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BMA Wealth Creators Equity Research
EQUITY RESEARCH
IPO NOTE
JUST DIAL LTD.
research@bmastock.com
033 40000163
17
th
May, 2013
DETAILS OF THE ISSUE
THE OFFER
Just Dial intends to raise Rs 822-950 crore through the Initial Public Offer
which comprises a fresh equity issue of 1.75 crore shares. At the lower band
of Rs 470/share the company intends to raise Rs 822 crore while at the
upper band of Rs 543/share it is estimated to raise Rs 950 crore.
Retail investors will be provided with a 10% discount on the floor price.
The promoters of the company provide to buy back shares under the
safety net arrangement for retail shareholders in case the price of the
stock goes below the safety net trigger price, within the period stipulated
by SEBI.
IPO GRADING
The Offer has been graded by CRISIL, a SEBI registered credit rating agency.
The credit rating agency has assigned a grade of 5/5, indicating that the
fundamentals of the issue are strong relative to other listed equity
securities in India.
RECOMMENDATION
At the upper end the total issue size is Rs. 950 crore whereas the price band
for the issue is Rs. 470 to Rs.543. retail investors will be given a discount on
10% to the resulting issue price and will further be given a safety net
mechanism. This means that if the market price (based on last 2 months
vwap price). Six months post listing is less than the issue price, retail
investors will be refunded money at the issue price. The valuation of the
issue leaves little room for appreciation. However, with the above
mentioned advantages for retail investors we recommend retail investors to
subscribe with a return expectation of 9% to 12%.
OBJECTIVES
The Company proposes to utilize the Net Issue proceeds for the following
objects:
To achieve the benefits of listing the Equity Shares on the stock
exchanges;
To enhance the brand name; and
To provide liquidity to existing shareholders.
Issue Size (Rs Cr) 882-950
Face Value 10.00
Issue Opens 20/05/13
Issue Closes 22/05/13
Price Band (Rs) 470-543
Bid Lot (no. of shares) 25
Morgan Stanley India
Citigroup Global Markets India
Pre-Issue% Post-Issue%
Promoters 37.15 33.13
Public - 25.04
Others* 62.85 41.83
Note*: Others include SAIF Mauritius Company,
Sequoia, Tiger Global and SAPV
Total Issue Size (No. of shares) 17497458
Issue Break Up Percentage
QIB 75
Non-Institutional 15
Retail 10
Issue Details
Lead Managers
Shareholding Pattern %
Book Building Pattern
Just Dial Limited
BMA Wealth Creators Equity Research
Just Dial provides search services across two main genera: company search – related to any specific or any business need;
category search - products or services based on a given classification, location or key words. Having started with live
operator-assisted phone (voice) search service, it later launched internet, mobile-internet and SMS-based services. The
search service is free for users. The company generates revenues from paid advertisers who subscribe to its fee-based
campaign packages. The advertisers will be given priority ranking at the time when users are searching for their required
results.
Just Dial was incorporated on December 20th
1993 as A&M Communications Pvt. Ltd by Mr V.S.S. Mani, in New Delhi as a
private limited company under the Companies Act. The name of the company was changed from A&M Communications
Private Limited to Just Dial Private Limited on December 26, 2006. The company was converted into a public limited
company on July 22, 2011 and consequently, the name was changed to Just Dial Limited. Over the years, Just Dial has
expanded its operations across India with a strong presence in top 11 large cities to become India’s leading local search
services player.
In FY12, the Company has addressed over 25.43 crore search requests across its platforms. The Company has a database of
approximately 9.1 million business listings (primarily SMEs) across various cities and towns in India. As of Dec 2012, Just Dial
Limited has conducted approximately 195100 campaigns for its paid advertisers.
COMPANY OVERVIEW
FUTURE STRATEGIES
Invest in strengthening the brand: Investment in brand building campaign will help Just Dial further strengthen the
brand, lead to greater search volume from their users and greater number of paid advertisers as well. Increasing
awareness through online and offline direct marketing efforts are their future brand building strategies.
