Hope to grow revenue by 20-25% in FY17: Just Dial CEO

Just Dial reported weak set of earnings in its third quarter result released on January 28.

Net profit fell 16 percent to Rs 26.99 crore year-on-year (YoY) and EBITDA margins dipped 5.15 percentage points to 26.99 percent (YoY).

In an interview with CNBC-TV18, VSS Mani, Founder and CEO of Just Dial said that the management is still debating on the Rs 100 crore expenditure on advertising and expects revenue to grow by 20-25 percent in FY17.Below is the transcript of VSS Mani’s interview with Reema Tendulkar and Nigel D’souza on CNBC-TV18. Reema: The two big concerns are slowing revenue growth. Your revenues used to grow at 30 percent plus and in this quarter it has come down to nearly just 11 percent on a year-on-year (Y-o-Y) basis. And secondly, on your margins which too, have declined. Guide us what we should expect in FY17 in terms of a revenue growth as well as in terms of margins. A: FY17 you definitely see us between 20-25 percent. I am taking a wide range, but definitely above 20 percent because we have already seen course correction. You would see a difference in this current quarter also. We will be far better than the previous quarter. So, whatever you saw in Just Dial was a self inflicted stuff by the management, nothing to do structurally, the business model is very strong, we have positive cash flows. I cannot say, we cannot be in a better position that what we are. Reema: So, what about margins because you are planning to up your sales force. A: If we increase our sales force, also despite that, the margins will improve substantially. But, if we are still bearing on this one time huge spend whether we should go ahead or we gradually go ahead, that clarity is not yet there because one clarity is there. There is a very clear visibility of revenue for us and the other thing is of course, on 25, we are launching another new product called JD Omni which is in the trial market, very well accepted by customers. So, that is giving us a lot more excitement. So, the combination of the two, we need to first focus on our topline and of course, a good margin and then we will try out these advertising strategy briefly, maybe one of the properties we will take on television and see how it goes. And if it turns out to be really fruitful, we will go ahead and continue that. That is going to benefit us in any case to improve the topline and the bottomline. Nigel: I wanted to know, your market cap is roughly around Rs 3,400-4,000 crore roughly and you have cash roughly of around Rs 900 crore in your books. Where exactly does this cash lie? What is the yield you are getting on this particular cash? Investors, they have been throwing this question, so wanted to know. A: We are close to about Rs 950-960 crore. We invest in government bonds and we do not look at treasury as a major revenue, we look for a 100 percent security for our shareholders’ money. So, that is a prime concern. We probably get 8 percent or 8.5 percent, I am not too sure. Reema: Let me come back to the margin. The point that you were making about your margins. You are saying that you are still not sure whether you will be utilising that big Rs 100 crore of advertising spend for Search Plus, that you have been talking about? You have not yet decided on that? A: Historically, if you see, whenever we have spoken about a high spend on advertising, we end up spending far less. We are basically a very frugal company and we really look at the value for money rather than just making a splash. So, our belief systems are different. What is important for us is of course to grow, the revenue which is very significantly growing as I speak. Apart from that, actually getting the users to use JD which is going to be the new app which we launch on 25 to see if it is an addictive, daily, most useful app you would have ever seen. So, we feel that a good product, if you look at any good internet product, they are rarely advertised. I keep telling this several times. Reema: So, fine, you have still not decided on that. But if you could just tell us will margins in FY17 be higher than FY16 ex of this Rs 100 crore of advertising spend, if you do or if you do not, let us keep that aside. Will FY17 margins be higher than FY16 and if yes, by how much? A: It will definitely be higher and significantly higher. But the reason for that is we have a very fixed cost structure, and any substantial increase in revenue adds to the bottomline and a 20-25 percent increase in the revenue can substantially add to the bottomline. So, those are there. But, this one-off advertising is not yet decision made, and we have been advising the market also, if we do, look at our track record, we are not one of those companies continuously spending on advertising. If we do it, it will be a one-off thing. So, you will have to take it more like an investment rather than a spend. But right now, as we speak, it does not look like we are going to go all out for this splurge. If we do that, then we will let the market know at least a quarter or at least a month in advance.