Just Dial IPO: Subscribe for listing gains, says Microsec

Microsec's IPO analysis of Just Dial

At the upper price band of INR543.00 Just Dial is priced at ~66.8 times of its FY2012 consolidated Earnings per Share (EPS) of INR8.13. Based on P/E valuations, Just Dial's upper price reflects premium vis-à-vis its competitor Info Edge India Limited (Info Edge). Although the company reported a strong fundamental performance in recent years, its valuation seems quite expensive. Considering costly valuations and risks associated with the company's corporate practices, the issue seems unattractive. However, Just Dial introduced a 'Safety Net Arrangement' for Retail Individual Allottees for a period of 180 days. This scheme is aimed at protecting the interests of retail investors, under which the company will be paying the money back to them if the safety net trigger price is below the allotment price. Safety net trigger price will be calculated as volume weighted average market price of the stock during 60 days preceding the relevant date. Considering this factor, which enables the safety of amount invested, and a discount of INR47.00, we recommend 'Subscription for Listing Gains' on the issue for retail investors. Just Dial's business model rolls around its large user base. The company received around 254.3 Mn search requests from the users of its search services in FY2012 compared with 180.7 Mn search requests in FY2011. A large number of search requests may prompt more businesses to pay for listing on Just Dial's network to get priority in its data base. In addition, as the company has the capability to cater search requests across internet, including mobile internet, voice, and SMS searches, it has a large untapped and potential market to enhance its platform. Also Read: Just Dial IPO subscribed 50% on Day 1 Healthy Financial Performance
Just Dial's healthy progress across the operational parameters is clearly visible in its financials. While the company's top line increased at a Compounded Annual Growth Rate (CAGR) of 39.3 percent over FY2008-12 period, its bottom line expanded at a CAGR of 135.7 percent over the same period. Furthermore, Just Dial reported a considerable improvement in operating margins over the period that expanded from 1.2 percent in FY2008 to 22.2 percent in FY2012. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions

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