Quest Beyond Naukri.com
Image: Amit Verma
anjeev Bikhchandani likes bird watching. At least once a year, India’s Web-business veteran hits the road to the famous Bharatpur bird sanctuary in Rajasthan, a six-hour drive from New Delhi. Armed with a camera and binoculars, he typically spends hours observing birds and marking out the exotic ones. As bird experts know, without the ability to wait out, the search for that exotic specie can become a frustrating one. But patience is something that 46-year-old Bikhchandani does not lack.
Of late, the bird watcher’s patience is being employed in looking for a different species. The founder of India’s most successful portal company, Info Edge, is busy looking for Web entrepreneurs. Ones with exciting ideas that have the promise to become the next naukri.com, Info Edge’s flagship portal that is also the most profitable one in India’s online industry.
Following the Cash Trail
With a chance to be mentored (and financed) by the master entrepreneur himself, scores of would-be entrepreneurs have sent in business plans. But Bikhchandani is careful, and closely studies each entrepreneur and every business plan. “I am looking for commitment in the entrepreneur. Does he have the ability to stick on when the times are not good?” Bikhchandani wants to know the team behind the entrepreneur, the space where the start-up will operate, and about the competition. But Bikhchandani believes there are more naukri.coms in the making. “I understand it is about having patience… to zero-in on an entrepreneur, for an idea to succeed and for it to become a profitable business,” he says, adding that he goes through “50 to 100 business plans” to shortlist one.
The idea to invest in start-ups cropped up when Info Edge got listed on the Bombay Stock Exchange in 2006 and raised Rs. 170 crore. But it was not until 2010, says Bikhchandani, “that we became more serious about our strategy”. This financial year alone, till June 2011, Info Edge has invested in three new start-ups, building a portfolio of six companies with a total investment of about Rs. 80 crore, a significant amount for a company that clocked Rs. 293 crore in revenues in the year ending March 31, 2011.
Thirteen years after founding Info Edge, last year, Bikhchandani vacated the position of managing director and CEO and asked his long-time associate Hitesh Oberoi to take over. Another senior colleague and Info Edge’s chief financial officer Ambarish Raghuvanshi additionally became group president – finance. In official jargon, Bikhchandani now focusses “primarily on strategic matters, investments and acquisitions”.
He has Rs. 450 crore of Info Edge’s cash reserves in his hands, thanks to the profitable operations of naukri.com. The high profitability has also made the company a darling among investors, with a valuation that is 45 times its price-earnings ratio and a market capitalisation of Rs. 3,800 crore. With 43.24 percent of the company’s shares, Bikhchandani is now a millionaire many times over. But he is clear that not all of the cash will be used for strategic stakes. “About Rs. 90 crore [consists of] advances from our clients that we do not touch. Then, I prefer to put aside 15 months of working capital, about Rs. 150 crore, in case of an emergency.” So that leaves Rs. 200 crore for Info Edge’s expansion plan.
The Risk-Reward Ratio
However, the healthy financial position raises a pertinent question: Is the new strategy a needless risk that could turn disruptive for Info Edge? Especially since Info Edge’s business, despite its presence across four segments of jobs, real estate, matrimony and education, still revolves around naukri.com. The job portal clocked 80 percent of Info Edge’s 2011 revenues. Sure, 99acres.com, the real estate portal, turned black in the January-March quarter of 2011, but increased competition might see added spends hurting profitability. While matrimony portal jeevansathi.com remains a laggard behind bharatmatrimony.com and shaadi.com, the education vertical shikshaa.com is still in the ‘investment stage’. And brijj.com, Info Edge’s answer to LinkedIn’s growing influence in the job market, “is challenged”, admits Bikhchandani. So, each of these businesses still needs a lot of attention and capital to grow.
Moreover, the change in Info Edge’s profile by taking on the venture capitalist form, will put it under more scrutiny. “Pure play venture capitalists use private money to invest and sit on an investment for up to five or six years before thinking of returns. But Info Edge is publicly listed and would be under more pressure to show returns from its investments,” says Alok Mittal, managing director of venture capital firm Canaan Partners, who earlier founded jobsahead.com. Canaan has invested in bharatmatrimony.com.
The failure of Info Edge’s first investment in education start-up studyplaces.com adds to the question marks. After investing Rs. 4 crore in the company in 2007, Info Edge exited two years later through a distress sale of studyplaces.com to Educomp Solutions. It hardly recovered its investment. “It is a risk,” admits Bikhchandani. “Though we want each of these companies to succeed, it might not turn out to be so. But looking at the investments that we have done till now, I am confident,” he adds.
Hitesh Oberoi agrees that it is the right strategy. “Internet penetration in India is growing and many new opportunities are coming up. It is not always possible for us to start new businesses by ourselves.” The last Web service Info Edge launched was in education, shikshaa.com, two years ago. As online traffic increases, “we want to expand our presence in the consumer Internet space and make Info Edge the biggest in it,” says Bikhchandani.
His peers also back him. Says Deep Kalra, founder of travel portal makemytrip.com, “If this strategy is to succeed, Bikhchandani is the best person to execute it. He has an eye for detail and given his experience, he will be a good mentor for entrepreneurs.”