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Edited Transcript of NAUKRI.NSE earnings conference call or presentation 13-Aug-19 1:30pm GMT

Q1 2020 Info Edge (India) Ltd Earnings Call

New Delhi Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Info Edge (India) Ltd earnings conference call or presentation Tuesday, August 13, 2019 at 1:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Chintan Arvind Thakkar

Info Edge (India) Limited - CFO & Whole Time Director

* Hitesh Oberoi

Info Edge (India) Limited - Co-Promoter, MD, CEO & Director

* Sanjeev Bikhchandani

Info Edge (India) Limited - Founder & Executive Vice Chairman

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Conference Call Participants

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* Arya Sen

Jefferies LLC, Research Division - Equity Analyst

* Jai Nandwani;Perfect Research;Analyst

* Manish Adukia

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Manish Poddar

Reliance Nippon Life Asset Management Limited - Investment Analyst

* Parag Gupta

Morgan Stanley, Research Division - Executive Director

* Pranav Kshatriya

Edelweiss Securities Ltd., Research Division - Research Analyst

* Prince Poddar

JM Financial Institutional Securities Limited, Research Division - Analyst

* Shaleen Kumar

UBS Investment Bank, Research Division - Associate Director and Analyst

* Vivekanand Subbaraman

AMBIT Capital Private Limited, Research Division - Media Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Info Edge Limited Q1 FY 2019/20 Results Conference Call. Joining us on the call today are Mr. Hitesh Oberoi, Managing Director and CEO; Mr. Chintan Thakkar, CFO; and Mr. Sanjeev Bikhchandani, Vice Chairman. (Operator Instructions)

I now hand the conference over to Mr. Hitesh Oberoi. Thank you and over to you, sir.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [2]

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Thank you. Good evening, everyone, and welcome to our FY '19/'20 First Quarter Results Conference Call. We will first take you through the quarterly financial performance of the company. Here I would like to mention about the implementation of Ind AS 116 from the current financial year. As you must be aware, effective April 1, 2019, there is a change in accounting for release as mandated by Ind AS 116. Accordingly, we've recognized the right of use assets and lease liability. They also charge depreciation and interest on the same instead of expensing the rentals. Consequently, EBITDA is higher but PAT is lower, as we have mentioned in the publication.

As we've opted for modified retrospective approach as per Ind AS, comparatives of previous quarters are not separately available in our published results.

To enable comparison, we will be announcing EBITDA for each segment with carved out impact of Ind AS. We will, of course, after that cover each business in more detail, and in the end, we'll be happy to take questions.

The audited financial statements file has been uploaded on our website infoedge.in. We've also provided segmental billing, revenue profit before taxes and DSR movement in our data sheet on our website.

Let's start with the stand-alone financials. Billings in Q1 were INR 336.3 crores, up 18.7% year-on-year. Revenue in Q1 was INR 312.8 crores, up 20.5% year-on-year. Operating expenses, excluding depreciation for the quarter, were INR 211.8 crores, up 20.8%. Operating expenses readjusted for Ind AS 116 stood at INR 217.8 crores, up 24.26%.

Operating EBITDA stood at INR 101 crores versus INR 84.3 crores last year, an increase of 19.8% year-on-year. And operating EBITDA readjusted for Ind AS 116 stood at INR 94.98 crores, up 12.7% year-on-year.

Operating EBITDA margin for the quarter stood at 32.3%. Operating EBITDA readjusted for Ind AS 116 stood at 30.37%, down from 32.5% last year.

And EBITDA readjusted for ESOP noncash charges and Ind AS 116 stood at INR 100.2 crores versus INR 88.1 crores in Q1 of last financial year.

And EBITDA margin readjusted for ESOP and Ind AS 116 for the quarter stood at 32%.

Cash EBITDA for the quarter stood at INR 123.5 crores, up 10.3% year-on-year.

Deferred sales revenue stood at INR 495.3 crores as of June 30, 2019, versus INR 419.8 crores as of June 30, 2018, a growth of 18% year-on-year. And the cash balance in IEL and all its subsidiaries, 100% of its subsidiaries, stands at INR 1,543 crores as of June 30, 2019. This was at INR 1,980 crores as of June 30, 2018.

So the recruitment -- the recruitment business and the real estate business, of course -- before that -- before I move onto the businesses, I'll let you also cover the consolidated financial highlights.

At the consolidated level of net sales for the company stood at INR 319.7 crores versus INR 277 crores from the previous -- from corresponding quarter of -- in '18. For the consolidated entity at the PAT level, there is a loss of INR [192.1 crores] versus a loss of INR 22 crores from the corresponding quarter of last year. And adjusted for exceptional items, PAT stood at a loss of INR 189 crores in the quarter ended June '19 versus a loss of INR 22 crores in the corresponding quarter last year.

The recruitment business and the real estate business continue to drive the growth for Info Edge in the last quarter. We increased our spend in marketing substantially in all our businesses, specifically Naukri and Jeevansathi. Our overall spend on the marketing -- on marketing for the quarter was around INR 55 crores, which is up 46% year-on-year.

We continue to sort of invest aggressively in product, technology, data science and engineering in all our verticals. Both of these investments have -- we've also sort of piloted a couple of new projects and investments in these areas will continue in subsequent quarters as well.

