeev Bikhchandani, executive]

The big tickets are done there. .

[Chintan Thakkar, executive]

Yes, it's nothing major.

[Anand Bansal, executive]

The next question is from Vijit Jain from Citi.

[Vijit Jain, analyst]

Sanjeev, my question is to you, I guess if you look at what's been trending in the SATA space in India and globally, more recently in India, it's ONDC specifically, I guess, AI, obviously, globally. My question is, are you seeing any...

[Sanjeev Bikhchandani, executive]

What's the question?

[Vijit Jain, analyst]

Sorry. So my question is, are you seeing any opportunities in those two that you're excited about? Are these focus areas or any interest areas for you in terms of how you look to deploy...

[Sanjeev Bikhchandani, executive]

Yes, like I said, like I said, we do would bottom up, not top down. But yes, of course, some of the deals we have looked at and possibly even done, have components of AI, machine learning, right? I mean there are a number of people trying. We typically have -- now ONDC is -- so we don't do D2C typically in our fund. We prefer -- we don't think that's a central to our mandate. We -- and therefore, ONDC may or may not work for us. Now having said that, if we see a really great deal get, will we do it, we might. I'm not ruling anything out, but is less likely.

[Vivek Aggarwal, executive]

Sanjeev, there's a question in the chat box from [Nishan dada]. On start-up investment, how is our portfolio company is as a whole performing in the current macroeconomic scenario. Are there any signs of stress or markdown in some of the companies?

[Sanjeev Bikhchandani, executive]

I think we've -- look, every portfolio will have some situation of stress and we are no exception. Having said that, I think we're doing very fairly all right so far. But tomorrow another way, we don't know. We are waiting and watching.

[Vivek Aggarwal, executive]

No more questions on Q&A .

[Anand Bansal, executive]

Yes, that was the last question we had.

[Vivek Aggarwal, executive]

So sir, no more questions, we'll conclude the call on behalf of the company.

[Hitesh Oberoi, executive]

Thank you. Thank you, everyone, and have a great evening.

[Vivek Aggarwal, executive]

Thank you. Bye-bye.

[Sanjeev Bikhchandani, executive]

Bye.

[Anand Bansal, executive]

Thanks, everyone. We conclude the call.