Markets
BSE See NSE See 39,599.19
164.25 (0.42%)
collapse Related Readings collapse

Just Dial IPO: Asking For Too Much

| 5/16/2013 9:00 PM Thursday

Just Dial, India the local search provider, is hitting the capital markets with an IPO which will be open from May 20-22, 2013. Under this issue, the company is putting on offer 1.75 crore equity shares of face value of Rs 10 each.

Issue Information Rating:  35
Issue Opens On 20-May-13
Issue Closes On 22-May-13
Issue Size (No. of Shares) 174.97 lakh equity shares
Price Band (Rs.) Rs 470-543
Issue Route Book Building
Promoters V.S.S. Mani, Anita Mani, Ramani Iyer and V. Krishnan
Post issue Equity 698.70 lakh equity shares
Lead Managers Citigroup Global Markets India, Morgan Stanley India
Listing BSE, NSE, MCX-SX
Retail Portion 17.50 lakh equity shares
QIB Portion 131.23 lakh equity shares
Non Institutional Portion 26.25 lakh equity shares

The company has priced the IPO in a price band of Rs 470 and Rs 543 a share. Just Dial would raise Rs 950 crore at the upper end of the price band and Rs 822.5 crore in the lower band. Following the offer, the public will hold 25.04 per cent of the post issue equity of Rs 69.87 crore or 6.99 crore equity shares. Retail investors are offered a discount of 10 per cent on the issue price.

The entire funds raised through this issue is an offer for sale with promoter V S S Mani and its existing investors, including SAIF Partners, Tiger Global, Sequoia Capital and SAP Ventures selling a part of their holdings.

About The Company

Just Dial is a local search engine with a massive database of local businesses, products and services across the country. The company provides users a search service with locality-wise, citywise information and user reviews free of cost. The users can access this service via multiple platforms like PCs, mobile internet, telephone (voice) and text (SMS). In fiscal year 2012, the company addressed over 254.3 million search queries across all platforms. The company has a definite first mover advantage, being one of the first to offer local search services in India.

Financials & Valuations

Just Dial has posted a topline of Rs 264.36 crore for 9MFY13 as against that of Rs 259.40 crore seen in FY12. On the operating front, the company has posted a profit of Rs 63.19 crore for 9MFY13 as against Rs 55.53 crore for FY12. In fact, the operating margins showed a consistent improvement until FY12. Its net profits for 9MFY13 stood at Rs 47.08 crore as against Rs 50.58 crore for FY12. In the 2008-12 period, the topline and bottomline witnessed a CAGR of 50 per cent and 136 per cent respectively, which is tremendous but does not look sustainable over a longer period.

Financial Performance (Rs/Cr)
 9M FY13FY12
Total Income 264.36 259.40
Operating Expenses 201.18 203.87
Operating Profit 63.19 55.53
Tax 20.74 20.60
Net Profit 47.08 50.58

Considering the price bands of Rs 470-543, the expected market capitalisation is likely to be in the range of Rs 3281-3818 crore. At the post issue capital and on an annualised profit of Rs 63 crore, the stock is likely to trade at a PE of 52.35x and 60.93x for the respective price bands. The only listed player in this space so far in the Indian context is Info Edge (India), which is trading at a trailing 12-month PE of around 39x.

Even in the global context, Google Inc. is trading at a price-to-earnings multiple of 25x. Even looking at the market cap-to-sales, the issue seems to be expensive. Info Edge (India) is trading at a market cap-to-sales ratio of 8.4x its FY13E sales, whereas Just Dial (at its lower price band) is coming in at a ratio of 9.3 its FY13E sales. Although the company has grown at a breathtaking pace in the past due to lower base, the growth would moderate in the future. This is visible in the annualised 9MFY13 sales and profit growth, which has grown at a slower clip of 36 per cent and 20.7 per cent respectively on a yearly basis.

As has been mentioned already, this is an offer for sale providing an exit route to the investors. The offer has already seen issues related with valuation, and hence the company has lowered the same. However, it does not justify a price-to- earnings ratio of 50x. There is no doubt that the valuation of the company is still looking steep.

The investors as well as two of the promoters are making an exit, booking partial profits from this venture. As this is an offer for sale, it has to be backed by institutions, and thus 75 per cent of the issue has been reserved for QIBs.

Shareholding PatternPre IssuePost Issue
Promoter & Promoter group 37.15 33.13
Other Investors 62.85 41.83
Public -- 25.04
Total 100 100

We believe that there is very little for retail investors in this issue at this juncture. In the last six months, we have seen a total of four issues with a size of over Rs 100 crore. Of these, three are trading below their respective offer price, indicating that valuations are of prime importance for the market. Bharti Infratel, the biggest IPO in the last two years, debuted on the stock exchange at a nine per cent discount despite being oversubscribed. Internet stocks need uniqueness in their business model, but Just Dial’s model is pretty similar to that of other search providers like Askme.com. Considering these factors, we suggest that the retail investors stay away from the issue.

 

Find More Articles on: DSIJ Magazine, New Issue Analysis, Stock Recommendations, Fundamental Picks, IPO, IPO Analysis, Product, Large Cap

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Ducon Infra partners with Sterling & Wilson to bid for large GFD projects

Apurva Joshi / Article rating: 5.0

Ducon Infratechnologies Limited has entered into a strategic tie-up with Sterling & Wilson Private Limited, a flagship group company of Shapoorji Pallonji Group, to jointly bid large-sized FGD tenders. Ducon is an emerging technology company providing solutions in the industrial, infrastructure and digital space to multiple business segments across varied industries.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.