Now let's move on to the recruitment business. In Q1, the recruitment segment billing was at INR 251.75 crores, up 19.8% year-on-year, while revenues were at INR 219.5 crores, a growth of 19.2% year-on-year.

Operating EBITDA stood at INR 114.9 crores, up 9.9% year-on-year. Margins were at 52.4% versus 56.8% in Q1 of last year. EBITDA readjusted for Ind AS 116 stood at INR 111.8 crores at a margin of 50.9%.

And EBITDA readjusted for ESOP noncash charges and Ind AS 116 stood at INR 117.37 crores at 52% versus 57.8% at the same -- in the same quarter last year.

And Cash EBITDA for recruitment during the quarter stood at INR 146.5 crores, up 10.6% year-on-year.

In Naukri, in Q1, we added an average of 19,000 fresh CVs every day, and the Naukri database grew to over 64 million CVs. Average CV modifications, are at [360,000] CV mods per day. Our traffic share in the traditional job board space continues to grow and is now at over 85% without Indeed and at about 67% including Indeed.

We continue to invest in our recruitment tools and systems business as we sort of experience more adoption of our offering in the market. We continue to invest aggressively in data science and AI and machine learning to improve the user experience of our -- for both recruiters and job seekers on our platform.

The IT and ITeS segment continued to drive the growth rate -- growth for Naukri in the last quarter. Southern markets did phenomenally well compared to markets in the West and North.

We've also -- we also invested aggressively in marketing, especially television, brand building and outdoor campaigns in the last quarter. All our metrics sort of indicate to us that these campaigns are very well received in the market and the impact on our sort of business has been positive, and our brand has got a boost as a result of these campaigns.

As you also know, we also acquired our -- we also completed the acquisition of iimjobs during the quarter. iimjobs reported a billing of INR 5.7 crores for Q1 of 2020. This is a growth of 22% from Q1 from the same quarter last year, as the business operates at a near-breakeven level.

Now let's move on to the other verticals. In the real estate business, in 99acres, billings in Q1 grew 18% year-on-year to INR 48.4 crores, while revenue grew 34.6% to INR 56.4 crores. EBITDA for the quarter stood at INR 24 lakhs. EBITDA adjusted for Ind AS 116 stood at a loss of INR 1.62 crores, against a loss of INR 11.84 crores -- INR 11.48 crores in Q1 of last year.

EBITDA adjusted for ESOP and Ind AS 116 expenses stood at a loss of INR 97 lakhs versus a loss of INR 10.73 crores last year.

Cash EBITDA loss of 99acres during the quarter stood at INR 7.3 crores -- INR 7.13 crores against the loss of INR 11.73 crores last year.

Our traffic share amongst the real estate portals continues to be around 50%, based on time spent as per SimilarWeb. And the broker segment continues to see strong growth, with almost 20,000 brokers now active on the platform. And like we've indicated in the past, the key focus and invest areas for 99acres will continue to be sort of market brand building and investment in product and technology and data quality to improve the quality of experience for our users on our platform.

Moving on to the Jeevansathi business. Billings in Jeevansathi grew 10.3% year-on-year in Q1 to INR 20.11 crores. And revenue grew 9.4% year-on-year to INR 19.92 crores. The operating EBITDA loss in Jeevansathi stood at the INR 8.83 crores in Q1 of FY '20, up from a loss of INR 5.6 crores last year.

EBITDA adjusted for Ind AS 116 stood at a loss of INR 9.49 crores.

EBITDA readjusted for ESOP and Ind AS 116 stood at a loss of INR 9.3 crores for Q1 versus a loss of INR 5.46 crores last year. Cash loss for Jeevansathi during the quarter stood at INR 9.13 crores. Higher marketing spends on Jeevansathi during the quarter led to an increase in traffic as well as number of paid users -- or, free users registering on the platform. We continue to see positive sort of benefits of increased marketing spend, which leads to higher traffic growth on the platform as we move into the second quarter of FY '19/'20.

In the Shiksha business. In the education business in Shiksha, in Q1, billings grew by 13.9% year-on-year to INR 16 crores, while revenue grew 10.7% year-on-year to INR 16.93 crores. In the Shiksha business, we made an EBITDA profit of INR 4.26 crores in Q1. EBITDA adjusted for Ind AS 116 stood at INR 3.73 crores versus an EBITDA of INR 3.06 crores last year.

And EBITDA adjusted for ESOP and Ind AS 116 for the quarter stood at INR 3.95 crores versus an EBITDA of INR 3.32 crores last year. Cash EBITDA for the quarter stood at INR 3.09 crores versus a cash EBITDA profit of INR 2.1 crores last year.

We continuously -- we sort of continue to put in all our -- put in a lot of effort to upgrade the quality of content on the Shiksha platform.

Then moving on to our strategic investments. Zomato continues to witness very strong overall growth across all their businesses, including the food-delivery business. They are now operating in many Tier 2 -- Tier 3 towns as well. Their focus is not only to grow but grow efficiently and hence they are able to so that they can reduce the burn over time.

