Just Dial Ltd (JDL) is one of the leading local search engines in India providing users of its “Just Dial” search service with information and user reviews from its database of local businesses, products and services across India. The company is coming with an offer for sale of 17,497,458 equity shares within a price band of Rs. 470 - Rs. 543.
The offer opens on May 20th 2013 and closes on 22nd May 2013.
Retail investors will get a discount of 10 % on the floor price i.e. Rs.47 per share. Also the company is offering a safety net for retail investors for a period of 180 days from the listing date. If the 121‐180 day VWAP (on day 181) is less than the retail offer price, the promoter group will buyback those shares at the retail offer price.
Business Background –
Just Dial Ltd. (JD) was founded and incorporated by first generation entrepreneur V S. S.Mani in 1993. Mr. Mani conceived the idea of providing up-to-date business listings 24x7 during its 2-year job stint with Yellow Pages during1987-89.
JD commenced its voice-based search business operation in 1996 in Mumbai. Today, the company has voice date center search service across 250 cities in India. It launched its local search web service in early 2007, and added SMS and mobile internet searchservices in the later part of the year.
The pre-IPO promoter holding stands at 37.1%, which is expected to decline to 33.1% post-IPO. Other than promoters, large institutional investors are Sequoia, SAIF and Tiger funds.
JD’s business model is B2B, wherein it earns revenue by charging a fee to run a campaign or have a premium listing on its platform. The client who pays listing fees gets its name posted on top of the search results in its category and location, or would be higher in ranking during a voice search or sms search.
The premium listing is divided into three categories: Platinum, Gold and Silver. The packages for the premium listings vary from weekly, monthly, quarterly to annually The fee for the same varies across industries and across sectors. For example, a restaurant in Mumbai would be charged more than a restaurant in tier-2 cities. Similarly, a high-end service like saloon would be charged more than a low-end service such as garage in the same location.
As on December 2013, JD had 9.1mn listings on its platform, of which 0.195mn listings (2%) were paying. Even if we assume that more than one-third of these listings were fake, inactive or repeated, even then nearly 3% of JD clients are paying.
More than 70% of its members are the ones who have paid the company earlier, thus highlighting the benefits clients enjoy from premium listings. Around 93% of JD’s revenue comes from top 11 cities
Strong brand equity, rich content and user-friendly platforms are the entry barriers to JD’s business model
Although JD’s business model and industry approach would sound simple in terms of setting up, the past has not proven so. There have been many new entrants in this business over last 5 years, but none of them have proven a threat to JD.
If one asks oneself is there is any other voice call number one remembers other than 88888888, the answer would be ‘NO’. Also, none of its competitors have even managed to build even half the listings, which JD has built over its existence spanning 17 years.
According to alexa.com, the globally renowned web analytics company, justdial.com, is ranked No. 36 in the top 100 websites in India and top site in its category. Even a very niche data search service provider such as burp.com and zomato.com are far behind JD.
High Operating Leverage, negative working capital, lower capex & treasury income – JD would generate huge cash with realistic growth
Over last 5 years, JD has grown manifold in terms of its reach, listings and paid membership. The company’s topline has grown at a CAGR of 40% over last 5 years, with PAT growing at a CAGR of 106% over same period. Its EBITDA margins, too, has expanded from sub 5% in FY08 to 28% for 9MFY13. This clearly depicts that there is high operating leverage in business, wherein PAT growth is at a much higher rate than topline growth.
Going forward, operating leverage would increase, as the customers search moves from voice to the Internet. Earlier, for every new city to enter and every voice call to service, JD had to incur a cost of infrastructure as well as human capital. But with the Internet as the medium and with voice reach already in 250 cities, these costs to the ratio of growing revenue would fall.
The business model is also low on capex, leading to a high asset turnover ratio. Every year the company would spend 5-8% of its operating revenue on the maintenance capex.
The hardware and software would be revamped every 4.-5 years to keep pace with the latest technology.
JD has negative working capital since it collects sales in advance, giving no credit to clients. With no inventory and debtors, growth in business would lead to higher cash generation from the balance sheet.
Financial Performance –
JD’s IPO and offer price range Just Dial's revenues increased at 39% CAGR over FY08-FY12 to Rs.262.1 crs. in FY12 (Rs.264.5 crs in 9 months of FY13).