Enhance the users’ experience: The Company intends to continue to invest in technology to develop search algorithms
that would be more efficient and adaptable to users. To enhance the user experience and handle user traffic, the
company is continuously upgrading the hardware used, and developing new software from time to time.
Expand and enhance the SME relationships: The Company plans to offer the existing membership packages for listing
to more areas in India and to more categories of businesses. These plans also involve the provision of special
membership packages to SME categories (witness high user interest). Moreover, the company intends to leverage on
their direct relationships with SME’s to educate and explain to them the benefits of advertising with Just Dial.
Development of new products and services: The Company intends to create mobile applications for searches for mobile
phones using WAP in keeping with the technological advancements. It is exploring areas for users to offer to sell, as well
as buy, goods and services through their website, starting with cars. The company is in the process of developing ‘Quick
Quotes’ to prospective buyers with a price quote from multiple vendors.
Broaden and deepen the footprint in India and expansion into new geographic markets: The Company approximately
had 9.1 million listings as of 31st
March, 2013. It intends to exploit further opportunities that come its way, beyond 11
cities in which it operates, to broaden and deepen its presence in India. Just Dial also plans to implement its multi-
platform local services model in other geographic markets like it is doing in the U.S and Canada.
Just Dial Limited
BMA Wealth Creators Equity Research
INDUSTRY OVERVIEW
Over the last few years, India has shown strong economic growth. According to the McKinsey Report, the country’s income
pyramid is expected to change, with India’s middle class expected to grow by over ten times by 2025. Small and medium
enterprises have contributed greatly to the economic development of India. Such SME’s need to advertise to grow for which
they need local service search providers, which provide both offline services (print directory and phone based searches) and
online services (localized portals providing a database). Just Dial falls under the local service search industry in which
advertising is the main source of revenue. The local search market has evolved from word of mouth.
Internet advertising is expected to grow at 34% over 2010-14. CRISIL Research expects expenditure in advertising to grow by
12% in 2013 subject to a revival in the economy. Growth is expected to pick up momentum in the following years and overall
ad revenues are expected to grow at 13% CAGR over the next four years to touch Rs 553 billion by 2016. Internet advertising
is expected to grow much faster at a CAGR of 34% to Rs 28 billion in 2014. Search engines, being the largest contributor to
internet advertising, are likely to benefit from this growth. The players in the local search services market include Justdial,
Asklaila, Burrp, Getit, Infomedia18, Sulekha etc. Just Dial ranks 40 among Indian websites, i.e. best ranked in comparison to
its competitors in the industry, with Sulekha holding the next best rank at 51. Just Dial’s ability to grow its online search
services is visible from the strong growth (three-year CAGR of 64% to 124.3 million in FY12) and mobile internet searches
(three-year CAGR of 127% to 23.8 million in FY12).
KEY STRENGTHS
First mover advantage in the Indian local search market: Just dial is one of the first companies to provide local search
services in India, since as early as 1996. Moreover, such a large database of local business listings, took several years to be
developed, and required a significant amount of time and effort, which serves as a barrier to entry to other firms. It also has
an advantage as it is a debt free company and follows an asset light model, as it has always taken 100% advance for paid
campaigns, which has enabled the company to operate with negative working capital.
Strong brand recognition: Just Dial’s long standing presence, quality of database, fast response to search queries and
consistent delivery of quality user experience has caused it to evidence 254.3 million searches. The brand development
however, has occurred mostly through word of mouth by its users.
Attractive value proposition offered to SME’s: Most of the business listings on just dials database are SME’s as they get a
cost effective platform, personalized service and access to relevant customers.
Experience and expertise in local Indian markets: Having operated in the Indian market for 16 years, Just Dials experience,
knowledge, management expertise and infrastructure has enabled them to establish relationships with SMEs, which is out of
the scope of most generic search engines.