Policybazaar and Paisabazaar both continue to maintain a healthy growth rate. The revenue growth in the last 2 financial years has been more than 60%, and we also continue to evaluate new investment opportunities.

That's all from me right now, and thank you. And we're now ready to take any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have our first question from the line of Jai Nandwani from Perfect Research Firms.

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Jai Nandwani;Perfect Research;Analyst, [2]

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I have a few questions. I would ask it in a single order. What competition do you foresee from players like Indeed, Google Jobs and Monster, which was recently acquired by Quess Corp. Like our global peers, are we planning to conduct screening tests to check aptitude, psychometric tests, so as to better filter out candidates as a major help to employers? Can you throw more light on recent investments in ShoeKonnect, Gramophone, and iimjobs? Global players like [speak.com], Recruit and 51jobs are growing at more than 15% revenue growth. With such a large base, can we also grew at the same numbers?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [3]

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Okay. As far as competition from the likes of Indeed, Google Jobs and Monster goes, Indeed has, of course, been very active in India for the last few years. It's been maybe more than 5,7 years now. For a while in between, they were very strongly -- they were spending a lot of money on marketing and advertising as well. And they were very active on the performance marketing side, too. We haven't really encountered them much on the customer side, but they were very aggressively sort of trying to attract more job seekers to their platform. And that continues to be the case with Indeed. They've sort of been a little out of media for the last 3 or 4 months, but they could come back any time.

So as Google Jobs is concerned, Google Jobs is not really trying to monetize the platform right now. They are basically -- I think their growth seems to be to improve the experience for job seekers who search on Google for jobs. We have not been giving them our job till now, but we will continue to revisit our position from time to time.

Monster. We haven't seen any activity from Monster in the market in the last -- for the last few years now. Yes. They have been acquired by Quess. But I think on traffic and on many other parameters, they still have a long way to go. Our traffic share in the job portal space, if you look at our traditional companies like Shine, Monster, TimesJobs, was actually higher than 85% or maybe -- also 88% in some months last quarter.

As for the screening tests and psychometric tests go, what tends to happen is that company's use platforms like ours for shortlisting candidates and only on the shortlisted candidates will they run psychometric and screening tests. So as a part of our effort to sort of build recruitment tools and solutions for our clients, we may sort of over time integrate with some assessment companies.

We already sort of allow companies, when they post jobs on Naukri, to ask a few questions, which can sort of help them filter out -- filter right candidates while posting the job itself on Naukri.com. So that continues. But we don't really have a big effort right now in Naukri to sort of provide screening and psychometric sort of services to our clients.

And then our first Naukri business is a small part of what we do. We sort of have a tie-up with the psycho -- with the assessment company and we sort of provide these services to companies who want to hire job seekers from campus, but not in the main Naukri business at the moment.

As far as -- you mentioned 15% revenue growth. I mean in the Naukri business, for the last few quarters, has been growing at more than 20%. And of course, we're working on a lot of interesting new ideas. If some of those work out, then of course, things could change. Also a lot depends on the economy. If growth rate picks up in the economy, then the growth rate in Naukri could pick up.

iimjobs, we acquired very recently for a consideration of around INR 80 crores. Company's got a very strong brand and a very good product in the space in which it operates, which is like right now a huge space.

We think sort of using our Naukri sort of phase-in distribution method. We, sort of, will be able to notice of iimjobs but also some of the other offerings which are slowly becoming popular, like highrisk.com and a bunch of others to a lot of customers -- because we work with close to 75,000 customers, as you know, while they currently have maybe just 700, 800 customers. On ShoeKonnect and gramophone -- yes, what's the question? I couldn't make out the question on ShoeKonnect. Could you repeat the question on ShoeKonnect and Gramophone?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [4]

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He just wanted to know a little bit about the investments.

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Jai Nandwani;Perfect Research;Analyst, [5]

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Yes, linkages about -- in 3 of these?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [6]

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Well, actually, there is no linkage among the 3 of them, but they are independent investments. And ShoeKonnect essentially is a B2B kind of player which connects shoe manufacturers to shoe retailers, underserved retailers and the small manufacturer. And it's a fragmented industry.

And it does their own logistics and ordering. It's showing good traction, and it's getting inbound interest from other investors. Gramophone has already (inaudible) one external investor after we went in. And that's -- and Gramophone is working in parts of Madhya Pradesh with farmers on advisory and selling them inputs.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [7]

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Miles, can we have the next question, please?

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Operator [8]

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We have next question from the line of Manish Adukia from Goldman Sachs.

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Manish Adukia, Goldman Sachs Group Inc., Research Division - Equity Analyst [9]

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A couple of questions. You mentioned that Indeed has been a bit absent from the media in the recent months in terms of advertising and marketing while your spend has gone up in the recent quarters. And you also indicated in your opening remarks that you've seen some positive trends coming out of that. So can you just throw some light on how has this increased advertisement spend helped you in terms of ramping up your custom made -- customer base for your revenue? That's one.

And couple of quick questions on the real estate. Again, if you can just provide a quick update on what the competitive scenario there is like at this point? And what the underlying real estate market at this point in time looks like? I mean there's been some weakness in the underlying real estate market, but what's your sense? How does it look like over the next 3, 6, 9 months in terms of the underlying market?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [10]

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Indeed has been around for a long time now. And they were -- and they've been advertising aggressively for the last few quarters, and they were out of media for the last 2 or 3 months. And when I say media, I mean sort of media like television and outdoors. They've been aggressive on the performance marketing side.