The strong revenue growth was driven by growth in paid listings/campaigns which grew more than four times to 171000 in FY12 from 40500 in FY09 (195100 listings in 9MFY13).
As a result , EBITDA margin increased to 25.7% in FY12 from 5.0% in FY08. As Just Dial’s business is not capital intensive and it does not have net debt, improvement in EBITDA margin has led to an improvement in PAT margin.
PAT margin increased to 20% in FY12 from 2.4% in FY08. Also, RoE improved to 53.6% in FY12 from 6.7% in FY08. JD reported a EPS of Rs 9.4 in FY12. And the company is debt-free with a negative working capital cycle.
Valuation & Long term Prospects –
JD’s IPO and offer price range are ideally suited for an investor who believes on the growth potential of an evolving industry and the position of the company to capitalize on the same. In the listed space, two closest comparable peers to JD are Yelp Inc. and Info Edge Ltd. While the former is US-based NYSE listed content search service provider, the latter is India-based listed player which makes money from operating sites like naukri.com, jeevansathi.com, 99acres.com, shiksha.com, etc.
Yelp is the closest comparable in terms of business, while in India Info Edge part of classifieds market is closest peer in listed space. Yelp is trading at a PE of 76x FY14 while Infoedge trades at a PE of 24x FY14E
Hence although JD’s pricing looks expensive, we believe its justified by the immense potential to generate strong cash flows going ahead. Hence the premium paid would be for the uniqueness of its business and scarcity of same in the listed space. We hence advise a SUBSCRIBE to this IPO with a potential upside of 15-20%% on higher price band. But we advise this IPO mainly for long term investors.
The recommendation is given as per our research. Our company accepts no liability for the content of this document, or for the consequences of any actions taken on the basis of the information provided, unless that information is subsequently confirmed in writing.
Last week we had mentioned about a small correction of up to 5940-5970 levels for the Nifty before any further rise. Nifty was accordingly dragged downwards up to 5970 levels in the initial trading session of the week itself. Nifty opened on a negative note and was dragged downwards up to our mentioned support level at 5972 to close lower by 2%. FMCG sector specifically ITC lead the move. Nifty opened on a positive note, moved downwards up to 5970 levels, was again pulled upwards taking support at these levels and ultimately closed near to where it opened. The third day undoubtedly opened lower and rose 2.5% in a single day with Realty sector and PSU banks specifically PNB at the forefront of the move. Last two days too traded with a positive bias up to our mentioned resistance at 6180-6200 levels. Nifty was revoked from moving further by the IT sector and Media sector.
Last week was the fifth consecutive optimistic week for the stock markets. Nifty has taken a resistance at our mentioned level of 6180-6200. Hence we can expect some correction of up to 6100-6050 levels for a bounce back. Moreover, the oscillators are lying in the over-bought zone hence nifty can fall further up to our next support at 5990-5970 levels in the first place and up to 5885 further which is the 50% retracement level. None of the indicators suggest reversal and hence if nifty has to rise further upwards with or without a breather; we maintain our next resistance at 6300-6330 levels. The stock has given a 'V' pattern breakout which suggests upward rally up to 6600-6700
Gold imports rose last week at the beginning itself to avail the benefits of possible large buying during Akshay Tritiya festival. However, the demand decreased that made gold to fall below its one month low due to the firmer dollar and fall in ETFs. The import has increased concerns about Current Account Deficit and trade deficit which records an increase to 17.8 billion $ for April. This accounts to nearly 138% rise in gold imports which shall contribute to high inflationary pressures and refrain RBI from any further monetary easing.
WPI data shows a rise of 4.89% which is the lowest since Nov 2009. The food inflation declined due to sharp fall vegetable prices and is expected to fall further if monsoon supports. Base metal prices too are easing out and hence we can expect marginal fall in the coming quarter, and thereby expect some easing by RBI.
We had talked of a breather and 20-50 EMA positive cross-over that would take nifty up to 6100 levels which was its next immediate resistance level. Nifty worked accordingly. Nifty opened on a positive note and IT sector specifically TCS & Auto sector led the positive move. Second day opened lower and traded with a positive bias to close higher by 1.21%. FMCG sector performed the best. Third day opened with a gap-up but was very choppy and hence filled the gap on the same day itself. Fourth day experienced some selling pressures where Realty sector and Pharma sector specifically Sunpharma were responsible to drag the markets downwards. Fifth day again opened lower traded positively up to 6100 levels and closed very near to these levels. Stock markets were open on Saturday. Nifty showed a lethargic attitude and played within 6100 range only. Pharma sector specifically Dr. Reddy, Lupin and Sunpharma prevented nifty from a fall.