Multiple platform service on a large scale: Search results may be obtained through a number of communication media i.e.
internet, mobile internet, voice and SMS providing easy accessibility to its users. Moreover, Just Dial also has a large
collection of reviews and ratings by users of the businesses. These are beneficial to the potential users to enhance their
search experience and enable them to make informed choices.
Advanced and scalable technology platform: Just Dials award winning technology is the key that efficiently consolidates its
huge database on various media to provide services to its users.
Ability to monetize growth in searches: Searches by users are potential business leads for listings. The company has
successfully managed to convert free listings into paid campaigns/listings, along with growing the number of searches. Thus,
a strong uptick in paid campaigns is brought about.
Just Dial Limited
BMA Wealth Creators Equity Research
Failure to manage growth and scalability or adapt to technological developments or industry trends: This could affect
the performance and features of the company’s products and services and reduce its attractiveness to users and paid
advertisers. The business of the company depends significantly on the users and paid advertisers. If the company fails to
maintain or enhance its technology and infrastructure, then the company's business, financial condition, results of
operations and future prospects may be adversely affected.
Proper functioning of the website and avoiding interruption or breakdown of telecommunications, information
technology systems and networks: The Company extensively depends on the provision of local search services through
technology-driven media, hence relying upon information technology and telecommunication systems, networks and
related infrastructure, to function efficiently with uninterrupted operations. Provision of a reliable, available and easily
accessible website is also a key concern for the company.
Intense and increasing competition for users and advertisers and brand recognition: There is local as well as
international competition for provision of search and advertising services. Increased competition could be a grave
concern. Negative publicity or inability to attract users will adversely affect the brand recognition.
Ability to expand business outside India may be limited: Due to its international expansion in the US and Canada there
may not be benefits from future growth in the USA and Canada as their subsidiaries there cease to exist. Currently, Just
Dial’s promoters, Mr. Mani and Mr. V. Krishnan, play an important role in the strategic planning and operations of Just
Dial. The company needs to ramp-up its senior and second line management because if JD Global provides services
globally, as Just Dial does in India, the global operations will take away significant management bandwidth, impacting
the company’s core operations in India.
Registered office is not owned: The registered office of the company in Mumbai, Maharashtra and other premises from
which it operates are not owned, but rented. This may prove to be a major concern in future.
Exposure to infringement claims by third parties: In the past there have been intellectual property claims against the
company which may occur in the future as well.
Distribution of third party data may lead to legal claims: The essence of Just Dials business model lays in the
distribution of third party data, which may lead to legal claims like breach of privacy, defamation etc.
Google poses a key threat: Google, the world’s largest search engine has been operating in India and providing search
services for many years. A comparison of Google India and Just Dial’s financials for FY12 showed that Just Dials revenues
were 22% of Google India’s revenues. Moreover, the fact that Google is a successful global player, poses a threat and
cause for concern for just dial. Globally, Google’s search services are based on technology while the search market in
India requires collection and maintenance of database through feet-on-street and voice-based search option. Thus, if
Google India enters into the same field as Just Dial, it will provide tough competition and pose a threat to the business of
Just Dial.
