Why CRISIL rates Just Dial as fundamentally strong company
CRISIL has assigned CRISIL IPO 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.
May 16, 2013 / 06:28 PM IST
CRISIL Research grading on Just Dial IPO
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 percent 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 percent to Rs 2,621 mn in FY12 and improved its PAT margin to 20 percent in FY12 from 2.4 percent in FY08. Accordingly, RoE improved to 53.6 percent in FY12 from 6.7 percent in FY08. It reported EPS of Rs 9.4 in FY12. The company is debt-free with a negative working capital cycle.
Grade: CRISIL IPO Grade '5/5': This grade indicates that the fundamentals of the issue 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.
Also Read: Just Dial eyes Rs 950 cr from IPO, issue opens on May 20
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