IPO Note | Justdial | Justdial Ltd (JDL) - InvestmentGuruIndia

IPO Note | Justdial | 17 May 2013 

Justdial Ltd (JDL) 

Rating 

Avoid 

Company Background 

Issue Details 

Justdial, is a prominent “local” search engine company in India, incorporated in 

1993 as A&M communications by Mr. V.S.S Mani. Justdial provides search service 

with information & user reviews of local businesses, products & services across 

India through multiple platforms such as Internet, Mobile internet (App), Telephone 

(Voice) and text (SMS). The search service is provided free to users, whereas it 

generates revenue from paid advertisers who subscribe to fee-based campaign 

packages to list their business (predominately, SMEs) on priority basis on search 

results. 

JDL has successfully transformed itself from mere voice based local search service 

providers to other emerging & under penetrated platforms like internet & mobileinternet. 

Currently, JDL’s internet platform generates ~50% of the search requests, 

followed by traditional voice (~39% in 9M13 vs ~64% in FY09) and mobile internet 

(~10% in 9M13 vs ~2% in FY09). Increasing smart phone penetration (~7% of total 

mobile phone shipments in CY12, grew by 36% over CY11) & under penetrated 

internet market (11.4% vs Asia 27.5% & World average 34.3%) provide enormous 

opportunity for JDL with strong mindshare with users. 

Outlook and Valuation 

At the lower price band of `470, JDL is valued at post-IPO issue market cap of 

`37.9bn, which translates into an annualised FY13E P/B & P/E valuation of 8.1x and 

52.3x respectively. The company enjoys the first-mover advantage & strong 

mindshare among users in the local search space. 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. On the 

financial front, JDL has a high cash conversion ratio (FCF/EBITDA - ~92% over 

FY10-12), due to 100% pre-payment by paid advertisers and the low capex 

intensive nature of the business. On the growth front, as the business model 

continues to move more towards non-linearity through increased penetration in the 

high growth internet and mobile internet platform (Mobile Internet & Internet - ~60% 

of the total traffic now vs ~35% in FY09), JDL should see expansion of operating 

margins and strong growth in earnings. 

The net proceeds of the IPO would not come into the company, as it is an exit 

opportunity for the existing investors (16% of the OFS by promoters and the 

remaining 84% by PE investors). We accept that the business model is efficient and 

has good growth prospects; however, the valuation premium JDL is demanding is 

very steep (P/E of 60x on upper band and 52x on lower band on FY13E), 

considering Google (US) trades at 27x. We believe that the steep pricing of the IPO 

factors in the medium term growth expansion. In addition, entering into low-entry 

barrier business model (Google India & Nokia City lens app biggest threat) – 

demands rigorous monitoring and also has the risk of technological obsolescence. 

Moreover, ~ 16% of the issue size is an offer of sale by the existing promoters – a 

move not likely to inspire confidence among investors. We, thus, recommend an 

Avoid rating to Justdial IPO on valuation basis. 

Issue Opens 

Issue Closes 

20-May-13 

22-May-13 

Equity Offerings (In mn shares) 17.5 

Face Value 10 

Price Band 470-543 

Issue Size (in bn) 8.22-9.50 

Post issue market cap (in ` bn) 32.84-37.94 

Maximum Application (no. of 

shares for retail) 

Issue Type 

Listing 

368 

100% Book 

Building 

NSE & BSE & 

MCX 

IPO Grading CRISIL – 5/5 

BRLMs 

Registrar 

Source: RHP 

Shareholding Pattern (%) 

Pre Issue 

Citigroup 

Global/Morgan 

Stanley 

Karvy Computer 

share P Ltd 

Post Issue* 

Promoter 37.2% 33.1% 

Non Promoter 62.9% 66.9% 

Source: RHP 

Issue Structure (In mn no. shares) 

Issue size 17.5 

of which: Fresh issue by the 

company 

offer for sale 17.5 

Break-up of net issue to public: 