KEY CONCERNS
Just Dial Limited
BMA Wealth Creators Equity Research
Rs in Crore
FINANCIALS
2009 2010 2011 2012
9 months
ended Dec-
2012
Income
Revenue from Operations
Sale of search and other related services 73.54 116.06 179.60 259.4 264.36
Yellow pages publication services 12.38 14.84 - - -
Other operating revenue
(revenue from reseller)
- - 4.33 2.66 0.13
Other revenue 5.89 3.86 3.73 13.15 7.12
Total Income 91.81 134.76 187.66 275.21 271.61
Expenditure
Employee benefits expense 52.28 66.88 94.72 130.84 129.03
Depreciation and amortization expense 3.84 5.00 6.79 9.02 10.20
Finance cost 0.005 0.004 0.029 0.017 0.005
Other expenses 25.71 33.66 43.83 63.99 61.95
Total Expenditure 81.83 105.54 145.36 203.87 201.18
Restated profit before tax and exceptional
items from continuing operations
9.98 29.22 42.29 71.34 70.43
Exceptional items - - - - (1.52)
Restated profit before tax from continuing
operations
9.98 29.22 42.29 71.34 68.91
Tax expense/(income)
Current tax 3.52 - 11.92 20.60 20.74
Deferred tax charge / (credit) (1.36) 9.89 1.55 0.32 1.09
Fringe benefit tax 0.28 - - - -
Total tax expense 2.44 9.89 13.47 20.92 21.83
Restated profit after tax from continuing
operations (A)
7.54 19.32 28.82 50.42 47.08
Discontinuing operations
Profit before tax from discontinuing operations - - - 0.23 -
Tax expense of discounting operations - - - 0.07 -
Restated profit after tax from discontinuing
operations(B)
- - - 0.16 -
Restated profit for the year (A+B) 7.54 19.32 28.82 50.58 47.08
EPS 1.09 2.78 4.15 7.29 9.05*
Note: *FY13E EPS computed on an annualized basis
Just Dial Limited
BMA Wealth Creators Equity Research
EXTRACT FROM GRADING RATIONALE BY CRISIL
The assigned grade takes into account Just Dial’s huge local search database (9.0 million products and service providers), the
largest in India, and a business model which has been difficult to replicate. Its search volume has grown multi-fold courtesy
quick service, relevant search results, updated database and technology, leading to a strong brand image. It has successfully
grown its paid campaigns by more than four times over FY09-12 to 171,000 in end-FY12 (195,100 in 9MFY13) and enjoys
100% advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs).
The grade takes cognizance of Just Dial’s experienced and proactive management personnel, who have enabled the
company to meet users’ expectations on two fronts: technology and search content. Having started with only phone based
search, the management has moved with the times to embrace the new-era media of mobile phones (SMS), internet and
mobile internet. Further, the company has indigenously developed its technology platform and search algorithm, which
enable it to provide search results that are relevant to users’ requirements. The number of search requests across all search
platforms was 254.3 million in FY12 (267.2 million in 9MFY13), up from 82.2 million in FY09.
While Just Dial has consistently innovated itself and stayed ahead of competitors, any aggressive move by larger players
such as Google India is a key monitorable. As the company grows, maintaining management bandwidth to oversee the
growth will be a challenge, particularly in the backdrop of expansion in the US and Canada through a different promoter
entity. Also, Just Dial has to keep itself abreast of new technologies and new applications to stay ahead of the pack.”
Just Dial Limited
BMA Wealth Creators Equity Research
BMA Wealth Creators Limited
www.facebook.com/bmawealth
www.twitter.com/bmawealth
Vishwakarma II
29-5A, Dr.Ambedkar Sarani, Topsia Road, Kolkata - 700 046
033-40110099 | Toll Free Number: 18602662131
www.bmawc.com
commodities@bmastock.com | investor.complaints@bmastock.com
Disclaimer: This document is for private circulation only. Neither the information nor any opinion expressed
constitutes an offer, or any invitation to make an offer, to buy or sell any securities or any options, future or
other derivatives related to such securities. BMA Wealth Creators Ltd. or any of its associates or employees do
not accept any liability whatsoever direct or indirect that may arise from the use of the information herein.
BMA Wealth Creators Ltd. and its affiliates may trade for their own accounts as market maker, block
positional, specialist and/or arbitrageur in any securities of this issuer (s) or in related investments, may be on
the opposite side of public orders. BMA Wealth Creators Ltd. and its affiliates, directors, officers, employees,
employee benefit programs may have a long or short position in any securities of this issuer (s) or in related
investments no matter content herein may be reproduced without the prior permission of BMA Wealth
Creators Ltd. While there report has been prepared on the basis of published/other publicly available
information considered reliable, we are unable to accept any liability for the accuracy of its contents.

