Two stock investment ideas for millennials – Part II

Millennials

Before I proceed further a quick disclaimer, I am not a SEBI registered analyst or an investment advisor. My views are just that. My views. A detailed disclaimer is given at the end of the blog, please go through it first in your interest.

Ever fancied investing in blockbuster companies when the valuations were very low? Say, Bitcoin when it was $ 100 or in Flipkart when the company valuation was Rs.75 crores or for that matter even in Paytm when the early-stage investors took the shares in today’s equivalent of say Rs.50 per share?  These deals would have given humongous profits. However, it is not feasible for retail investors. Only Angel Investors and early-stage venture capital funds have that luxury. But these venture funds are not listed entities. So, there is no way, generally, for retail investors to invest. What if we can taste a spoon full of gravy in the world of alternative investments? If you are interested in tasting it, then you should have a serious look at Info Edge.

Courtesy: Company’s investor Presentation

This time around I did not do any scuttlebutt. The millennials are unlikely to know. However, they will know naukri.com. Info Edge is a major player in the internet classified space. It has four powerful brands to its credit – naukri.com in the online recruitment space, 99acres in the online real estate, siksha.com in the online education information services space and Jeevansathi.com (online matrimonial). Recently they have taken over the Aisle.co, an online dating app for Indians from around the world. So, fundamentally the core business is for today’s millennials. You can get education advice, find a date, get married with somebody else (in a lighter vein), get a job and perhaps purchase a flat – all using Info Edge’s portals. The world between 15 years and 30 years of age is Info Edge’s business.

When the company has grown its Return on Equity CAGR of 21% over the last ten years and it may be worthwhile, looking at the company closely to find out if they can repeat the feat over the next ten years also. Just to put 21% CAGR in perspective – this would imply an investment of Rs.1 lac today will become Rs.2.59 lacs in five years, Rs.6.72 lacs in ten years, Rs.17.45 lacs in fifteen years, Rs.45.25 lacs in twenty years. This does not mean Info Edge will produce this kind of result over the next decade or two. During the same period the company’s market cap has grown at a CAGR of 38%

Rs.100000 invested in 2011 has become Rs.25 lacs in 10 years. Courtesy, Info Edge investor presentation

Their regular business is slated to grow at approximately 18% p.a. over the next few years. Profitability, though, may come down due to an increase in salary costs. Annual sales growth is likely to be 18% with perhaps an operating profit of 15% p.a.

Their core business – naukri – is in high demand and evergreen. However, today’s market price of approximately Rs.4,800/- is not solely due to its core business. The company is a major alternate investor. Over the years the company invested Rs.2,324 crores till 31st March 2021. This included priced possessions like Zomato and Policy Bazaar. Their stake in Zomato was 19.3% and Policy Bazaar was 15%. It looks, like as a policy, Info Edge does not hold less than 15% in any of the investing companies and it goes up to as close as 50%.

Investee Companies of Info Edge – Dec 2020 data. Courtesy Info Edge Investor Presentation

In FY 22 the company divested fully from Zomato and Policy Bazaar that gave them a whopping return of nearly Rs.13,500 crores. Their trailing twelve months’ Other Income was Rs.13,732 crores.

The reason why the company needs to be looked at seriously is this. Their total investments in FY 21 were Rs.2,324 crores. As stated earlier, they have made a profit of Rs.13,732 crores as profit from the sale of an investment. Their September 2021 Balance Sheet shows an investment of Rs.18,195 crores, i.e. the entire of the profits plus the original investment made plus some more, has already been invested in other companies for a significant minority interest stake or is earmarked in their investing arm for future investments. They have investment and exposure in nearly 70 companies at the moment. One can only imagine the future income that can be generated if some of the companies make it really big.

This is where we believe Info Edge wields lot of potential. Ten year abridged data can be downloaded here.

I personally have invested in Info Edge and Avenue Supermarts. So don’t trust me and do your due diligence. At the moment both are slightly higher priced, though and both the companies are on a weak wicket based on two hundred days and fifty days moving averages, of closing price.

DISCLAIMER This Blog, its owner  & contributors are neither a Research Analyst nor an Investment Advisor and expressing the views only as a valuation enthusiast and an Investor in Indian equities. He/She is not responsible for any loss arising out of any information, post or opinion appearing on this blog. Investors are expressly advised to treat the blog entries as one more opinion on the subject company and are expressly advised to do own due diligence and/or consult financial consultant before any investment decision. Author of this blog not providing any paid service and not sending bulk mails/SMS to anyone or asking for email ids or contact details. These are just ballpark enterprise valuations. We do not claim the value provided by us to be correct. These are based on the past ten years financials which has no relevance to the future whatsoever. We are just providing our views on the stocks concerned. In fact, the market price is of no relevance to us and we just provide the enterprise value debt component and shareholders value. And its future business prospects. Additional

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