So they continue to aggressively advertise online. And sort of we were happy doing a little bit of advertising, but not that much, for a long time now. We were out of media. We made a new ad film and went back on TV a few months back. And the results have been very encouraging. You see the advertising we do is more directed at consumers and job seekers. And it's unlikely to impact our corporate revenue in the short term. But in the long run, if we get a brand sort of -- if our brand moves to the next level and we are able to attract more job seekers through the platform and more people to come, download our apps and become more active, over time, it will sort of translate into increased revenue from our customers as well.

That's the idea behind sort of these marketing campaigns. As far as the real estate sort of business is concerned, the real estate market continues to be in very bad shape. In fact, in our business also while billing growth has actually slowed down this quarter, so -- and while we grew at 18%, billing at 18%, they were -- sort of different markets behave differently. In some markets, we were at 25%, 27%. In some markets, we grew in single digits. So I guess the impact has been different in different sort of cities. But definitely what we're hearing from our customers is that there is a problem with sort of financing, both for builders and for buyers of new homes. And as a result, new launches are likely to be hit, right? So not enough builders will probably launch new products now. And that impacts our business.

Having said so still a market where we're a tiny part of the market. The real estate market has been through hell for the last 5 years. We had RERA, demonetization, GST, all kinds of issues, but we've been growing every year. And in fact this quarter, we made us out of -- we sort of broke even in this business. So if the market continues to be even sort of -- if the market continues to grow even moderately, we should be fine. We should be, at some point in time, able to pick up on our -- pick up our growth rate. But yes, if there's a big crash in the market, then who knows?

As far as competitive position is concerned, like I mentioned, we continue to sort of have a close to 50% traffic share in the market as per sort of SimilarWeb. In some cities, we believe we are fairly strong and we have a close to [60%] share. In some other markets, we are -- we have a close to 40% share. On the whole, we believe we have a closer to 50% share of the -- a 45% to 50% share of market at this point in time.

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Manish Adukia, Goldman Sachs Group Inc., Research Division - Equity Analyst [11]

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Sure, Hitesh. Just a quick follow-up on the matrimony business. Again, in that business, the ad spend has been quite high. How is the competitive scenario there in that space? What are we seeing?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [12]

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So that space is very competitive. There -- it's a 3-player market. In the North and West, where we are a strong player, it's a 2-player market, mostly between us and Shaadi. And what has happened really in the last 3 or 4 years is that we've managed to create a play for ourselves in this market. From a virtual nobody, we are now a business which is doing about INR 20 crores a quarter in terms of collections. Of course, there is an aggressive sort of price war in this market at this point in time. Companies -- all the 3 companies are spending a lot of money on advertising also. And therefore, cost of customer acquisition is going up. And that's why our losses have gone up. But we believe this is the right strategy for us at this point in time. If we continue with this strategy for the next couple of years, we will be able to sort of become a strong player in one part of the market.

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Operator [13]

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We have that question from the line of Vivekanand Subbaraman from Ambit Capital.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [14]

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So this customer addition trend that we are seeing in Naukri, can you throw some more light on this? What's going right for you there? And can you give a bit more color on the recruitment market growth that you have seen?

My second question pertains to your investments. So over the last year or so you've been making a lot more B2B investments. So can you give some color on the evaluations in the B2B space compared to the B2C space? And how do you see it in the context of the addressable opportunity in the B2B markets versus B2C?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [15]

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Yes. So the recruitment market as a whole is very sectoral. I mean some sectors continue to do well, like I mentioned IT. Our IT business grew at more than 20%, in fact, last quarter. So IT companies seem to -- especially the companies based out of Bangalore and Chennai and Hyderabad seem to be doing well and they seem to be hiring large numbers, and that's a positive for us. Sectors like health care, education, services in general, except for now NBFCs and telecom services, which have been hit, I mean we're hiring and to some extent continue to do well. The infrastructure or sectors like construction, real estate, high-end heavy metals, engineering, they continue to be sort of in trouble. We've not sort of -- our revenue share, for example, from the so-called or what we call the infra sectors, has over a period of last 10 years, declined from a high of 25% to maybe now 15%, 16%, right? So these sectors continued to be in trouble from a hiring standpoint.

And in general, the SME space for us continues to do well. So we've been able to get more SMEs to sort of list on Naukri, which is where a lot of new customer growth comes from.

But all in all, you see in a good economy, what tends to happen is that companies have high attrition and therefore, they hire more people to even stay at the same number. They're more aggressive and bullish on the future and therefore they hire more people also to sort of -- the head count also tends to go up. Many new companies that have shops because of the new opportunities -- more opportunity. And while in the slow market, the exact opposite happens.

So some sectors have been slow, some sectors are okay. Overall, things seem to be under control right now, but of course, a lot will depend on what happens.