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Just dial ipo_note

  • 1. BMA Wealth Creators Equity Research EQUITY RESEARCH IPO NOTE JUST DIAL LTD. research@bmastock.com 033 40000163 17 th May, 2013 DETAILS OF THE ISSUE THE OFFER Just Dial intends to raise Rs 822-950 crore through the Initial Public Offer which comprises a fresh equity issue of 1.75 crore shares. At the lower band of Rs 470/share the company intends to raise Rs 822 crore while at the upper band of Rs 543/share it is estimated to raise Rs 950 crore. Retail investors will be provided with a 10% discount on the floor price. The promoters of the company provide to buy back shares under the safety net arrangement for retail shareholders in case the price of the stock goes below the safety net trigger price, within the period stipulated by SEBI. IPO GRADING The Offer has been graded by CRISIL, a SEBI registered credit rating agency. The credit rating agency has assigned a grade of 5/5, indicating that the fundamentals of the issue are strong relative to other listed equity securities in India. RECOMMENDATION At the upper end the total issue size is Rs. 950 crore whereas the price band for the issue is Rs. 470 to Rs.543. retail investors will be given a discount on 10% to the resulting issue price and will further be given a safety net mechanism. This means that if the market price (based on last 2 months vwap price). Six months post listing is less than the issue price, retail investors will be refunded money at the issue price. The valuation of the issue leaves little room for appreciation. However, with the above mentioned advantages for retail investors we recommend retail investors to subscribe with a return expectation of 9% to 12%. OBJECTIVES The Company proposes to utilize the Net Issue proceeds for the following objects: To achieve the benefits of listing the Equity Shares on the stock exchanges; To enhance the brand name; and To provide liquidity to existing shareholders. Issue Size (Rs Cr) 882-950 Face Value 10.00 Issue Opens 20/05/13 Issue Closes 22/05/13 Price Band (Rs) 470-543 Bid Lot (no. of shares) 25 Morgan Stanley India Citigroup Global Markets India Pre-Issue% Post-Issue% Promoters 37.15 33.13 Public - 25.04 Others* 62.85 41.83 Note*: Others include SAIF Mauritius Company, Sequoia, Tiger Global and SAPV Total Issue Size (No. of shares) 17497458 Issue Break Up Percentage QIB 75 Non-Institutional 15 Retail 10 Issue Details Lead Managers Shareholding Pattern % Book Building Pattern
  • 2. Just Dial Limited BMA Wealth Creators Equity Research Just Dial provides search services across two main genera: company search – related to any specific or any business need; category search - products or services based on a given classification, location or key words. Having started with live operator-assisted phone (voice) search service, it later launched internet, mobile-internet and SMS-based services. The search service is free for users. The company generates revenues from paid advertisers who subscribe to its fee-based campaign packages. The advertisers will be given priority ranking at the time when users are searching for their required results. Just Dial was incorporated on December 20th 1993 as A&M Communications Pvt. Ltd by Mr V.S.S. Mani, in New Delhi as a private limited company under the Companies Act. The name of the company was changed from A&M Communications Private Limited to Just Dial Private Limited on December 26, 2006. The company was converted into a public limited company on July 22, 2011 and consequently, the name was changed to Just Dial Limited. Over the years, Just Dial has expanded its operations across India with a strong presence in top 11 large cities to become India’s leading local search services player. In FY12, the Company has addressed over 25.43 crore search requests across its platforms. The Company has a database of approximately 9.1 million business listings (primarily SMEs) across various cities and towns in India. As of Dec 2012, Just Dial Limited has conducted approximately 195100 campaigns for its paid advertisers. COMPANY OVERVIEW FUTURE STRATEGIES Invest in strengthening the brand: Investment in brand building campaign will help Just Dial further strengthen the brand, lead to greater search volume from their users and greater number of paid advertisers as well. Increasing awareness through online and offline direct marketing efforts are their future brand building strategies. Enhance the users’ experience: The Company intends to continue to invest in technology to develop search algorithms that would be more efficient and adaptable to users. To enhance the user experience and handle user traffic, the company is continuously upgrading the hardware used, and developing new software from time to time. Expand and enhance the SME relationships: The Company plans to offer the existing membership packages for listing to more areas in India and to more categories of businesses. These plans also involve the provision of special membership packages to SME categories (witness high user interest). Moreover, the company intends to