JUST DIAL Ltd IPO Analysis

IPO Opens on 20th & Closes on 22nd May 2013 Price band Rs. 470 to 543 per shares Retail investors are offers Safety Net and also 10% upfront discount. Just dial maiden offer: apply at lower price band The long waited IPO of Just Dial Ltd (JDL) is finally seeing the day of the light as it has now planned maiden public offer that opens for subscription on 20.05.13 and will close on 22.05.13. JDL is one of the leading local search engine portals and provides its users Just Dial search service with information and user reviews from its database of local businesses, products and services across India. The company search service is available to users through multiple platforms: Internet, mobile Internet, telephone (voice) and text (SMS). In fiscal 2012, it addressed over 254.3 million search requests across our platforms. As of December 31, 2012, it is conducting approximately 195,100 campaigns for our paid advertisers. As one of the first companies to offer local search services in India, it believes that it has a first mover advantage among consumers seeking information on local businesses. It aims to provide fast, free, reliable and comprehensive information to its users, which it believe will create a network effect to attract more search queries. JDL also believe that it has established Just Dial as a well known Indian brand on the Internet. In addition, through its easy to remember phone numbers and user friendly mobile phone interface, it has been able to attain significant mind-share with users for their local search needs. Reports of JDL IPO evinced great interest in primary market community as it is likely to change the parameters for primary market as well as grey market, opine seasoned observers. Just Dials database lists 9.0 mn businesses as of February 2013 (4.5 mn as of end-FY10), mostly MSMEs. New data is added and updated regularly by 314 employees. To expand its network in existing and new cities, it has appointed resellers to collect data from their respective territories. More than just the scale of its database, Just Dials ability to consistently keep it updated has been the reason for strong growth in usage of its search services. The company that postponed its IPO plans as it could garner the then needed funds from private equity partners and is now providing exit route to some of them and also to others via offer for sale of 17,497,458 Equity Shares of Rs. 10 each by the Selling Shareholders. The listing of the Equity Shares will enhance its brand name and provide liquidity to the existing shareholders. Listing will also provide a public market for the Equity Shares in India. The Company will not receive any proceeds from the Offer. In April 2010 the company has issued bonus shares in the ratio of 55 shares for every 1 share held and thereafter has done ESOP/placement at a price ranging between Rs. 10 and Rs. 4595 with a major chunk at a price of Rs. 488.66. Now the company is coming out with an offer for sale from existing shareholders for 17497458 equity share of Rs. 10 each with a price band of Rs. 470-543 to mobilize Rs. 822-950 crore based on lower and upper price band. Minimum application is to be made for 25 shares and in multiples thereof thereafter. Retail investors are offers Safety Net and also 10% upfront discount. Out of 17497458 shares on offer the company has reserved only 1749745 shares (i.e. just 10%) is kept for retail shareholders, 2624618 (15%) shares for HNIs and rest (75%) for QIBs . This is perhaps due to the mandatory safety net clause imposed by SEBI the company wants to reduce the Safety Net burden. Issue is rated as IPO 5 by CRISIL indicating strong fundamentals. While grading, CRISIL has put disclaimer that it does not mirror the issue pricing and the issue size was considered for 9,554,307 shares. The grade is not a recommendation to buy, sell or hold the graded instrument, its future market price or suitability for a particular investor. Citigroup Global Markets India Private Limited and Morgan Stanley India Company Private Limited are the joint BRLMs and Karvy Computershare Pvt Ltd is the registrar to the issue. Shares will be listed on BSE and NSE. It appears that as promoters have to honor the Safety Net they too have opted for some dilution of stake to keep some buffer with them so that in the event of Safety Net clause application, it can pay from the buffer created and hence the issue size has more than doubles of its original plans and even higher than the CRISIL consideration. On the performance front, the company has posted an average EPS of Rs. 6.05 (on consolidated and fully diluted basis-with a CAGR of 40.2% in top and 135.1% in bottom-line respectively) and its NAV as on 31.12.2012 is Rs. 57.51. For the first 9 months of the fiscal 2012-13 it has clocked turnover of Rs. 271.61 crore with a net profit of Rs. 47.08 crore and as the equity capital post IPO remains the same due to offer for sale, this translates into an annualized EPS of Rs. 8.99 and thus the asking price is at a P/E of 52 to 60 and at a P/BV of 8.2 to 9.4 based on lower and upper price band. Thus issue is aggressively priced. The company has no listed peer for comparison. The company is now facing competition from Askme, Asklaila, Getit, Sulekha etc and hence the first mover gains made in the past may see diminishing pattern going forward. On BRLMs front, Citi Group and Morgan Stanley had mandate for 17 and 11 IPOs and out of them 4 IPOs failed to give listing gains to investors from both of them. Remark: Apply at the lower price band at Rs. 423 per share (with upfront 10% discount to retail investors) for a lot as applicable under safety net.