The auto sector is another sector which is now in trouble when it comes to -- they are not hiring. They're sort of -- and all this is also very well captured in our JobSpeak index, which we release every month. So for July, I think the JobSpeak index was up 14%, while the IT index within the JobSpeak index was up more than 25%. Sectors like banking and auto were negative in the JobSpeak index. So that gives -- that should give you a very good sense of what's happening in the market.

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [16]

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On the B2B space, look, we evaluated opportunities, and we've invested in 2 B2B companies among the last 5 companies we've invested in that we announced. One is a company called ShoeKonnect that we discussed a little while back. The other is a company called ShopKirana, which essentially is in last-mile distribution of FMCG products to the small retailer. It's operating right now in Indore and Jaipur and Bhopal. And they're doing a fairly good job. Good news about both these companies is that they've got a lot of inbound investor interest and from other investors. So it looks like they have like -- as far as valuations are concerned, right now in private markets, the phenomenon we're seeing is that, look, if a company is showing traction, we're are getting chased by number of investors and when there's B2B or B2C, evaluations get better. Of course, B2C will be higher. But even B2C -- even -- so B2C will be higher, but B2B is also not cheap.

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Vivekanand Subbaraman, AMBIT Capital Private Limited, Research Division - Media Analyst [17]

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Okay. Just a couple of follow-ups. Hitesh, you've mentioned that in a good economic scenario, you have a lot more companies set up and a lot more attrition. So notwithstanding the GDP slowdown, how is it that we've managed to kind of sustain the billing growth and revenue growth compared to say previous occasions when GDP growth used to slowdown, our billing growth also would taper down? What is it that is working for us this time compared to prior occasions?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [18]

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Broadly what you're saying is right. GDP growth does impact our billing growth. But you know there are 2, 3 things I want to say. One is, of course, IT -- I don't know whether IT is sort of more indexed to -- IT hiring is more indexed to India GDP growth or is it -- maybe it is more indexed to how the U.S. is doing and how the rest of the world is sort of looking at. So that is one.

And two, even within India, there could be a -- there is a slowdown in certain sectors for sure, like I mentioned in the NBFC sector, the auto sector, telecom. These sectors seem to have been impacted. But there are other sectors which continue to do well. So there's no slowdown in those sectors as far as we're concerned. Sectors like travel, tourism, hospitality, education, and health care, some of these services sort of continue to -- jobs from these companies continue to grow on our platform. So one doesn't really know whether it is -- I'm not the best person to comment on this, but it doesn't seem like it's a slowdown like we saw in 2008 or 2009, when the entire economy -- hiring came to a standstill. Enough companies are still hiring. But yes, certain sectors seem to be slow.

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Operator [19]

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We have our next question from the line of Arya Sen from Jefferies.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [20]

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Firstly, if you could repeat the Jeevansathi revenue? I missed that.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [21]

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Jeevansathi, just 1 second. So billing grew 10% to INR 20.11 crores and revenue grew 9.4% to INR 19.92 crores.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [22]

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INR 19.92 crores, right? Okay.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [23]

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Yes.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [24]

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Secondly, the Naukri margin seems to have come off a bit more than usual this quarter. So you talked about brand campaign and ad spend. So how do we look at it going forward? I mean should it then -- was there a bit of a one-off in this quarter? And should it improve going ahead? Or does that continue for the rest of the year?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [25]

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There are 2 or 3 type of investments we're making in the recruitment business. One is, of course, this quarter, as in Q1, we spent a lot of money in marketing. We are spending -- right now also as we speak we are on TV. So this is going to be at least a 2-quarter thing. We will see what to do in Q3 and Q4. We haven't made up our mind as yet as far as marking's expenditure goes. The other investments which are taking place are in. One, we are beefing up our product in technology and data science and design capability. So we've hired a lot of good people in that area and we are doing a bunch of -- working on a bunch of things. The impact of which will not be seen tomorrow, but maybe over a period of time. So these investments will continue and these investments may only increase -- will probably increase with time.

The third thing, we're also now doing a couple of new experiments. I mean we've set up teams to look at the blue-collar space. We've set up a team to look at how we could disrupt the premium hiring market using AI, machine learning. So there's some investment which is going to go into these themes. These themes will not be able to -- they won't be generating revenue for quite some time, in fact. So this is something which we are -- we're not capitalizing on these investments. We are charging them to our P&L. So these investments will only also increase over time. Yes.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [26]

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Right. And lastly, in your consolidate, the share of net losses of JVs, that seems pretty high. That is mainly Zomato and Paisabazaar, right? Or had...

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [27]

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Yes. I think the main contributor would be these 2 companies. So you're right.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [28]

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And how much would be Zomato within that? And what is the sort of -- what's happening there in terms of the cash burn?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [29]

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So burn, they're bringing it down. I think they have a plan to bring it down substantially, and they have begun to act on it over the last 3, 4 months and it's already showing results. We're not announcing any numbers just yet, but they are progressing on that path.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [30]

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Right. But I mean just to sort of clarify the net -- the contribution to loss this quarter seems to be like INR 253 crores versus INR 310 crores for the whole of last year. There is no accounting thing in that, right? That is a loss?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [31]

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(inaudible)

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [32]

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Last year, Zomato has sold one of its (inaudible) business. So there was a one-off...

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [33]

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They did a transaction in the Middle East with Delivery Hero and so that gave it a revenue boost.