Nifty has made a two year high at current levels. We saw that nifty could not move higher to break 6100 with rising volumes. Moreover, the oscillators are in the over-bought zone. So if nifty corrects our next support would be between 5970-5940 levels. The further support would be at 5870 levels. However, none of the indicators is giving the exact direction of a fall. So optimistically speaking, if nifty rises further our next immediate resistance would be 6180 and further up to 6330 levels. Nifty has made a kind of a ‘V’ pattern on the weekly charts and hence if broken with higher volumes can give incredible results for the nifty.
Currently the liquidity conditions are comfortable due to the better government cash balances and narrowing gap between banks’ lending and deposits. However, RBI Governor told that liquidity might remain in a deficit for few months ahead which is in a way good for restricting inflation rise. But RBI might give one more cut of at least 25bps in the next policy announcement.
Indian IIP rose at 2.5%. Indian Factory output data rose consecutively for the third month in 2013 due to improved investments and exports. However, the domestic demand is lethargic which is preventing a further rise. Growth rate is expected to touch 6% in the current fiscal year.
Gold buying was summoned last week after a sharp sell-off. Taking advantage of the bargain prices many private investors initiated physical buying. Retail investors seem to be bullish on gold for the coming period.
Nifty took a breather at the end of last to last week and hence made a new upward rally of up to 6020 levels. Nifty movement was volatile for the entire week as expected. We had talked of 5970 as our major resistance level and if broken we had mentioned next resistance to be at 6100 levels. Nifty opened on a positive note and traded with a positive bias with for the entire session. Second day opened on a positive note, showed highest intraday volatility and finally closed near to where it opened. FMCG sector specifically HUL lead the positive move and surged nearly 17.17%. This was due to the 22.52% stake offer made by the parent company Unilever Plc along with Unilever N.V. to HUL. Moreover, Lok Sabha passed the Finance Bill for 2013-14 which was the reason of high intraday volatility. The third day maintained positive momentum due to the positive expectations from RBI policy announcement for a 50 basis points rate cut. The RBI policy day traded with a negative bias with Banking sector to drag the stock markets downward.
We had mentioned 6100 levels as our resistance level and hence nifty might give some more upward movement before a major fall in the markets, if last Friday’s tick is to act as a breather. Nifty has also given 20-50 day EMA positive crossover which depicts the change in the trend. However, the oscillators have given a negative crossover that too in the over-bought zone and hence we expect a correction of up to 5850-5820 in the first place and 5750 to be the next support level.
RBI initiated the policy announcement with repo rate cut by 25bps due to slow growth and receding inflation and declared no more easing. Other rates specifically CRR, Reverse repo remained unchanged. The major bottleneck to the growth is high Current Account Deficit and hence RBI would be more concerned in these areas. RBI also tightened gold loans by restricting to finance import of gold especially from jewellery exporters. It also expected gold coins up to 50 grams only.
- Unitech Ltd: Buy
Buying Range: 28.7-28
- Asian Paints: Sell
Sell Range: 4645-4650
Stocks on Radar:
Cipla Below 397
Crompton Greaves above 95
Siemens Above 566
Sail Above 65.80
Tatasteel Above 315.40
As they say, “Days begin with hopes and end with dreams. A chit-fund group by the name of ‘Saradha’ had sold the ticket to the moon to people but their journeys ended on the doorstep to hell. A dream that was incredible while it lasted. The Saradha Group had sold big dreams, and many had invested every bit of their life’s savings; some had even left their jobs. At risk is at least Rs.20,000 crore, mostly in small savings from the poor, who can ill-afford the loss.
The Saradha Group had got advances from investors as contribution for allotment of plots or flats besides a ‘money back’ option. However, there was an option for the investors to cancel the booking and get back their money with compound interest from 12% to 14%.
Saradha Reality catered to all kinds of investors. It had installment plans with tenure varying from 12 to 60 months where minimum investment was Rs 100 per month. It raised money from investors with contributions ranging from Rs 10,000 to Rs 1 lakh for a tenure of 15 months to 120 months. It also had a lump sum investment scheme (with minimum amount of Rs 1,000 and multiple thereof) with tenure varying from 12 months to 168 months. At the end of the tenure the investor had the option to get either allotment of land or a flat or to simply get a refund of the money he or she had put in, along with the promised interest.
