Cash is king and for internet companies, it is often the lifeline that keeps them alive. So when you think of internet companies, you think of them as cash guzzlers that often use huge chunks of investor capital to gain scale and market share. An antithesis of all that we perceive internet companies to be is Noida-based Info Edge, the first internet company to be listed in India. Info Edge is the country’s leading online classifieds company with a leadership position in recruitment, real estate and a growing presence in matrimony and education. What makes Info Edge stand apart from other pure-play internet peers is the fact that its flagship business Naukri, which is the undisputed leader in the online recruitment space with a 73% traffic share, is a cash-generating machine which spews more than Rs.4 billion from operations. In fact, cash generation from the business has been rising steadily over the past couple of years thanks to high margins. Naukri, which brings in 70% of the revenue, has seen EBITDA margin improve from 51% to 56% over the past five years.
Until FY11, the business was generating upto Rs.1 billion, which doubled to Rs.2 billion by FY15 and now by FY18, the cash generation has doubled again to Rs.4 billion. This not only allows the management to invest more in the other three verticals — real estate, matrimony and education — but also pursue investment opportunities outside the company. Over the 10 years led by Sanjeev Bikhchandani, its founder, Info Edge has built a solid portfolio of investments in more than 15 start-ups such as Zomato and Policybazaar (see: Pulling their weight). A leadership position in their flagship business, prudent capital allocation and a smart investment strategy meant the company was able to generate a compounded return of 32% for its shareholders over the past five years.
Breaking into new verticals
Launched in 1997, Naukri broke even within two years of its operations, attracting its first investment from ICICI Venture in 2000. The company turned profitable in 2002. With the company generating cash, the option was to take Naukri international or look at other avenues of growth within the classi