QIB's portion 75% 

Non-institutional portion 15% 

Retail Portion 10% 

Source: RHP 

Analyst Details 

Dinesh Kumar K - 022-42333531 

dinesh.kumar.k@adityabirla.com 

0 

Aditya Birla Money Limited 

2 nd Floor, Sheil Estate, Dani Corporate Park, 158 CST Road, Kalina, Santacruz (East), Mumbai 400 098 | Tel: +91 22 42333400 

Page No. 1


Business Model 

Having being a free service provider to users, JDL generates revenues from paid advertisers (mostly SMEs) who subscribe to feebased 

campaign packages or memberships in order to list their businesses on priority ranking on users’ search results. The 

company offers annual and long-term renewable memberships to paid advertisers. The payments are made in advance by SMEs 

on a monthly or annual basis (~` 1130/month), which reduces the credit risk profile for JDL. Currently, JDL converts ~2% of the 

total listings into paid category (in that, ~22% belongs to premium ad package and rest belongs to non-premium ad package) and 

rest are free business listings. Since FY09, paid advertisers base has grown exponentially from 40.5k to 195.1k in 9MFY13. 

Further, the total business listings (free + paid) database has increased to 9.1 mn in 9MFY13 from 7.2 mn in FY12. 

Chart 1: Traffic Mix – 9MFY13 

Chart 2: Business Listings categories 

Search Mix - 9MFY13 

0.3% 

Business Listings 

39.2% 

49.9% 

Premium 

Ad package 

(21.7%) 

Paid listings 

(2.1%) 

Non-premium 

Ad package 

(78.3%) 

Free listings 

(97.9%) 

10.6% 

Internet Mobile Voice SMS 

Platinum Diamond Gold 

Source: RHP, ABML Research 

Having started its search services through only phone (voice call local search in Mumbai & Delhi), JDL has expanded into emerging 

verticals internet, mobile net and sms in 2007 and increased their presence across the nation. Currently, JDL is witnessing bulk of 

the traffic from new verticals: a) Internet: attracts ~50% of the traffic (up from 34% in FY09, CAGR of ~48%), b) Mobile Net: 

witnessed rapid CAGR of ~94%, constitutes ~11% of total traffic (up from 2.4% in FY09) and c) Traditional voice: grew at 

relatively lesser pace at CAGR of 19% to ~39% (down from 63.5% in FY09). JDL is the most preferred brand in the local search 

engine space, primarily due to high user satisfaction experience along with a first mover advantage, which has enabled it to occupy 

strong brand recall and mindshare among users. 

Key Strengths 

 

First mover advantage in local search & strong brand recall: First, JDL started local search services in 1996 under Just 

Dial brand in only two cities (Delhi and Mumbai) and launched its internet and mobile internet services in 2007. By being the 

first in this local search market, JDL enjoys first mover advantage and strong mindshare among users largely due to high user 

satisfaction. Currently, JDL concentrates on 11 large cities, in order to expand its network and database further in existing and 

new cities appointed resellers to collect data. JDL’s database has 9.1 mn businesses listings in 9MFY13 (up from 4.5 mn in 

FY10), mostly SMEs. 

“History shows that the first brand into the brain, on an average, gets the twice the long-term market share of the No.2 

brand and twice again as much as the No.3 brand” – Al Ries & Jack Trout 

 

Profitable business model: JDL takes payments in advance from paid advertisers, thereby reducing credit risk and enabling 

a comfortable working capital management. In addition, JDL would likely benefit from non-linearity, as the business model is 

skewing more towards net and mobile as against the traditional voice based linear model. The company has a) higher cash 

generation capabilities (FCF/EBITDA - ~92% from FY10-12 and 93% OCF/EBITDA in 9MFY13), b) no long-term debt and 

c) cash and cash equivalents worth ` 4.76 bn (12.5% & 14.5% of higher & lower end of M-cap respectively). 



Page No. 2


 

 

SMEs lifeline for advertising: JDL acts as a platform for SMEs to advertise with relatively low cost (` 1130/month) compared 

to traditional Medias. With limited marketing budgets, SMEs can attract right target customers. SMEs can upgrade their listings 

from free to non-premium memberships and finally to premium memberships based upon their customer traction. Currently, 

JDL has conversion ratio of ~2% of total listing as paid advertisers. To achieve higher conversion of paid advertisers, it is 

working on a dedicated category portal to attract SMEs in a particular business. 

