I went through Info Edge’s Annual Reports at a glance here and here. The first thing that caught my eye was how much the company was earning via Other Income. So I dug in a bit more:
Why does Other Income constitute >30-50% of Net Income?
FY15: Other Income is 764.01, where Net Profit is 1938.59, which is almost 40%
FY16: Other Income is 828.10, where Net Profit is 1415.80, which is 58%
FY17: Other Income is 828.45, but there’s a Net Loss of (1895.56), which they say is a Net Loss from their JV holdings. They’ve actually retrospectively adjusted these losses. The PL statement of FY16 is not consistent in the FY16 Annual Report and the FY17 Annual Report because of this. In the FY17 PL statement, FY16’s Other Income has been increased to 4406.55 and again, a Net Loss from JV holdings of (3015.07) has been deducted. I don’t even understand if this is legal. Maybe an Accountant can help me out.
What bothers me the most is why didn’t they adjust for the losses in FY16 itself? The FY16 Annual report makes no note of this.
On an interesting note, Info Edge holds shares in Zomato from many countries. FY16 Annual Report shows that it owned 100% of Zomato Media (Yes, that Zomato), but it’s been reduced in 2017:
What does ‘Other Income’ constitute?
Let’s get back on track.
I didn’t want to get judgmental. I thought ‘Other Income’ could be from their investments in some subsidiary which runs their major businesses (Websites). Boy, was I surprised. This is from the Notes to Financial Statements:
A majority of Other Income is Dividend/Sale from Current Investments and Interest from Bank FD (Seriously?). ‘Current Investments’ are a bunch of Mutual Funds. Again, reading between the print, it was true unfortunately that they earn a bulk of their income from Bank FD Interest:
This shows that the company has somehow generated cash flows in the past which they have invested in Bank FD and Mutual Funds. But why is it that their core business is so flimsy that the Net Income figure is 50% made up of income from their passive investments? Are they unable to reinvest the cash in their core business? Earning Interest and MF Dividends/Gains on some past profits while the core business takes a back seat isn’t a Business Model at all. If investors wanted to invest in Mutual Funds and Bank FD, the company could pay out massive dividends and the investor could choose which FD or MF they want to invest in.
Thoughts?