Just Dial IPO

Just Dial is one of the leading local search engines in India. It provides users of "Just Dial" search service with information and user reviews from its database of local businesses, products and services across 11 major cities in India. Its search service is available to users through multiple platforms: Internet, mobile Internet, telephone (voice) and text (SMS). In FY 2012, it addressed over 25.43-crore search requests across its platforms. As of December 31, 2012, it is conducting approximately 195,100 campaigns for its paid advertisers. As one of the first companies to offer local search services in India, Just Dial has a first mover advantage among consumers seeking information on local businesses. Just Dial is now also a well-known Indian brand on the Internet. In addition, through its easy to remember phone numbers and user friendly mobile phone interface, the company believes that it has been able to attain significant mind-share with users for their local search needs. Its search service bridges the gap between users and businesses by helping users find relevant providers of products and services quickly while helping businesses listed in its database to market their offerings. Its search service is particularly relevant to SMEs (small and medium enterprises), which currently, do not have many other cost effective options to access and advertise to such a large number of potential consumers. Listing on Just Dial provides businesses with exposure to users at a time when the users are making a purchase decision. Businesses may choose to pay for a listing to be featured on a priority basis in its search results, which the company calls a ‘campaign'. The businesses that pay for this service are called ‘paid advertisers'. The number of campaigns increased from approximately 40,500 as of March 31, 2009 to approximately 195,100 as of December 31, 2012. Just Dial has a large database of approximately 9.1 million listings as of March 31, 2013. The management believes that by providing fast and free access to its database, it provides a compelling user experience that will create a network effect and attract a large number of users who search for information to Just Dial. These large numbers of users will, in turn, prompt more businesses to pay for listings and become paid advertisers in order to be featured in its search results on a priority basis. About Rs 822-Rs 950 crore will be collected by the company's selling shareholders by offering 17,497,458 equity shares of Rs 10 through an offer for sale. The upper price band is fixed at Rs 543 and the lower price band is fixed at Rs 470. A discount of 10% to the Floor Price is being offered to Retail Individual Bidders. The company's existing investors, including SAIF Partners, Tiger Global, Sequoia Capital and SAP Ventures, will sell a part of their holdings. V.S.S. Mani (CEO), Ramani Iyer (COO) and V. Krishnan (promoter) will provide a safety net arrangement to eligible original retail individual bidders n allotted equity shares in the offer and who are resident in India The safety net scheme will operate for a period of 180 days beginning from the date of listing and commencement of trading of the equity shares on the stock exchanges. Strengths During the past few years, it has experienced high growth in revenues. Sales jumped from just Rs 85.92 crore in FY 2009 to Rs 262.06 crore in FY 2012, a CAGR of 45%. Net profit during the same period rose from Rs 7.54 crore to Rs 50.42 crore, a CAGR of 88%. Nine-month sales has already crossed FY 2012 full year sales and PAT for the nine months is just a tad lower than FY 2012 PAT. It's a cash rich business. As one of the first companies to offer comprehensive local search services in India, it has a first-mover advantage among consumers seeking information on local businesses. It has a very strong brand recall. It is almost a monopoly in voice-based local search service. Weaknesses In future, searches will increasingly shift to Internet and mobile Apps, where competition will be much higher and revenue/cost dynamics will be different from voice-based searches, which the company dominates currently. Regulatory changes restrict sharing of user data will affect revenues and profits. The company earns revenues largely from SMEs, which do get affected more by economic downturns. Two criminal complaints have been filed against the company and directors and employees. An adverse outcome in the above mentioned proceedings could have an adverse effect on the ability of its directors and employees, who are involved in the above proceedings, to serve the company, which may have a material adverse effect on its business, prospects, financial condition and results of operations. Valuation Annualised EPS for nine months ended December 2012 works out to 9.0. The lower price band (470) discounts this 52.3 times and upper price band (Rs 543) 60.4 times. Fast growing unique companies with strong brand and leading position tend to attract high valuations. It will be the first such company to get listed on Indian bourses and hence no Indian benchmark is available. With 90% of issue reserved for them, large investors (mainly institutional) will be deciding the issue price as well as post-listing performance. Retail investors are being given 10% discount and safety net to give them some comfort.