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [34]

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Last year.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [35]

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Yes, so last year there was the other one-off. This year, they did (inaudible).

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [36]

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Right. Last year, there was one-off in the -- so adjusted for that, the loss would have been higher for the full year?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [37]

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That's right.

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [38]

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That's correct.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [39]

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Okay. And how much would that number have been?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [40]

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Number for the sale that they did?

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [41]

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So the INR 310 crores for the full year, if I sort of adjust for that sale of the Middle Eastern business, that's what you're referring to, right, how much would that be?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [42]

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I don't know the -- right now, I don't know the exact numbers. We'll get back to you.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [43]

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But -- it was announced, so it will be there in our (inaudible).

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [44]

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Yes, it is there in our (inaudible)

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Operator [45]

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We have next question from the line of Shaleen Kumar from UBS Securities.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [46]

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I have 2 questions, one related Naukri and other related to 99Acres. So in Naukri, we could see that your marketing spend has gone up sharply. Just wanted to know how has your spend gone up on Google, Google Ads plan or Adwords? And what percentage of traffic come to you from Google?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [47]

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See, we don't really share this kind of data. We advertise on multiple platforms. Google is, of course, one of them.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [48]

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So Hitesh, the thing is -- the reason I'm asking, see, earlier, when somebody used to search jobs, let's say, software job in Bangalore, you will get some links, maybe yours, maybe Shine jobs, maybe TimesJobs, right. But right now, what somebody will get is a list of jobs which is provided by Google. Now if you have to -- that's what I'm understanding, will the pricing power shift to Google at that point of time because now Google can ask you if you want your ad to be above mine, you may have to pay premium, right? So in that case, is the marketing spend going to go up?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [49]

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See, that was the case earlier on. So and if you want, actually, we can give our jobs to Google, they will be happy to take our jobs and feature them in their search. It's just that we're not doing it right now. And earlier also and this has been Google's model from day 1, that if you want to appear on top, you have to advertise, right. Otherwise, you can dig into any link on top and it doesn't add necessarily up to your link.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [50]

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Yes. The only point is that has it increased, this Google Jobs? Or is it the same?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [51]

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What has increased?

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [52]

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The pricing -- the amount which Google is charging.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [53]

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I really don't have the numbers. But you know, what you must have to understand is that Google is one of the -- one platform we advertise on. We, sort of, advertise on Facebook. We advertise of YouTube. We advertise on Google. We advertise on the networks. We do app marketing campaigns. We are on television, everywhere. So Google is a very small part of our advertising sort of mix.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [54]

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Okay. Fine. Good enough. On the second bit on 99acres, as you've also pointed out, we've been seeing a growth of 30% plus in this segment. In this quarter, the billing growth was a little lower, around 18%, while the revenue growth was around 35%. So we were coming out of RERA and there was some kind of pent-up demand. And there was a market shift, an organized play for better place and probably we were able to garner that the demand at that point of time. Are you think that from this -- even 18% growth is very good, but do you think that from a very high growth, we're kind of reaching to a steady growth or robust growth kind of a scenario?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [55]

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We -- it's difficult to say. Because like I mentioned earlier on the call, even in this quarter, we saw a very robust growth in some markets. So in some markets, we hit even 27%, 28%. In some markets, our growth was down to single digits.

Yes, our growth has slowed down in the last 1 or 2 quarters, but we are not sort of calling it a slowdown as yet. We are still hopeful that if we sort of do a few things right, we could sort of up our growth rate. But having said so like real estate, I don't want to comment on, because like I said, the last 3 years, we have been through RERA, we have been through demonetization, we have been through GST, and now there's an NBFC crisis, which has hit both builders and buyers, right?

So hard to predict what's going to happen in the market. It's not as if transactions have gone up over the last year. Transactions are where they were. It's not as if the number of homes being sold has gone up. Maybe -- and the situation is different in different market. So we'll have to wait and see what happens. I mean hard for me to predict.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [56]

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Yes, because if underlying industry is in trouble, there is only a limit to which you can also grow.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [57]

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Not really, see, because overall market is still -- we estimate that the ad market for real estate is at least INR 3,000 crores, if not more. And even -- and 10 years ago, actually, this market was more like INR 6,000 crores. So the market has actually declined, the ad market, over the last 10 years. And in this market, we are doing what, we're doing INR 200 crores. So it's not as if we're 20% of the market or 30% of the market. So even -- and there's market -- in a declining market, over the last 5 years, we've sort of managed to more than double or triple our revenue, right?

So we believe that there is still opportunity for us to grow. Of course, we have to execute well. We have to do a lot of things at our end to make that growth happen. But even in a slow market, we can continue to grow for a while -- for a long time, I mean.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [58]

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Right. And now how has our deferred revenue grew in real estate? And also point where it stands right now.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [59]

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(inaudible)

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [60]

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So I think we have...

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [61]

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The overall deferred revenue, I think, is up 18% over last year.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [62]

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Yes, but do you have the 99acres number?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [63]

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So it would be in line with -- because we have -- billing growth is about 18%, revenue growth was about 34%, right? So revenue growth is kind of coming down because it is coming from the previous quarter, right? So it would be in line with what the current billing growth would be.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [64]

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Billing growth.