Multiple platforms: JDL provides services through several communication media i.e., Internet, Mobile Internet, Voice and 

SMS. Multiple platforms offer to provide reviews and ratings from users on one platform to users across all other platforms 

(~23 mn reviews and rating in FY13). These reviews help users for better selection of product, services and brings social 

quotient into the picture. 

Objects of the Issue 

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 mn 

shares by the selling shareholders. The listing would further enhance the brand name and provide liquidity to existing shareholders. 

The company will not receive any proceeds from the offer. 

Company’s Strategy going forward 

 

 

Widening the pan-India presence: The company has enormous scope to expand beyond its existing main concentration of 

11 large cities and deepen its presence in existing cities. Apart from brand recall, JDL’s database updating capability would 

keep them ahead of competitors and attract niche users and customers. Currently, it has 9.1 mn listings across various cities 

and towns in India and is planning to convert more non-premium customers to premium by offering specialised packages 

(2.2% of total listing is paid). 

Develop new products and services: 

 

 

 

 

 

Mobile apps: JDL created a Master App for Android & iPhones and is expected to launch for Blackberry and Windows 

enabled phones. In addition, users can use WAP to search the JDL’s database. 

Enabling transactions: JDL is in the process of offering additional services under its existing platform by enabling 

purchases and bookings that are integrated in the search results from across the platforms in collaboration with service 

providers and vendors. For example, reservations at restaurants, taxi bookings, doctors’ appointment fixing, ordering 

groceries, etc., 

Car listings: JDL is exploring various areas for users to offer to sell, as well as buy, goods and services through its 

website. On this process, it is developing a car listings website in which users can research and rate car models being 

offered for sale, list their cars for sale and receive price quotes from vendors of both new and used cars. 

Quick Quotes: This product will provide a price quote from multiple vendors for the prospective buyers on 24/7 basis. 

Prospective buyers will also receive real-time updates of revised quotes by vendors through SMS and email. 

Structured data for business: JDL plans to use data analytics to leverage its existing search & user data to provide 

structured data to various businesses, product and services. 

Key Risks 

 

 

 

Low entry barriers: Local search industry has a low entry barrier as any player can establish a database and offer services. 

As it requires more initial investment, players with strong balance sheets can enter and offer competitive pricing (Google India 

and Nokia’s city lens app would be the biggest threat). 

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. 

Technological obsolescence: As the technological cycles are getting shorter and shorter, any failure to adapt to the latest 

and next generation of technology might affect them quite adversely. 



Page No. 3


Income Statement 

Profit & Loss Account (` In Mns) FY09 FY10 FY11 FY12 9MFY13 

INCOME: 

Sale of search related services 735.39 1160.62 1796.03 2593.98 2643.63 

Yellow pages pub services 123.83 148.45 0 0 0 

Revenue from operations 859.22 1309.07 1796.03 2593.98 2643.63 

Other Op. Income 0 0 43.3 26.63 1.34 

Total Income 859.22 1309.07 1839.33 2620.61 2644.97 

23.5% 52.4% 40.5% 42.5% 

EXPENDITURE: 

