DSIJ Mindshare

Dial Just Dial To Re-Enter The Stock

Dial Just Dial to re-enter the stock

The stock has been trading range bound with huge volumes picking up since Feb 2016. This suggests bottom finishing at the current levels.

Just Dial, is synonymous to an online multilinguistic directory that operates 24x7. Bolloywood's most popular face, Amitabh Bachchan became its brand ambassador in 2010. To add to it, Bachchan had also invested about Rs 6 lakhs in the company and earned jaw dropping returns of Rs 3.4 crores in the company in less than 2.5 years.

Just Dial 08888888888 and get data of all the service providers registered therein. Moreover, just visit www.justdial.com and get the bookings done for any hotel, flight, event, bus, hospital, cab, movie tickets etc. and also do online shopping of the products like any other e-commerce. On the whole, it helps consumers find the relevant information about the providers of products and services listed in the database of the company. Just Dial has bridged the gap between consumers and service providers through its e ‘one stop shop' methodology.

The company offers voice and online platform for the companies which get registered with it. It generates revenues majorly from search related services with paid listing services for SMEs, thereby providing large number of SMEs to create existence in the online world. The search service is available to the consumers across its multiple platforms of internet, telephone and text messages on mobiles.

Since inception, the company has advanced to transacting from search in just three clicks and has become a national search destination with its pan India expansion through its ‘Search Plus' service.

IPO:

A concept like ‘Google of India' with no peers around was bought by Just Dial in 1996. The biggest IPO of the calendar year 2013, Just Dial could raise nearly Rs 1000 crores with an issue price of Rs 530. Investors had bid for over 50 Million shares and company offered just 13.5 Million shares resulting in oversubscription at 12 times despite of expensive valuation. In an earlier development the IPO had got cancelled in 2011! The bubble of its IPO lasted only for a year when the stock made its all-time high at Rs 1900 in August 2014. Thereafter the stock has never seen any upside, rather has dipped nearly 80 per cent in the next two years, with mounting competition in the ecommerce industry.

Facts and Figures:

Just Dial had total of 16.3 million SMEs listing as of March 2016. Just Dial users have contributed nearly 6.39 crores reviews and ratings for various listings. It had approx. 3.68 lakhs campaigns. The owners of the business get an option to list their businesses on Just Dial database for free. Apart from generating revenues via search related services, the company has entered new revenue streams viz; transaction fee, vendor app usage fee, shop rentals, ad revenue, subscription fee from vendors though the Search Plus model.

Financials:

The company so far has only one subsidiary Just Dial Inc. USA established in October 1 2014. Hence its standalone and consolidated numbers reflect more or less same numbers.

Revenues (limited to India) for the year ended March 2016 came in at Rs 690.83 crores with an increase of 17.1 per cent from the previous fiscal. Company's 5 years' revenues CAGR stands at 21.39 per cent but latest 3 years declined to 14.41 per cent. Company is paid fixed periodic fees to carry out advertising campaigns on its platforms. Moreover, company has varied packages like platinum, diamond that decides the priority in search results. Nearly 68-70 per cent of the direct expenses of the company are incurred in employee benefits. During the year company increased its employee benefit expenses by 22 per cent to Rs 377.41 crores. Other expenses that mostly includes rent, advertisement expenses, communication costs, internet charges and database and content charges. Company's EBITDA stood at Rs 170.59 crores as against Rs 165.66 crores in FY15. Company's net profits rose just 2.2 per cent to Rs 141.85 crores for FY16. During the year company's net worth decreased to Rs 671.57 crores from Rs 673.35 crores. The trade payables have increased by 41 per cent to Rs 19.28 crores. Meanwhile it decreased its short term provisions by 75 per cent to Rs 5.05 crores. The return on net worth has been gradually decreasing since FY 13 to 21 per cent in FY16. All in all, the company's bigger aims towards growth have hit the margins badly. As its dividend yield stands low at 0.43 per cent.

Speaking quarterly, the standalone year on year revenues have increased by 6.2 per cent to Rs 176.29 crores in Q1FY17. During the quarter company's operating expenses increased 22.3 per cent to Rs 155.99. Meanwhile, other income too rose triple digit to Rs 28.86 crores. Finally, its net profits rose almost 8 per cent to Rs 38.93 crores. The EPS growth remained muted for FY16 with just 1.7 per cent rise to Rs 19.96. Previous year's growth stood at 14.5 per cent. The stock has witnessed a free fall every time it has announced the quarterly results for September and December 2015 and March 2016 as the company failed to fulfil the rosy picture it created ahead of the results.

From the above chart, we can see that the company's ROA, ROE and ROCE growth numbers are diminishing. Out of the total assets of the company 70-75 per cent are the current investments which fetches it the regular returns. Company's reserves and equity have reduced marginally in FY2016. Company is almost debt-free and hence capital employed is nearly similar to the net worth.

Peers:

Just Dial hardly has any listed peer in its search business. Amongst the non-listed ones it's competitor askme.in of Infomedia18 is likely to shut down its operations from the August end. It has terminated the services of delivery employees and asked other employees to work from home. Even, Getit, that operates ecommerce under AskMe also is to be shut down after it failed to offer options to its Mauritius Based Astro Entertainment Networks Limited. Another peer sulekha.com connects 25 million users with over 5 million businesses and operates with come big investors around the world.

