Shares of Info Edge (India) Ltd are down about 15% over the past month, broadly mirroring the decline in the Nifty IT index. Investors appear concerned about potential collateral damage to recruitment business revenues from the rapid rise of artificial intelligence (AI).
In the December quarter (Q3FY26), the company’s recruitment business, Naukri.com, which accounts for nearly three-fourths of standalone billings, reported 11% year-on-year growth to ₹548 crores.
Despite efforts to diversify the recruitment business into non-IT sectors, direct exposure to the IT sector remains significant at around 25% of billings, including global capability centers (GCCs) in terms of billings, according to the company’s presentation. GCCs are captive centers set up by multinational companies to replace service providers such as Tata Consultancy Services and Infosys. If indirect exposure through manpower consultants serving the IT sector, many of whom are Info Edge’s customers, is included, the total exposure rises to 30-35%.
Overall, Q3 revenue rose 14% year-on-year to ₹765 crore, while EBITDA grew by 12% with margin at 42.5% compared with 43.1% in the year-ago quarter. Recruitment (Naukri.com) was the only segment with positive EBITDA, as real estate (99acres.com), matrimonial (jeevansathi.com), and Shiksha made losses.
Billings growth—an important indicator of future revenue—rose 12% year-on-year, lagging revenue growth. While billings represent customer bills raised, which could be annually or quarterly, revenue reflects the amount earned for services rendered in a particular period. As of now, Q3 results do not show any significant strain in IT and GCC segments, given their billings increased by 14% and 13%, respectively.
Over the longer term, however, AI-driven productivity gains could reduce demand for IT engineers for software coding, potentially weighing on hiring and billings growth in IT and GCC segments. It remains to be seen whether hiring across other sectors can offset the likely drag from IT-related recruitment going forward. Excluding IT and GCC, billings across all other sectors combined grew a modest 2% in Q3. The hiring environment in India remains uncertain, said the company’s management in the earnings call.
The outlook for Q4FY26 does not look encouraging either. Info Edge’s Jobspeak Index report for January shows just 3% year-on-year growth as job gains in IT, hospitality, and real estate sectors were eroded by job losses in banking, auto and fast-moving consumer goods (FMCG) industry.
Meanwhile, the company has revised its dividend payout policy. It intends to pay as much as 65% of standalone net profited compared with the earlier 25-40% range. This is a welcome move, but at the stock’s current valuation, the dividend yield could be just about 1% in the near future, which is hardly compelling. Nevertheless, even after factoring in the revised policy, the stock appears richly valued.
Info Edge’s current market capitalization is ₹74,000 crores. If the value of its financial investments in Eternal and PB Fintech at ₹₹34,000 crore ₹₹9,000 crore, respectively, is deducted from the overall market capitalization (no discount is assumed as they are financial investments and not strategic holding), the remaining valuation mainly attributed to standalone business is ₹30,000 crores. The net valuation is at EV/Ebitda of 21x based on Bloomberg consensus estimate for FY27, which is pricey against the backdrop of only 12% year-on-year billings growth for 9MFY26.
