Just Dial's Rs 950-cr IPO opens today: All you need to know

The estimated Rs 950-crore IPO of local search engine Just Dial will begin today and is one of the largest initial public offers by an Indian Internet company.

Just Dial a safety net for investors but is fuelling a grey market

•The IPO, which does not have issue of fresh shares, would see promoters offloading 17.49 million shares. This would make up for 25.2 percent of the company’s paid up equity capital. According to a report in the Economic Times, Just Dial will adopt a scheme “safety net’’ for retail investors where the company promoters assure that they will buy back shares from the retail applicants at the IPO price, if its stock falls sharply during the first six months after listing. However, while the move is welcome, it seems to be a fuelling a grey market already.

[caption id=“attachment_796961” align=“alignleft” width=“380”] The objects of the offer are to achieve the benefits of equity shares listing on stock exchanges and to carry out the sale of 17.50 million shares by the selling shareholders.[/caption]

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“The Just Dial IPO is quoting at a premium of Rs 70 to the upper end of Rs 470-543 band in the grey markets of Gujarat, Maharashtra and other states in the north as punters in this illegal market believe the IPO would be lapped up by retail investors,” the ET report added.

Price range of issue price

• The issue price range is Rs 470 - 543 and the discount to retail investors is Rs 47 (10 per cent to the floor price). “This is for the first time that any company is offering such a huge discount of 10 percent at the lower price band,” KRIS Director Arun Kejriwal said.

However, the net proceeds of the IPO is unlikely to come into the company, as it is an exit opportunity for the existing investors.

If successful, it will be the biggest IPO this year

• The Just Dial IPO, if successful, will be the biggest IPO in calendar year 2013. Last year, Bharti Infratel raised Rs 4,118 crore in 2012’s biggest IPO.

Co has already raised Rs 208 cr

• Founded by V S S Mani, the company, which started offering local search services in 1996 under the Justdial brand, has already raised Rs 208 crore by issuing shares to anchor investors including Goldman Sachs and HSBC.

• Citigroup and Morgan Stanley are the book-running lead managers to the issue. The company plans to list its shares on the BSE, NSE and MCX-SX.

Crisisl has rated Just Dial as a fundamentally strong company

• According to CRISIL Research, Just Dial provides search services across two main genera: company search - a specific or any business; category search - product or service based on a given classification.

• CRISIL has rated Just Dial as a fundamentally strong company relative to other listed equity securities in India. The assigned grade takes into account Just Dial’s huge local search database (9 mn products and service providers), the largest in India, and a business model which has been difficult to replicate.

The company enjoys the first-mover advantage & strong mindshare among users in the local search space.

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 percent advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs).

In addition, it has shown resilience to the technological changes over the period and is planning to expand & deepen its presence into new territories & existing geographies respectively.

Key challenges

Just Dial has to keep itself abreast of new technologies and new applications to stay ahead of the pack

“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,” said Crisil in a research report.

Once lost is lost forever

The business model depends on the user traffic, - the higher the traffic, the more the SME’s advertising. Any dissatisfaction on user’s experience on data updation (availability), technological glitches in mobile & website would be difficult to win back the customer’s trust, said brokerage GEPL Capital in a report.