Rediff.com Continues To Bring Home the Curry

Rediff (REDF) reported third quarter numbers January that looked pretty good (conference call available here). The street certainly seems to think so as the stock is up 8% since reporting.

Lets look at the highlights from the third quarter (ended December 31, 2006):

• 3Q revenues totaled $7.75 million - 54% YoY
• Indian Online (Portals) revenue grew to $5.69 million - 80% YoY
• US Publishing revenue grew to $2.06 million - 11% YoY
• Gross margins increased to 80% from 70% a year ago
• Net Income came in at $1.51 million, or 5.20 cents per ADS, compared to a net income of $0.31 million, or 1.19 cents per ADS a year ago.
• Registered user grew by 23% YoY to 50.66 million

The company also announced some new initiatives:

• Rediff Fare Search
• Job Search
• Product Search
• Image Search
• Launched a mobile client of its Instant Messenger Rediff Bol
• Rediff also saw a surge in their Classifieds Listing service which they heavily advertised

Rediff has done a good job of launching their search products which searches across multiple sites and provides unbiased and vendor neutral results for jobs, airfare and products. You have to appreciate Rediff’s management team when you compare the portal divisions of Rediff and Sify. Rediff continues to be the leading domestic portal in India. According to Alexa, its the 5th most popular site in India behind Yahoo, Orkut, Google India and Google US. Their main competitor Indiatimes.com and Sify.com (SIFY) come in at 13th and 21st respectively.

Rediff has a lot to gain with more non-English speakers coming online in the near future with their strong local brand name. It is widely considered that most of the English speakers in India are already online. The next wave will include people who speak one of the many regional languages. This is exactly the reason why Rediff bought a minority stake in Bangalore-based software company Tachyon Technologies. Tachyon Technologies’ Quillpad software lets people use the English alphabet to type words in other languages phonetically and converts the text into the other languages’ characters.

I recently shorted Rediff successfully but got out the day before earnings since I didn’t want hold during the earnings. It turned out to be a good call and I will look into shorting the stock again if its goes over $20. Rediff is a very good company with a great future but Internet and Broadband penetration in India hasn’t been that great. There is plenty of time to go long on Rediff and until then, it's a good trading stock.

Disclosure: I don’t have a position in REDF. I closed out my short position in REDF the day before earnings.

REDF 1-yr chart: