Info Edge, Early Backer Of Zomato To Policybazaar, On Startup Valuations, Business Recovery And More
Info Edge: Traditional valuation methods do not work to determine the valuations of internet companies
As the markets debate the valuations of internet companies that have yet to report profit, Info Edge (India) Ltd., an early backer of startups including Zomato Ltd. and Policybazaar, says the traditional valuation methods do not work.
"Large players like Sequoia (Capital) have seen merit in investing early and being with entrepreneurs throughout the journey. In a tech business, you are valuing an IP (intellectual property), not cash, at the early stage,” Chintan Thakkar, chief financial officer at Info Edge, told BloombergQuint’s Niraj Shah in an interview. "Valuing IP means you are foreseeing the potential 10-15 years down the line.”
The business then sees growth in cash generation as well as the top line, he said. “It is this growth potential that people are ascribing value to. It is subjective and, hence, is witnessing varied valuation trends.”
Among Info Edge’s portfolio firms, Zomato and Policybazaar’s parent PB Fintech Ltd. have already made market debut with gains. Some others are also nearing the IPO stage, drawn by India’s record year for maiden offers that saw investor demand for digital businesses. Yet, the listing debacle of One97 Communications Ltd., Paytm’s parent, has raised concerns about valuations again.
Info Edge has 25 active investments, either directly or through its alternative investment fund, according to Thakkar. These are early-stage bets made in 2016-17 but showing promising results in terms of demand during the subsequent rounds of funding, he said.
For the company, business picked up in the quarter ended September with a surge in usage of portals including Naukri.com and 99acres.com, Thakkar said. He is hopeful of a pickup for matchmaking portal Jeevansathi.com.
Naukri And 99 Acres
Job listing and real estate businesses grew in the quarter ended September.
The recruitment unit has been gaining momentum as acceleration of digital shift increased demand for tech talent, according to Thakkar. Hiring appears to be “a secular trend and there is a real demand-supply gap”, he said.
"Given our leadership position in the recruitment business, we don’t have to incur ad spends in this segment,” Thakkar said. “Cash Ebitda coming from that business has sharply risen. It was always in the range of 50% plus and is now in the range of 60%.”
Real estate is more competitive, and Info Edge is still in the early stage of the investment and needs to spend on pulling clients towards the site, he said. Hence, it requires additional ad spends.
That spend, however, is in line with the rate of growth and will rise as the momentum improves.
While the real estate business was impacted by the second wave in the first quarter of the ongoing fiscal, it improved in the second quarter and Thakkar expects it to continue doing well.
Matchmaking To Education
Thakkar said the company’s matchmaking portal Jeevansathi.com ranks third and so Info Edge is heavily investing, not just for promotion but also investment discounts.
That’s the only business to burn cash as real estate portal has largely reached breakeven, job listings vertical is the cash cow and education (student portal Campus Connect and college-search website shiksha.com) is growing and profitable.
The company may also invest in areas adjacent to the four units and could acquire strategic stake in some startups relevant for its core businesses.