Buy Back:

During February 2016, the company had informed that it had received the observation letter from SEBI as an approval to dispatch buyback offer. The short term investors who were stuck in the free fall of the share price were advised to tender the buyback offer as the stock seemed to have bottomed out and that the company had justifiable reserves and investments to back the buyback. The offer to tender shares and again buy in the secondary market was feasible as the divergence in the prices was huge. The stock had surged nearly 140 per cent in just two months' post offer. However, the buyback is still pending as the buyback has been stayed for now.

Search Plus and JD Omni:

Search Plus is an Android app integrates nearly 24 services. It features an updated UI and large tiles for each category. It also features voice search option and find results on the app. It has loyalty points which users get for when they get other users to sign up. It allows online shopping also.

The company has launched ‘JD Omni' in Feb 2016, which is the first cloud hosted solution which handles supply chain of the businesses of people who buy it, like your own website that helps the SMEs manage their online and offline sales. It helps businesses track their revenues, profits, inventory including payrolls etc.

Search Plus and JD Omni are growth oriented products but would require huge one-time expenses and advertising expenses. It aims at investing nearly Rs 100 crores in the ad spending for Search Plus. The commercial launch of Search Plus was delayed that considerably disappointed the investors. Long term investors need to be patient to have any profits generated out of the said products.

The company believed that the growth had decreased because of shortage of staff in the search business and thereby aims at increasing it to 2000-2500 in FY17. The company has around 800 employees including 600 in sales in recent quarter is mulling to add more 500-600 in Search Plus. JD Omni had a customer base of 6000 up to Q1FY17 that brought in Rs 50 million. The company intends to increase the base to 25000 in the fiscal 2017.

Apart from this, the company has recently integrated business of Ola and Uber for cab booking and IRCTC for train booking. Just Dial has enhanced the user interface for its Search Plus verticals and also Android App.

Just Dial has recently approved the with Just Dial Global Private Limited for demerger of data and information undertaking of the latter.

Going Forward:

The stock has been used as an arbitrage and reverse arbitrage opportunities because of variations in its spot and future prices. The stock is mostly traded where it has a trend of giving obvious moves at times of events or news. Recently, the open interest in the stock peaked 25 per cent from just 11.5 per cent in a week. The 25 per cent was held by just 4 clients out of which only one held more than 12 per cent. The stock has been trading range bound with huge volumes picking up since Feb 2016. This suggests bottom finishing at the current levels.

Moreover, on long term basis the stock has been bracing its structure with the launch of unique products in the online market. But the investors ought to have patience as to get breakeven in the costs and the results the products start fetching. Tracing the P/E of 23.2 as against the industry P/E of 54 and a Book Value of 116, this debt free company seems to be undervalued and has a long way to go. We suggest a BUY in the stock with reasonable upside at least.

Deb Mukherjee, CEO, Wisdom Capital
Fundamental View: Just dial is currently trading at an attractive price of 518 and can be considered an excellent investment opportunity. Listing price of this share was 612, i.e. we are getting appx 15% discount. However, June qtr results were not as per the expectation of the market but continuous improvement in operating margin is a clear signal of positivity in the stock. The stock has already fallen over 30 per cent in the last three months and going forward sustained momentum in JD Omni-license sales can provide further upside. We are expecting that JD Omni to contribute 3-8 per cent of revenues over FY17-19. Technical View :Scrip is in primarily down trend for the last couple of years. But simultaneously for the last two quarters downtrend has been arrested with huge volume. This is clearly indicating huge accumulation. On the other hand since August 2014 scrip was moving in a downward channel, which has completed its downward journey in 104 weeks timeframe. In weekly charts there is a clear cut double bottom formation with positive bias. 
(Deb Mukherjee does not have his investment position in this stock).

DSIJ MINDSHARE

Mkt Commentary28-Mar, 2024

Mindshare29-Mar, 2024

Multibaggers28-Mar, 2024

Interviews28-Mar, 2024

Multibaggers28-Mar, 2024

DALAL STREET INVESTMENT JOURNAL - DEMOCRATIZING WEALTH CREATION

Principal Officer: Mr. Shashikant Singh,
Email: principalofficer@dsij.in
Tel: (+91)-20-66663800

Compliance Officer: Mr. Rajesh Padode
Email: complianceofficer@dsij.in
Tel: (+91)-20-66663800

Grievance Officer: Mr. Rajesh Padode
Email: service@dsij.in
Tel: (+91)-20-66663800

Corresponding SEBI regional/local office address- SEBI Bhavan BKC, Plot No.C4-A, 'G' Block, Bandra-Kurla Complex, Bandra (East), Mumbai - 400051, Maharashtra.
Tel: +91-22-26449000 / 40459000 | Fax : +91-22-26449019-22 / 40459019-22 | E-mail : sebi@sebi.gov.in | Toll Free Investor Helpline: 1800 22 7575 | SEBI SCORES | SMARTODR