Brand building was an inherent part of Sudipta’s Ponzi Scheme. He cleverly ensured that the Saradha Group had huge presence in the media. His first entry into the space was through Channel 10 and thereafter he expanded into dailies like the Bengal Post & Sakalbela—in 2010. Sen bought out Tara channels, as well. At the time of closing down, the group had 10 media outfits — news TV channels, newspapers and magazine,” the Business Standard points out. This gave the group a lot of credibility and helped build its brand. The cine actor Mithun Chakraborty was the brand ambassador for Channel 10.
To understand the entire chit-fund scam, one must understand their modus operandi. Say, with the start-up cash of Rs 50,000 from two depositors, a company floats a ‘Rupees One Lakh’ scheme, with an assurance of 20% return. Eventually, the fund manager or agent needs to cough up Rs 1.20 lakh at the end of the first year. To raise this sum, he brings in three more investors who contribute Rs 40,000 each.
At end of the second year, the manager has to repay those who contributed the previous year at Rs 48,000 each. To make this payment, the agents raise another Rs 48,000 from three new investors at the end of the second year to make the previous payments. Now, these new investors need to be repaid Rs 57,600 each for a total of Rs 1,72,800 at the end of the third year. The manager now needs more investors and collects Rs 43,200 from four investors this time to make those payments.
The first rule, therefore, is that the company has to constantly keep on adding fresh investors. So even if the old depositors do not ask for refunds, the chain instantly treads into troubled waters if the company fails to get new depositors.
Cut to the chit-fund scam, Shankaraditya Sen, an ambitious Naxalite, who had once fought for the poor, later turned into a land shark. Going by the name of Shankar in his neighbourhood at the height of the Naxal movement in the 1970s, he had disappeared over a decade ago, only to resurface with a new identity — Sudipto Sen.
It might be just an eyewash to throw investigators off their investigation track or a frantic attempt of a drowning man clutching at the straws, but Sudipto Sen put down everything in a tell-all letter to the CBI revealing all the details of the scam. He, in due process, also opened a can of worms – following which, he had to make a dash to save his life.
Announcing a Rs 500 crore relief package for scam-hit small and medium depositors, the TMC has proposed a 10% hike on tobacco products in the state to raise money for the relief fund. Meanwhile, the state government has frozen Sudipta’s Sen’s bank accounts, seized his cars and four office buildings in and around Kolkata. But will all this help the small retail investors?
Sparing a thought for the above-mentioned scam, one might think, why do such fraudulent schemes keep cropping up in India? What is the actual issue which comes out of it?
In this jungle of scamsters and cons, what are the opportune avenues for the middle class to invest in, other than the fixed deposits in bank, gold, or the more obvious - real estate?
It seems that a lack of knowledge of decent investment opportunities is one solid reason why people tend to get pushed towards these schemes.
It is actually very difficult for the government to stop such high-risk Ponzi schemes, since it is the people’s own discretion to invest in such systems. But the middle class in India is increasingly finding it difficult to make sensible investments and in the dearth of choices which can provide them huge returns with small investments, fall prey to such schemes.
In conclusion the ‘chit fund scam of the Saradha Group in West Bengal is not new and it is not for the first time that something of this sort has happened. The ‘Stockguru’ scam or the ‘Speak Asia’ frauds have been some glaring examples. But in spite of these, newer scams keep occurring every other day. So it becomes peoples’ responsibility to understand that nobody can turn rich overnight. People should think before investing and lets hope that the law is also enforced strongly to stop such crooks fool the small retail investor.
We had talked of 5970-5950 as our resistance level for the nifty to break the downward trend. Nifty has currently made a high at 5925 levels. Last week nifty opened lower and traded with a positive bias for the entire daily session to close higher by 0.89%. Amongst all NSE India & BSE India sector only IT sector specifically Infosys and HCLTech could not withstand the positive move. Second day opened on a positive note and was dragged downwards in the initial half but was again pulled upwards to close near to where it opened. After a festive gap of one day the fourth day again experienced fresh buying in the stock markets. That day being the expiry day in derivatives market was also putting thrust on the buoyant prices in the F&O stocks. Last day ended on a negative note with Realty sector at the forefront of the move. It sector performed the worst in the last week. As recently declared by NASSCOM about the US Immigration Bill announcement is likely to hit Indian IT sector as the IT companies have been restricted to obtain visas for their H1B and L1 employees if more than 75% already have it. The restriction is likely to be increased to 65% and 50% up to 2015 and 2016 respectively. And most of the IT large-caps are highly dependent on US outsourcing and off shoring business.
