CRISIL Research has assigned a CRISIL IPO grade of '5/5' to the proposed IPO of Just Dial Ltd. This grade indicates that the fundamentals of the IPO are strong relative to the 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.
The assigned grade reflects Just Dials strong position in the local search market across India. Leveraging its first mover advantage in phone-based search engine, Just Dial has created Indias largest local search database (7.2 mn products and service providers) and a business model which has been difficult to replicate. Its search volume has grown multi-fold, thanks to its fast service, relevant search results, updated database and technology, whereby it has created 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, and enjoys 100% advance payments from its clients, who are mostly micro, small and medium enterprises (MSMEs).
The grade is further strengthened by Just Dials experienced and proactive management, who has enabled the company to meet users expectations on two fronts: technology and search content. Having initiated with phone-based search, it was quick to embrace the new-era media of the mobile phones (SMSes), internet and mobile internet. Further, the company has indigenously developed its technology platform and search algorithm which enables it to provide search results that are relevant to users requirements. The number of search requests across all search platforms was 254 mn in FY12 up from 26 mn in FY07.
While Just Dial has consistently innovated itself and stayed ahead of its competitors, who are mostly loss making, any aggressive move by larger players, like Google India, remainsa key monitorable. As the company grows, maintaining management bandwidth to oversee the growth will be a monitorable, particularly in the backdrop of global expansion 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 40% to Rs 2,621 mn in FY12 and improved its PAT margin to 20.0% in FY12 from 3.3% in FY07. Accordingly RoE improved to 52.2% in FY12 from 14.6% in FY07. It reported EPS of Rs 9.4 in FY12. The company is debt free with negative working capital cycle.
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