leverage on their direct relationships with SME’s to educate and explain to them the benefits of advertising with Just Dial. Development of new products and services: The Company intends to create mobile applications for searches for mobile phones using WAP in keeping with the technological advancements. It is exploring areas for users to offer to sell, as well as buy, goods and services through their website, starting with cars. The company is in the process of developing ‘Quick Quotes’ to prospective buyers with a price quote from multiple vendors. Broaden and deepen the footprint in India and expansion into new geographic markets: The Company approximately had 9.1 million listings as of 31st March, 2013. It intends to exploit further opportunities that come its way, beyond 11 cities in which it operates, to broaden and deepen its presence in India. Just Dial also plans to implement its multi- platform local services model in other geographic markets like it is doing in the U.S and Canada.
  • 3. Just Dial Limited BMA Wealth Creators Equity Research INDUSTRY OVERVIEW Over the last few years, India has shown strong economic growth. According to the McKinsey Report, the country’s income pyramid is expected to change, with India’s middle class expected to grow by over ten times by 2025. Small and medium enterprises have contributed greatly to the economic development of India. Such SME’s need to advertise to grow for which they need local service search providers, which provide both offline services (print directory and phone based searches) and online services (localized portals providing a database). Just Dial falls under the local service search industry in which advertising is the main source of revenue. The local search market has evolved from word of mouth. Internet advertising is expected to grow at 34% over 2010-14. CRISIL Research expects expenditure in advertising to grow by 12% in 2013 subject to a revival in the economy. Growth is expected to pick up momentum in the following years and overall ad revenues are expected to grow at 13% CAGR over the next four years to touch Rs 553 billion by 2016. Internet advertising is expected to grow much faster at a CAGR of 34% to Rs 28 billion in 2014. Search engines, being the largest contributor to internet advertising, are likely to benefit from this growth. The players in the local search services market include Justdial, Asklaila, Burrp, Getit, Infomedia18, Sulekha etc. Just Dial ranks 40 among Indian websites, i.e. best ranked in comparison to its competitors in the industry, with Sulekha holding the next best rank at 51. Just Dial’s ability to grow its online search services is visible from the strong growth (three-year CAGR of 64% to 124.3 million in FY12) and mobile internet searches (three-year CAGR of 127% to 23.8 million in FY12). KEY STRENGTHS First mover advantage in the Indian local search market: Just dial is one of the first companies to provide local search services in India, since as early as 1996. Moreover, such a large database of local business listings, took several years to be developed, and required a significant amount of time and effort, which serves as a barrier to entry to other firms. It also has an advantage as it is a debt free company and follows an asset light model, as it has always taken 100% advance for paid campaigns, which has enabled the company to operate with negative working capital. Strong brand recognition: Just Dial’s long standing presence, quality of database, fast response to search queries and consistent delivery of quality user experience has caused it to evidence 254.3 million searches. The brand development however, has occurred mostly through word of mouth by its users. Attractive value proposition offered to SME’s: Most of the business listings on just dials database are SME’s as they get a cost effective platform, personalized service and access to relevant customers. Experience and expertise in local Indian markets: Having operated in the Indian market for 16 years, Just Dials experience, knowledge, management expertise and infrastructure has enabled them to establish relationships with SMEs, which is out of the scope of most generic search engines. Multiple platform service on a large scale: Search results may be obtained through a number of communication media i.e. internet, mobile internet, voice and SMS providing easy accessibility to its users. Moreover, Just Dial also has a large collection of reviews and ratings by users of the businesses. These are beneficial to the potential users to enhance their search experience and enable them to make informed choices. Advanced and scalable technology platform: Just Dials award winning technology is the key that efficiently consolidates its huge database on various media to provide services to its users. Ability to monetize growth in searches: Searches by users are potential business leads for listings. The company has successfully managed to convert free listings into paid campaigns/listings, along with growing the number of searches. Thus, a strong uptick in paid campaigns is brought about.
