Why is InfoEdge Stock Falling? | Yadnya Investment Academy

InfoEdge Stock has been corrected by more than 25% from its All-Time High Levels. Hence, we will be talking about the reason why the Infoedge stock price is falling consistently.

Introduction:

Infoedge is one of the very few profitable pure-play internet companies in the country. It is India’s premier online classifieds company in recruitment, matrimony, real estate, education, and related services. As there is brainstorming going about InfoEdge on why the stock price is falling let's check on the updates below.

InfoEdge- Valuation:

• InfoEdge stock price has witnessed a correction of more than 25% in the recent past.
• To analyze the InfoEdge stock one should check the standalone and consolidated price. The standalone tells about the main business of InfoEdge like Naukri.com, Jeevansathi. The Consolidated business of the company includes unicorns such as policy bazaar, Nykaa, and Zomato.
• The standalone PE ratio of InfoEdge Stock is 235.19 and for the consolidated, it is 47.4.
• The price of InfoEdge should not be considered only from the standalone perspective as its valuation comes out to be irrational. It is always better to analyze this business as a consolidated business.
• The Median PE ratio of 1 year is 50.25. Currently, the stock is trading around 47.4 which means the stock has already come to the level of Median PE.
• Now if we consider the 3 year PE ratio the value is 37.83 and for 5 years the Median PE ratio is 34.5. The stock is trading at premium valuation after seeing the longer Median PE ratios of the company.
• The reason to find the stock to trade in a premium valuation is that InfoEdge is investing in good startups which is have exponential growth.
• To date, the companies that have been funded had never been listed. Zomato is the first company to get listed.
• From a liquidation point of view, the company can sell its stakes. This could be a positive sign.
• The remaining unicorn's that InfoEdge has invested in can be listed in the future. This is a positive sign for InfoEdge.

InfoEdge-Financials:

• The Standalone Net Profit of the Q3FY21 is around Rs 70 Cr while the Net Profit of Consolidated Business is around Rs 679 Cr. for the same period.
• By seeing consolidated figures it shows how the overall impact on stocks has happened by holding its other investment.
• The growth of profitability in the last 3,5,10 years gives more confidence to investors about Infoedge.
• The unprecedented profits are seen because of profit booking, New deals have been cracked, etc.
• The company is trying to improve its balance sheet by improving the cash flow.
• ROC and ROE is also having very strong numbers. This is again a positive sign.
• Despite investing a huge amount in the new startup the debt to equity ratio of the company is zero which means the company does not believe in borrowing money and investing. The Company is funding from its cash flow and giving good results.

Possible Reasons behind fall in Stock Prices:

i)  Lowering Down of Stakes by Promoters & FIIs:

• In recent quarters Indian promotors have lowered down their stakes. It could be required for new investment and opportunity, this could a small thing to worry about. The Promoter stake in the last 3-4 quarters was 40.37 which has reduced to 38.41 as of March 2021.
• In one year the promoters have lowered down the stacks by more than 2%, that not a positive sign.
• In the same period, FIIs have increased their stakes from 35.45% as of March 2020 to 40.54% in December Quarter
• But in the last quarter of FY21, FIIs have also decreased the stake from 40.54% to 39.33%.
• This could be the main reason why the stock is underperforming.

ii) Entry of Big Player:

• As Zomato is getting listed but there is a big competitor who is coming into the market with deep pockets. The company’s name is Amazon foods.
• Amazon food has started its services in Bengaluru. There are 240+ Pincodes in Bangalore where Amazon Foods have launched its service for 60 Pincodes. The entry of such a big player in the market is not a positive sign for players like Zomato & Swiggy.
• But Amazon Good is related to Amazon Prime. Their main objective is to increase the prime membership but not to build a food delivery system.

Conclusion:

Currently, the major concern for the company is regarding Zomato, which was eyeing profitability. But with the entrance of a big player in the market and other possible reasons market seems watchful for this stock, hence witness a downfall in its price. This downfall can be an investment opportunity for those who have this stock on this radar. But be cautious before investing in any of the companies and should only invest based on proper research & study.