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [65]

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Or maybe -- yes, I mean we make the adjustments, but roughly you can say that.

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Operator [66]

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We have next question from the line of Pranav Kshatriya from Edelweiss Capital.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [67]

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I have only 1 question. Regarding Jeevansathi, how do you see your incremental market share in the -- your targeted North and the West markets? You think you're closer to 40% to 50% market share there? Or -- and how -- what is aspiration in terms of the market share in that market?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [68]

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So you know we are stronger in the North than we are in the West. West is still a 3-player market, where in the North it's most largely a 2-player market. I don't really have an exact sort of sense of our share. Maybe we are in the 30s, not in the 40s, I think, at this point in time.

In terms of transactions, we may have slightly higher share because we sort of tend to sell at lower prices than some of our competitors.

Our long-term goal is to sort of keep increasing our volume share and then of course, our value share over time. We want to sort of be a player in this market, and we are focused on the North and West. In terms of population, the North and West are close to 50%, 60% of the country. They are -- they sort of have been slower to get onto the Internet because PC penetration was, of course, very low in these markets, at least in the North. And -- thanks to smartphones, our penetration is going up. These sort of geographies are also -- or, these sort of areas are also getting online. So in the long run, we believe that the North plus West would be -- will end up being between 50%, 60% of the market. And if we can get to 50% share in these sort of regions over time, then at least we have a small -- we have a play.

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Operator [69]

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We have our next question from the line of Parag Gupta from Morgan Stanley.

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Parag Gupta, Morgan Stanley, Research Division - Executive Director [70]

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Hitesh, you seem to have seen a significant increase in your recruitment traffic or, actually, in your market share, I think, about 70% in the previous quarter to 85% this quarter. So what's really happened out there?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [71]

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Well, we've been active on -- we've been advertising aggressively for the last 3, 4 months. That must have had an impact for sure. And yes, I mean maybe that's -- and of course, we continue to work on improving our product and improving our expedience. That may have had some impact as well. But I think it's largely because of our media presence at this point in time.

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Parag Gupta, Morgan Stanley, Research Division - Executive Director [72]

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And in your view, who probably has been the largest market share donor in the quarter?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [73]

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I mean between -- so this 85% -- 87%, 88% is when you take the market to be just TimesJobs plus Monster plus Shine, which are our traditional competitors. So in my sense, all of them must have lost shares in the quarter. I haven't really looked at the individual numbers, but...

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [74]

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See, what happens in a slowdown, and we have seen that in the past a lot, that our competition begins to cut back a lot on investments, right, for everyone. Because simply financially that makes sense for them because they're already probably loss-making. And I think, other hand -- we on the other hand have, as Hitesh has said, we want to invest in. So it's probably been a double whammy for them.

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Parag Gupta, Morgan Stanley, Research Division - Executive Director [75]

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And, Sanjeev, do you think that it's also because you have kind of exposure across segments, while some of your other competitors may not be, let's say, in IT sector? Is that also a reason for that? Or do you think competitors are also spread across most of the segments?

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Sanjeev Bikhchandani, Info Edge (India) Limited - Founder & Executive Vice Chairman [76]

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See, pretty much everyone does everything. So it's not as if they are focused on a few segments only.

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Parag Gupta, Morgan Stanley, Research Division - Executive Director [77]

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Got it. Okay. And your acquisition of iimjobs, I don't think that's showing up in your Q1 numbers. So is that something that will only start coming through in Q2?

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Sanjeev Bikhchandani, Info Edge (India) Limited - Founder & Executive Vice Chairman [78]

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Probably, it will come from next year, because right now we have just -- we are holding it 100%, but we may go for formal merger. And once that is done, then it'll become part of stand-alone. So that for now is the number that we have. But I think, like, the addition is, in our scripted remarks it's said that the growth in the billing is about 22%, and it's kind of EBITDA breakeven. If you don't take certain exceptional calls which are related to acquisition, if you don't take that into account, then it's kind of a breakeven number.

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Parag Gupta, Morgan Stanley, Research Division - Executive Director [79]

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But, Chintan, wouldn't iimjobs start coming in your consolidated numbers from Q2?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [80]

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In consolidated numbers, in that sense then, I guess, no. But as a stand-alone, it will not come unless and until there is either a formal merger or a business transfer or anything else -- any other sector involved.

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Parag Gupta, Morgan Stanley, Research Division - Executive Director [81]

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Okay. And in this quarter, your tax rate was pretty high in the stand-alone. So is that the number going forward? Or do you think this will normalize through the year?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [82]

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It should be normalized through the year. I think that could be -- I'm not sure if there is some Ind AS impact or maybe some effect on that, but yes.

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Operator [83]

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We have the next question from the line of Manish Poddar from Reliance AIF.