  • 4. Just Dial Limited BMA Wealth Creators Equity Research Failure to manage growth and scalability or adapt to technological developments or industry trends: This could affect the performance and features of the company’s products and services and reduce its attractiveness to users and paid advertisers. The business of the company depends significantly on the users and paid advertisers. If the company fails to maintain or enhance its technology and infrastructure, then the company's business, financial condition, results of operations and future prospects may be adversely affected. Proper functioning of the website and avoiding interruption or breakdown of telecommunications, information technology systems and networks: The Company extensively depends on the provision of local search services through technology-driven media, hence relying upon information technology and telecommunication systems, networks and related infrastructure, to function efficiently with uninterrupted operations. Provision of a reliable, available and easily accessible website is also a key concern for the company. Intense and increasing competition for users and advertisers and brand recognition: There is local as well as international competition for provision of search and advertising services. Increased competition could be a grave concern. Negative publicity or inability to attract users will adversely affect the brand recognition. Ability to expand business outside India may be limited: Due to its international expansion in the US and Canada there may not be benefits from future growth in the USA and Canada as their subsidiaries there cease to exist. Currently, Just Dial’s promoters, Mr. Mani and Mr. V. Krishnan, play an important role in the strategic planning and operations of Just Dial. The company needs to ramp-up its senior and second line management because if JD Global provides services globally, as Just Dial does in India, the global operations will take away significant management bandwidth, impacting the company’s core operations in India. Registered office is not owned: The registered office of the company in Mumbai, Maharashtra and other premises from which it operates are not owned, but rented. This may prove to be a major concern in future. Exposure to infringement claims by third parties: In the past there have been intellectual property claims against the company which may occur in the future as well. Distribution of third party data may lead to legal claims: The essence of Just Dials business model lays in the distribution of third party data, which may lead to legal claims like breach of privacy, defamation etc. Google poses a key threat: Google, the world’s largest search engine has been operating in India and providing search services for many years. A comparison of Google India and Just Dial’s financials for FY12 showed that Just Dials revenues were 22% of Google India’s revenues. Moreover, the fact that Google is a successful global player, poses a threat and cause for concern for just dial. Globally, Google’s search services are based on technology while the search market in India requires collection and maintenance of database through feet-on-street and voice-based search option. Thus, if Google India enters into the same field as Just Dial, it will provide tough competition and pose a threat to the business of Just Dial. KEY CONCERNS
  • 5. Just Dial Limited BMA Wealth Creators Equity Research Rs in Crore FINANCIALS 2009 2010 2011 2012 9 months ended Dec- 2012 Income Revenue from Operations Sale of search and other related services 73.54 116.06 179.60 259.4 264.36 Yellow pages publication services 12.38 14.84 - - - Other operating revenue (revenue from reseller) - - 4.33 2.66 0.13 Other revenue 5.89 3.86 3.73 13.15 7.12 Total Income 91.81 134.76 187.66 275.21 271.61 Expenditure Employee benefits expense 52.28 66.88 94.72 130.84 129.03 Depreciation and amortization expense 3.84 5.00 6.79 9.02 10.20 Finance cost 0.005 0.004 0.029 0.017 0.005 Other expenses 25.71 33.66 43.83 63.99 61.95 Total Expenditure 81.83 105.54 145.36 203.87 201.18 Restated profit before tax and