Indian internet firm Info Edge`s business interests – ranging from job portals to online food delivery firm Zomato – may have been hit hard by the effects of the coronavirus pandemic, but its share price has more than doubled in value after surging to record highs during the crisis.

Analysts say the rally is fuelled by its focus on web-based firms, which have enormous growth potential in a market that is increasingly going digital.

“The recent run up in the stock is largely due to increased preference towards digitisation where Info Edge is a strong player,” Ajit Mishra, vice president of research at New Delhi-based online stock trading firm Religare Broking, says. “In terms of financials, its standalone business has decent fundamentals and strong growth prospects. However, most of its investment companies are still loss-making.”

Info Edge was founded by Delhi businessman Sanjeev Bikhchandani during the 1995 internet boom, and owns brands including Naukri.com, one of India`s biggest recruitment websites, real estate portal 99acres.com, and Jeevansathi.com, a matrimony platform that helps members search for suitable partners.

Info Edge has also invested more than $200 million in more than 20 start-ups over the past few years. The biggest among them is a one-fifth stake in Zomato, which is expected to launch an initial public offering next year. It also owns Naukri Gulf, a jobs website in the Middle East.

The company employs 4,500 people and has 75 offices in 46 cities in India, as well as offices in Dubai, Riyadh, Abu Dhabi and Bahrain, according to Info Edge`s financial statements.

Info Edge is benefitting from its “well-diversified product portfolio” and over the years has “gained trust from its investors through strategic utilisation of [money] fundraised so far”, Ashis Biswas, head of technical research at CapitalVia Global Research, says.

“Info Edge has a detailed knowledge of the Indian consumer internet domain, too. We believe those are the major factors influencing such optimism and a strong outlook in general.

"From a valuation perspective, it is a little stretched,” he adds.

But given the fundamentals and the outlook, Mr Biswas says he expects the share price to continue to perform well. To its advantage, its businesses are tapping a rapidly expanding market of internet users in a country of more than 1.3 billion.

Info Edge was the first internet company to list on India`s stock exchanges in 2006, starting out at about 145 rupees (US$2) a share.

Before India`s Covid-19 lockdown came in to effect on March 25, its shares were trading at about 1,700 rupees on the National Stock Exchange. On Friday, the stock closed at a record high of 4,306.35 rupees.

Some analysts, however, believe that the stock is overvalued.

“While execution remains top-notch, dependence of its core vertical on economic recovery could jeopardise growth rate in the medium term,” analysts at Edelweiss Research said in a note this month. It says it maintains a “hold” recommendation on the stock, citing its “expensive valuation”, trading at 62 times the forward estimated earnings for the next financial year.

The company is “a long-term play on the internet space in India”, Edelweiss Research adds.“With [a] lead in the online recruitment market through Naukri.com and presence in the online classified space, it has the potential to establish a market leading position and grab [a] large pie of increasing online adoption,” the analysts at Edelweiss Research say in the note. However, key risks include the potential for losses to mount from the companies it has invested in," they add.

Info Edge`s performance will also hinge on the country`s emergence from the Covid-19 pandemic, as hopes for a vaccine grow. But risks remain that a surge in infections could derail an uptick in the economy.

India`s GDP contracted by 7.5 per cent in the quarter to the end of September this year, according to official data released on Friday.

This compares with a slump of 23.9 per cent in the previous quarter at the height of India`s Covid-19 lockdown restrictions. With two consecutive quarters of negative growth, the latest numbers confirm that India has entered a recession.

However, many economists forecast that the country will return to growth early next year, which would bode well for companies such as Info Edge.

Info Edge`s latest financial results for its standalone companies, released on November 10 for the quarter to September, revealed the impact of the Covid-19 crisis. The company`s revenue was down by 19.1 per cent to 2.56bn rupees compared with the same quarter a year earlier.

Things have, however, picked up in the third quarter after lockdown restrictions were eased by the government, helping Info Edge`s businesses, including its recruitment vertical, to recover.

“Things are getting better with every passing week,” Hitesh Oberoi, the company`s managing director and chief executive, said on a conference call with analysts this month. “And if the situation on the Covid front improves, hopefully more sectors [that the recruitment business depends on] will come back to normal levels.”

Its jobs website Naukri.com has seen traffic returning to pre-Covid levels, while 99acres.com, which saw a sharp drop in revenues during the peak of the lockdown, is also starting to recover but builders remain cautious about advertising spend, Mr Oberoi added.

Matrimony portal Jeevansathi.com, however, managed to grow its revenues even during the peak of the pandemic, with the company revealing plans to invest heavily in marketing spend to boost the brand`s position across the country.

Despite the Covid-19 crisis, Info Edge encouragingly managed to raise capital of 18.75bn rupees after it closed its qualified institutional placement (QIP) issue in August, and it is looking to use the funds for further acquisitions.

“We`re constantly evaluating companies – in the last quarter alone, we must have looked at five to six deals,” Mr Oberoi told analysts during the conference call. “We`ve said `no` to most of them. We have a team inhouse and we`re continuously looking for opportunities to both invest in start-ups and acquire companies, in all the verticals we operate in.”

There could be another boost for Info Edge to come, financial experts say. According to Indian media reports, Zomato is expected to launch an initial public offering next year, which analysts say could help increase Info Edge`s valuation. Zomato`s other investors include Jack Ma`s Ant Group.

Zomato is valued at high premium being a start-up,” says Hemant Sood, managing director of Findoc Group, citing estimates that peg it at $3.5bn. “But on negative side, it is still in losses and the company cannot enjoy higher valuations in the long run if losses rise or are even sustained.”

Nevertheless, he believes the future is bright for Info Edge, as technology continues to expand its role in India.

“Info Edge being a leader in its verticals is expected to grow and outpace its competitors,” Mr Sood says.

The large customer base that Info Edge has built up over the years, coupled with “expertise, finances and technology” has put it in a very strong position.

“This is the era of digitisation and companies with strong a database are expected to capture a major market share in the long run,” he says.