Naukri Can Roll-up Indian Consumer Internet Sector

Info Edge (BOM: NAUKRI), which owns Naukri.com – the largest job portal in India – announced its Q4 results last month. Comscore data over the last 3-6 months shows that Naukri holds around 50% of the market share.

Naukri’s consolidated net revenue for the year recorded an impressive 63% increase to Rs 2,397 million (~$ 58.5 million). EPS for the year was up 80% to Rs 20.34 (~ $0.50). For Q4, revenue increased by 45% to Rs 690 million (~ $16.8 million). EPS for Q4 increased to Rs 5.72 (~ $0.14), registering a 54% increase over the year.

By segment, recruitment services revenue of Rs 1,960 million (~$47.8 million) contributed over 80% of the company’s annual revenues. Other verticals grew by 90% over the year.

Naukri has been growing impressively over the years. In the quarter, it added 14,000 resumes daily to its database. For the year, it recorded an average of 10,000 resume additions daily and 36,000 modifications daily and serviced about 32,500 unique customers.

Naukri gets 31% of its revenue from IT, 49% from services and the balance from manufacturing and other industries. Despite the challenges faced by the IT industry, Naukri grew by 33% in the quarter and 48% in the year. The slowdown in the IT industry, pressured by the weakening dollar, has resulted in reduced hiring, lower attrition, and fewer new entrants. The IT industry is looking for a higher new graduate to experienced staff ratio, increased utilizations, and bench reduction, and Naukri needs to figure out ways to help with these requirements.

Management claims Naukri’s growth was achieved through the changes to its user interface and navigation, and the wider range of price-competitive services introduced for its retail consumers, who look for only 5-10 recruits. Naukri is even planning to go to an offline model at a later stage. It will sell candidate services through the upcoming centers of its sister website, Jeevansathi.com, an online matrimonial portal.

Besides recruitment, Info Edge is currently in the matrimonial and real estate businesses. It is planning to enter the education space through its portal Shiksha, due to be launched this quarter. Additionally, it is looking at growth through acquisitions in travel, e-commerce and other web spaces. Its forays do make me wonder if it will go the Rediff way and lose out on its vertical focus or preserve a strong vertical roll-up strategy. But, as I said earlier, with job search driving Internet adoption in India, Naukri definitely has a green path ahead.

Read more about in my other article on Internet VC Activity in India which has definitely bolstered the consumer internet sector in India in a big way. Consolidation will happen over the next few years, and Naukri, presumably, will be playing a role in that as a major acquirer.