exceptional items from continuing operations 9.98 29.22 42.29 71.34 70.43 Exceptional items - - - - (1.52) Restated profit before tax from continuing operations 9.98 29.22 42.29 71.34 68.91 Tax expense/(income) Current tax 3.52 - 11.92 20.60 20.74 Deferred tax charge / (credit) (1.36) 9.89 1.55 0.32 1.09 Fringe benefit tax 0.28 - - - - Total tax expense 2.44 9.89 13.47 20.92 21.83 Restated profit after tax from continuing operations (A) 7.54 19.32 28.82 50.42 47.08 Discontinuing operations Profit before tax from discontinuing operations - - - 0.23 - Tax expense of discounting operations - - - 0.07 - Restated profit after tax from discontinuing operations(B) - - - 0.16 - Restated profit for the year (A+B) 7.54 19.32 28.82 50.58 47.08 EPS 1.09 2.78 4.15 7.29 9.05* Note: *FY13E EPS computed on an annualized basis
  • 6. Just Dial Limited BMA Wealth Creators Equity Research EXTRACT FROM GRADING RATIONALE BY CRISIL The assigned grade takes into account Just Dial’s huge local search database (9.0 million products and service providers), the largest in India, and a business model which has been difficult to replicate. Its search volume has grown multi-fold courtesy quick service, relevant search results, updated database and technology, leading to a strong brand image. It has successfully grown its paid campaigns by more than four times over FY09-12 to 171,000 in end-FY12 (195,100 in 9MFY13) and enjoys 100% advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs). The grade takes cognizance of Just Dial’s experienced and proactive management personnel, who have enabled the company to meet users’ expectations on two fronts: technology and search content. Having started with only phone based search, the management has moved with the times to embrace the new-era media of mobile phones (SMS), internet and mobile internet. Further, the company has indigenously developed its technology platform and search algorithm, which enable it to provide search results that are relevant to users’ requirements. The number of search requests across all search platforms was 254.3 million in FY12 (267.2 million in 9MFY13), up from 82.2 million in FY09. While Just Dial has consistently innovated itself and stayed ahead of competitors, any aggressive move by larger players such as Google India is a key monitorable. As the company grows, maintaining management bandwidth to oversee the growth will be a challenge, particularly in the backdrop of expansion in the US and Canada through a different promoter entity. Also, Just Dial has to keep itself abreast of new technologies and new applications to stay ahead of the pack.”
  • 7. Just Dial Limited BMA Wealth Creators Equity Research BMA Wealth Creators Limited www.facebook.com/bmawealth www.twitter.com/bmawealth Vishwakarma II 29-5A, Dr.Ambedkar Sarani, Topsia Road, Kolkata - 700 046 033-40110099 | Toll Free Number: 18602662131 www.bmawc.com commodities@bmastock.com | investor.complaints@bmastock.com Disclaimer: This document is for private circulation only. Neither the information nor any opinion expressed constitutes an offer, or any invitation to make an offer, to buy or sell any securities or any options, future or other derivatives related to such securities. BMA Wealth Creators Ltd. or any of its associates or employees do not accept any liability whatsoever direct or indirect that may arise from the use of the information herein. BMA Wealth Creators Ltd. and its affiliates may trade for their own accounts as market maker, block positional, specialist and/or arbitrageur in any securities of this issuer (s) or in related investments, may be on the opposite side of public orders. BMA Wealth Creators Ltd. and its affiliates, directors, officers, employees, employee benefit programs may have a long or short position in any securities of this issuer (s) or in related investments no matter content herein may be reproduced without the prior permission of BMA Wealth Creators Ltd. While there report has been prepared on the basis of published/other publicly available information considered reliable, we are unable to accept any liability for the accuracy of its contents.