Last week ended on a negative note. We can expect a further fall of up to 5750-5720 levels which is a 50% retracement level of the upward rally and 5660 levels which is a 200day EMA support. The oscillators too are lying in the overbought zone. The last negative tick might also act as a breather for a further upward move up to 5750-5790. If nifty manages to break these levels 6100 would be the next resistance level.
We are heading towards the RBI policy announcement. RBI is expected to cut benchmark short term lending rate by 0.25% and repo rate to maintain falling inflation and boost growth. Goldman expects a cut of 0.50%.
Chidambaram strived hard to convince foreign investors about the determination of Indian Government to bring in growth through constant reforms. Moreover, Rangarajan forecasted the growth rate to reach 6.4% in the current financial year. Trade deficit has also come down to record to a two year low. The reason being fall in oil imports. Exports to Pakistan have risen to 1.64 Billion $.
Commodity prices have fallen. And we can sense WPI also cooling off a bit. Results season adding up spices to the market with volatility and we may conclude that we can witness some consolidation before rate cut. Banking stocks to be monitored with caution and expectation.
We are recommending BHEL buy@190 -185 with a target of 202 and stop loss at 179 for 2-3 months time span.
We also recommend SAIL for long term. Buy@ 62-59.5, stop loss @56 with target of 73-76
The stock market moved precise with the obvious technical indications it got last week. We had talked of a bounce back for the further fall in the markets. Nifty fell slightly more than our mentioned support level at 5550 but closed near to these levels. The fall below 5550 levels might have acted as a continuation of a sudden selling pressure or an indication of a further fall of up to 5450 levels which is the gap-filling. Now both RSI and Stochastic indicators are lying in the oversold-zone that suggests a bit of correction i.e. a bounce back in the markets. Nifty is near to the support level but with a downward trend. To break the trend nifty will have to break last week’s high at 5754 levels. For a time being nifty might give a bounce of up to 5620-5650 levels as a part of retracement of the last week’s fall for the next fall.
Industry has witnessed deregulation of the sugar sector by giving freedom to mills to sell sugar in the open market. The gist of the recommendation is to use the Fair and Remunerative Price (FRP) fixed by the central government as the base price for sugarcane, while Rangarajan has also suggested that sugar mill should share a part of their market gains with farmers. Rangarajan has said that 70 percent of market prices realised from sugar and sugar products can be given to cane growers. The sugar industry is losing Rs 3000 crore per year because of levy sugar burden. If that burden is taken off from the industry, it stands to benefit Rs 3000crore. This in turn would benefit farmers as large part of this amount would be utilised to pay the sugar cane farmers. It is to be noted that nearly 70 per cent of the payments accounts for the sugar cane. Levi decontrol gives choice to mills to sell this stock at market price and this can in turn increase the supply taking prices down if the supply is not monitored properly.
This leaves sugar stocks to be observed fundamentally for long term. Renuka Sugar and EID Parry with better cash flow will perform better. Rest will follow the technicals as the bottom forming is not significant.
Nifty opened on a positive note but experienced high intraday volatility to close positively flat. Amongst all NSE India BSE India sectors; Realty sector specifically DLF could exceptionally beat nifty to close higher by 5% & 7.8% respectively. Second day traded with a positive bias with Pharma sector specifically Sunpharma and Metal sector specifically Sesagoa at the forefront of the move. Third day initiated the fall which lasted till the end of the week. Last day ended on a sluggish note with Maruti Suzuki competing nifty by almost 7%.
Our very own FM is all set to a world tour to market and promote India’s growth and states that India has a potential to absorb 50 Billion $ per year. This would naturally help to bridge the fiscal deficit gap. The yesteryear’s inflows were sufficient to pay the Current Account Deficit. But the falling exports and rising oil and gold imports would need some more funds flowing in the market. Moreover, the Government cannot levy higher import taxes to avoid smuggling. Government sure of higher profitability in 2013-14 if the RBI periodically trims its rates by 25bps. As it is we are heading towards Assembly elections 2014, so everything will be fine in the long-run .