CRISIL has assigned grade 5/5 to the proposed IPO of Just Dial. This grade indicates that the fundamentals of the IPO are strong relative to other listed equity securities in India.
CRISIL has assigned grade 5/5 to the proposed IPO of Just Dial. This grade indicates that the fundamentals of the IPO are strong relative to other listed equity securities in India. However, this 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.
Just Dial launched the first phone-based search engine in India. The assigned grade takes into account Just Dial's huge local search database (9.0 mn products and service providers), the largest in India, and a business model which has been difficult to replicate. Its search volume has grown multi-fold courtesy quick service, relevant search results, updated database and technology, leading to a strong brand image. It has successfully grown its paid campaigns by more than four times over FY09-12 to 171,000 in end-FY12 (195,100 in 9MFY13) and enjoys 100% advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs).
The grade takes cognizance of Just Dial's experienced and proactive management personnel, who have enabled the company to meet users' expectations on two fronts: technology and search content. Having started with only phonebased search, the management has moved with the times to embrace the new-era media of mobile phones (SMS), internet and mobile internet. Further, the company has indigenously developed its technology platform and search algorithm which enable it to provide search results that are relevant to users' requirements. The number of search requests across all search platforms was 254.3 mn in FY12 (267.2 mn in 9MFY13), up from 82.2 mn in FY09.
While Just Dial has consistently innovated itself and stayed ahead of competitors, any aggressive move by larger players such as Google India is a key monitorable. As the company grows, maintaining management bandwidth to oversee the growth will be a challenge, particularly in the backdrop of expansion in the US and Canada 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 2,621 mn in FY12 and improved its PAT margin to 20% in FY12 from 2.4% in FY08. Accordingly, RoE improved to 53.6% in FY12 from 6.7% in FY08. It reported EPS of Rs 9.4 in FY12. The company is debt-free with a negative working capital cycle.
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