CRISIL assigns grade 5/5 to Just Dial IPO

CRISIL Research has assigned an grade 5/5 to IPO of Just Dial, which indicates that the fundamentals of the IPO are strong relative to the other listed equity securities in India.

The grade is not an opinion on whether the issue price is appropriate in relation to the issue fundamentals. The grade is not a recommendation to buy, sell or hold the graded instrument, its future market price or suitability for a particular investor.

According to the report, the assigned grade reflects Just Dial's strong position in the local search market across India. Leveraging its first mover advantage in phone-based search engine, Just Dial has created India's largest local search database (~6 mn products and service providers) and a business model which has been difficult to replicate. Its search volume has grown multi-fold, thanks to its fast service, relevant search results, updated database and technology, whereby it has created a strong brand image. It has successfully trebled its paid campaigns over FY09-11 to 120,200 in end-FY11, and enjoys 100% advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs).

The report says, "The grade is further strengthened by Just Dial's experienced and proactive management, who has enabled the company to meet users' expectations on two fronts: technology and search content. Having initiated with phone-based search, it was quick to embrace the new-era media of the mobile phones (SMSes), internet and mobile internet. Further, the company has indigenously developed its technology platform and search algorithm which enables it to provide search results that are relevant to users' requirements. The number of search requests across all search platforms is up at 180 mn in FY11 from 26 mn in FY07."

?While Just Dial has consistently innovated itself and stayed ahead of its competitors, who are mostly loss making, any aggressive move by larger
players, like Google India, remains a key monitorable. As the company grows, maintaining management bandwidth to oversee the growth will be a
monitorable, particularly in the backdrop of global expansion through a different promoter entity. Also, Just Dial has to keep itself abreast of new technologies and new applications to stay ahead of the pack."

"Just Dial has grown its revenues at a four-year CAGR of ~39% to Rs 1,899 mn in FY11 and improved its PAT margin to 15.1% in FY11 from 3.3% in FY07. According RoE improved to 36.6% in FY11 from 14.6% in FY07," the report says.

To read the full report click on the attachment

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