Employee cost 522.77 668.82 947.17 1308.37 1290.28 

Other Exps 260.7 343.17 438.29 639.47 619.47 

Total Expenditure 783.47 1011.99 1385.46 1947.84 1909.75 

EBITDA 75.75 297.08 453.87 672.77 735.22 

EBITDA Margin (%) 8.8% 22.7% 24.7% 25.7% 27.8% 

Depreciation 40.81 52.53 67.88 90.23 101.98 

Finance Cost 0.05 0.04 0.29 0.17 0.05 

Other Income 58.92 38.56 37.26 149.63 71.17 

PBT 93.81 283.07 422.96 732.00 704.36 

Tax 24.41 98.82 134.73 209.22 218.33 

Tax on PBT (%) 26.0% 34.9% 31.9% 28.6% 31.0% 

PAT 69.4 184.25 288.23 522.78 486.03 

PAT Margin (%) 8.1% 14.1% 16.0% 20.2% 18.4% 

Discounting operation/Share of loss 0 0.09 -2.08 5.37 -15.25 

PAT - Restated 69.4 184.34 286.15 528.15 470.78 

EPS (Pre-issue) 0.99 2.64 4.10 7.56 6.74 

EPS (Post-issue) 0.99 2.64 4.10 7.56 6.74 




Page No. 4


Balance Sheet 

Particulars (` In Mns) FY09 FY10 FY11 FY12 9MFY13 

a) Current Assets 647.40 936.15 1462.50 1904.83 4912.62 

b) Non-Current Assets 307.63 298.50 431.51 572.92 820.93 

Total Assets (a) 955.03 1234.65 1894.01 2477.75 5733.55 

c) Current liabilities 485.90 578.49 945.34 1382.37 1644.32 

d) Non-current Liabilities 30.16 19.37 17.10 22.95 40.49 

Total Liabilities (b) 516.06 597.86 962.44 1405.32 1684.81 

Share issue expenses (c) 38.76 

Net worth (a-b-c) 438.97 636.79 931.57 1033.67 4048.74 

Share Capital - Equity 8.56 8.56 519.05 519.08 694.44 

Preference SC 2.52 2.52 1.96 11.64 0.00 

Reserves & Surplus 427.89 625.71 410.56 541.71 3354.30 

Share issue expenses 0.00 0.00 0.00 38.76 0.00 

Net worth 438.97 636.79 931.57 1033.67 4048.74 


Cash flow 

Particulars (` In Mns) FY09 FY10 FY11 FY12 9MFY13 

Restated PBT 93.81 283.07 422.96 732.00 689.11 

Cash flow from operating activities 61.41 349.83 604.67 902.02 684.54 

Cash flow from Investing activities -98.49 -297.55 -527.82 -1144.34 -3185.15 

Cash flow from financing activities -3.55 5.89 -1.09 291.33 2521.20 

Net inc/dec in cash and cash equivalent (A+B+C) -40.63 58.17 75.76 49.01 20.59 

Opening cash balance 93.52 52.89 111.06 180.08 214.54 

Cash pertaining to de-merged sub -6.74 -14.55 

Closing cash balance 52.89 111.06 180.08 214.54 235.13 



Page No. 5


Research Team 

Vivek Mahajan 

Hemant Thukral 

Head of Research 

Head – Derivatives Desk 

022-42333522 022-42333483 

vivek.mahajan@adityabirla.com 

hemant.thukral@adityabirla.com 

Fundamental Team 

Akhil Jain Metals & Mining 022-42333540 akhil.jain@adityabirla.com 

Sunny Agrawal FMCG/Cement 022-42333458 sunny.agrawal@adityabirla.com 

Sumit Jatia Banking & Finance 022-42333460 sumit.jatia@adityabirla.com 

Shreyans Mehta Construction/Real Estate 022-42333544 shreyans.m@adityabirla.com 

Dinesh Kumar Information Technology/Auto 022-42333531 dinesh.kumar.k@adityabirla.com 

Pradeep Parkar Database Analyst 022-42333597 pradeep.parkar@adityabirla.com 

Quantitative Team 

Jyoti Nangrani Sr. Technical Analyst 022-42333454 jyoti.nangrani@adityabirla.com 

Advisory Support 

Indranil Dutta Advisory Desk – HNI 022-42333494 indranil.dutta@adityabirla.com 

Suresh Gardas Advisory Desk 022-42333535 suresh.gardas@adityabirla.com 

Sandeep Pandey Advisory Desk 022-30442104 sandeep.pandey@adityabirla.com 

ABML research is also accessible in Bloomberg at ABMR 



Page No. 6


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related information and opinions. 

Analyst holding in the stock: NIL 



Page No. 7

IPO Note | Justdial | Justdial Ltd (JDL) - InvestmentGuruIndia

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