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Manish Poddar, Reliance Nippon Life Asset Management Limited - Investment Analyst [84]

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I just had 1 question. Wanted to understand the thought process behind this RMS tool for Naukri. So what is this -- what is opportunity that's there for a SaaS tool like this? And what is the thought process behind it?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [85]

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See our thought process is very simple. You see, we work with 75,000 companies of all shapes and sizes. Some of them a very small; some of them are very large. The large ones, of course, have access to the best tools out there in the market. So they -- or many of them go for international tools. There are some high-end domestic players as well who sort of cater to that market. But there are a bunch of companies in the middle and some of the smaller ones as well who don't use anything at this point in time, or they have tools that are very, very outdated. So the idea is to sort of see how -- if you can get some of these companies to use our tool. There are many benefits: one, of course, one gets some incremental revenue; two, if you get a lot of good clients who do a lot -- spend a lot of the time on the platform, there is beta locking over time. So that's really the thought process. Still early days and it's a new business for us. We're still trying to figure out at the SaaS space. We are not a SaaS company to start with, as you know. But yes, we are making good progress and we'll continue down this path.

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Manish Poddar, Reliance Nippon Life Asset Management Limited - Investment Analyst [86]

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All right. Just wanted to understand, is it open source right now? Or -- so can the employer plug in the other players? Or just only Naukri which...

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [87]

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There are different versions. So there are versions where you can, sort of, plug in other players as well. But it's -- a lot of it is work in process. So it's not as it's start 100% baked out. There's still a lot of work going on, on the offering.

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Operator [88]

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(Operator Instructions) We have next question from the line of Prince Poddar from JM Financial.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [89]

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Just 2, 3 questions from my side. Firstly, a bookkeeping question. Ind As EBITDA margin comparable last year as reported numbers and similarly 99acres EBITDA comparable as an Ind AS adjusted?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [90]

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So the thing is, overall employees margin was about 2% lower if you kind of do the Ind AS adjustment.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [91]

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Okay. Recruitment comparable margin basically?

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Chintan Arvind Thakkar, Info Edge (India) Limited - CFO & Whole Time Director [92]

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I will give you 1 second. I think, Hitesh called out earlier. The recruitment, I think, is north of both.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [93]

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Okay. So I'll just read out everything, okay? So operating EBITDA for recruitments were INR 114.9 crores. Margins of 52.8%, that's 4% versus 56.8% last year. EBITDA readjusted for Ind AS 116 stood at INR 111.8 crores at a margin of 50.9%. Does that answer your question?

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [94]

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Yes, yes, that does. 50.9% is what I was looking for. And similarly, in 99acres, there is a comparable EBITDA. I think there was INR 24 lakhs...

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [95]

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INR 24 lakhs versus a loss of INR 1.62 crores if you take adjusted for Ind AS 116.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [96]

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Okay. Okay. Got it. Got it. Okay. And the second thing, sir, I was looking at Naukri job stake. It has been -- for the last 2 months especially, the jobs did -- grew by 6% and 14%, while there were strong growth in IT of 26% and 31% IT software. So I couldn't understand, if the IT is the biggest component of job or basically biggest component of Naukri and is growing so well, what is causing this overall JobSpeak index to come down? I mean because (inaudible).

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [97]

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Yes, yes. Some sectors, like I mentioned earlier on the call, are in trouble. Sectors like the financial services sector. Sectors like auto, sectors like telecom, sectors like the infrastructure, construction, real estate. They continue to sort of either degrow or grow in very, very low single digits.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [98]

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Okay. And so because of these job seekers are pulling out. Okay. And so the last question is on essentially 99acres. So in the last 1 or 2 quarters, even on a normal base -- I mean on a normal adjusted base, you are growing by 30-odd percent. And this quarter, it has come off that, at 18% billing growth. Do you think this is to continue for a while if the underlying market remains as it is? Because if we remember correctly, 30-odd percent growth was coming on a higher base which was adjusted last year? And this has come off a bit. So this is a new normal going forward? Or do you think this can improve, this might be a 1 quarter thing?

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [99]

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Well, it's really hard for me to say because there's so much happening in that market. They are all kinds of trends. And in some -- in some geographies, we are doing well. In some geographies, we are not doing so well. I think we have to sort of we should wait and watch one more quarter before we sort of come to conclusion on what sort of should be the new sort of normal for us going forward.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [100]

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And just addition to this question, what -- how is the builder market versus the agents market doing in this? Are still the agents market providing the better revenue growth? Just...

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [101]

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Yes. The agent business continues to do well. It's a trade-off like, no -- the dairy market, for example, is largely driven -- is largely an agent market, while the markets in the South are largely builder related. So like I said in this quarter we saw a strong growth in some markets, regrowth in others. Now by and large, yes, of course the agent sort of piece continues to do well and continues to grow well for us. But if South is doing well for example, there are no agents in the South, that means a builder -- in that particular quarter, the builder market sort of may do better than the agent market. But yes, but trend wise, I think the business over time will move more and more towards agents.

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Operator [102]

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(Operator Instructions) As there are no further questions from the participants, I'd now like to hand the conference over to Mr. Hitesh Oberoi for closing comments. Sir, over to you.

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Hitesh Oberoi, Info Edge (India) Limited - Co-Promoter, MD, CEO & Director [103]

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Yes. Thank you so much for sort of staying back till late for this call. We've got a little late today because of our AGM and that's why the caller kept late. So have a great evening and happy Independence Day to everybody.

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Operator [104]

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Thank you very much, sir. Ladies and gentlemen, on behalf of Info Edge Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.