Fresh investments to dial down margins: Just Dial

Local search engine Just Dial reported 25.08 percent decline in net-profit at Rs 35.33 crore for the quarter ended March 31. Speaking to CNBC-TV18, Ramkumar Krishnamachari, CFO of the company, said he expects FY17 revenue growth to be better than FY16. He believes steps taken by the company recently will boost growth in FY18. The company's focus is on the execution of JD Omni, Krishnamachari said, adding, Omni's customer run rate in the last one and half months was at 2,000-2,500. There has been a lot of synergy between its Search and Search Plus engine, he added.  He believes Just Dial's margin may be under pressure in the near-term due to investments that will have to be made in FY17. Further, he said one-time ad spends will start in June and will be spread over the coming quarters. The company has added 1,000 sales employees in Q4 and will further add 2,000 more in the next 9-10 months. Below is the verbatim transcript of Ramkumar Krishnamachari’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Revenue growth 15 percent aided by upfront booking from the JD Omni, can you tell us what will be a sustainable revenue growth going forward? A: We believe that the steps that we have taken this year, starting this quarter, Q4, and we will go over the next few quarters that is the scaling up of the sales force, the entire marketing infrastructure. That will yield us results from Q3, Q4 onwards. So, the full impact of that should be visible to us in Fy18. As far as FY17 is concerned, we are hoping that we will be able to do better than FY16. Sonia: The last time we spoke to you, you said you are targeting a 20-25 percent revenue growth for FY17. Would you maintain that? A: I would not want to comment or commit at this point of time. We believe that we will be doing better than FY16 in FY17 certainly. As I mentioned, whatever steps that we have taken, probably we should have taken at least a year back but whatever we have taken right now should definitely yield us and get in to the growth path of 20 percent plus maybe Q4 onwards at least on the run rate and FY18 is going to be a great year for us based on the steps we have taken now. Latha: Your Q4 bookings were at 1,800 customers, what is your expected trajectory? What will be say the JD Omni revenues in FY17? A: Right now we are focused on executing on JD Omni. We believe that there is also a lot of synergy between the Search as well as Omni. Without getting into specifics of exact number, we believe that the run rate that we have, about 2,500 customers odd that we have booked over the one and a half months, we should be able to continue that over the next 12 months or so on Omni. However, having said that, we are formulating the exact strategy whether it is going to be separate sales force, you need unified sales force, as I mentioned there is a lot of synergy between both Search and Search Plus from a SME perspective and we are in the process of formulating final strategy on that.Sonia: The paid campaign growth has slowed down to about 11 percent versus 26 percent a year ago. What was the reason for that and can we expect a pick up any time soon? A: If you look at sequentially, quarter-on-quarter (QoQ) from Q3 to Q4, we have net added about 12,000 odd contracts if you exclude the Omni that is on the core search which is far greater than what we added in Q3 which was 5,000. So, actually the cumulative figure that you see has been impacted by what steps we did not take in FY16 and which we have started doing Q4 onwards.So, we believe that campaign growth should also come track. In fact it will be far visible earlier than the revenue growth track. So, we believe that what we are seeing in Q4 net addition, that should only keep on improving as we move ahead in subsequent quarters. Our belief is that we would have seen from a business standpoint the bottoming out of what we have seen in Q3 and now on you can look forward in terms of growth trajectory, both in terms of number of contracts as well as the total pie out there. Latha: Just a word on margins, at 24.7 percent will you be able to do better in FY17? A: As you mentioned, our focus is on scaling up of sales force, infrastructure, continue making the investments that we are making on the products like Omni, etc. plus we are going to be spending on the marketing as well of JD Search Plus. We believe that even though there could be some pressure on the margin in the near quarter and the next couple of quarters, but once the sales and the overall topline growth comes back, we believe margins should come back. So, having said that, FY17 we may see that contraction in the margin profile primarily on account of the investments that we are making but it won’t be a great amount, it will be probably, if I look at normalised basis, what we ended up in FY17, probably maybe at the same level of 100 basis points here and there.