Justdial Initiating Coverage_280613

8/13/2019 Justdial Initiating Coverage_280613

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Your success is our success

Emkay

Initiating

Coverage

Emkay Global Financial Services Ltd. 1

Financial Snapshot (Consolidated) (Rsmn)

YE- Net EBITDA EPS EPS RoE EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY12A 2,621 673 25.7 523 7.5 81.1 52.5 83.0 61.8 40.9

FY13E 3,636 1,000 27.5 703 10.1 34.6 25.9 61.7 38.1 9.9

FY14E 4,583 1,377 30.1 989 14.2 40.6 21.2 43.9 27.0 8.8

FY15E 5,962 1,996 33.5 1,370 19.7 38.5 26.2 31.7 18.1 7.9

Justdial Ltd.

Still room to dial in

June 28, 2013

Rating

Accumulate

CMP

Rs629

Target Price

Rs700

EPS Chg FY14E/FY15E (%) NA

Target Price change (%) NA

Nifty 5,682

Sensex 18,876

Relative price chart

500

535

570

605

640

675

Jun-13 Jun-13 Jun-13 Jun-13 Jun-13 Jun-13 Jun-13 Jun-13

Rs

10

14

18

22

26

30%

Just dial ltd (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock DetailsSector Others

Bloomberg JUST.IB

Equity Capital (Rs mn) 698

Face Value(Rs) 10

No of shares o/s (mn) 69.8

52 Week H/L 684/ 581

Market Cap (Rs bn/USD mn) 44/ 730

Shareholding Pattern (%)

Promoters

33%Pre-IPO

Investors

40%

Public

25%

Employees

2%

Source: Bloomberg

Tejas Sheth

[email protected]

+91-22-66242482

n JDs strong brand recall, high business understanding, far

superior services and path-breaking product pipeline make it

a strong enabler for growing B2C local commerce in India

n With high operating leverage, negative working capital, low

capex-driven model and cash-rich b/s, JDs profitability and

cash generation potential are at a higher rate with growth

n Pre-empting the new medium, changing users perception

towards JD and data sharing, fruition of vertical-specific

search engines are the key challenges to JDs growth

n Initiate coverage with Accumulate rating and a TP of Rs 700.

Valued JD at 3% yield on FY15E FCF of Rs1.4bn. At the TP,

JD would trade at P/E of 35x and P/B of 7.7x on FY15E

Online classified industry expected to grow at 26% (CAGR) till 2016 - JustDial has what it takes to capitalize on it

Established in 1996, Just Dial (JD) is a pioneer of B2C local commerce in India on digital

media. With the digital classified industry estimated to grow at a CAGR of 26% to

Rs39bn by 2016, JD is evidently well equipped to seize the growth opportunity, thanks to

its strong brand recall, diverse data content, presence across three platforms, superior

user-interface and path-breaking product pipeline. It is in the forefront of the online

classified industry, which has evolved from Search to Assist, and now

metamorphosing into Suggest mode. While Search and Assist have been JDs forte,

Suggest is still at the users end. To change user perception about JD from being a

mere search engine to a data-sharing platform would be a challenge.

JD growth is driven by Usage, which is driven by User experience,

technology and improving user lifestyle. Paid listing is a derivative

Evidently, JD earns its revenue from paid listing of vendors. But its revenue growth may

be mainly attributed to usage/search traffic across its three platforms. An increase in

usage enhances business potential of vendors, who, in turn, pay for the listing. We

expect the usage to scale up considering the increasing user-base because of high

penetration and growing usage/users. Penetration and frequency will increase with

enhancement of user experience, technology to access usage will become cheaper, and

improving user lifestyle will lead greater necessity for local search. Perceptibly,

vertical/domain-specific local search sites will be a major threat to usage growth.

Initiate coverage with TP of Rs 700, upside of 16% from CMP

JDs free cash flow to firm (FCFF) will grow at a much higher rate than its topline growth

considering high operating leverage, negative working capital and low capex. Going

forward, working capital days will increase with the company moving to lower durations

of contract, though it will continue to remain negative. We value JD on an FCF yield

basis, assigning 3% to FCFF of Rs 1.45bn in FY15E, leading to a TP of Rs 700. At the

TP, the stock would trade at P/E of 35x on FY15E and will derive 86% of fair-value from

terminal value. In comparison to listed peers, on a similar business model and some

consumer companies with a similar financial model, the valuation looks reasonable.


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Justdial Ltd Initiating Coverage

Emkay Research June 28, 2013 2

Just Dial From Search Engine to Enabler of Local Commerce

The local commerce industry may be broadly classified into segments, which are defined

by the two transacting parties: Business-to-Business (B2B), Business-to-Consumer (B2C)

and Consumer-to-Consumer (C2C). A commercial transaction is effected through three

parties: buyer, vendor and enabler. Essentially, enablers are brokers, newspapers,

magazines and yellow pages. In digital media, voice platform, websites and mobile appsdeveloped to connect a buyer and a vendor. The enabler on digital media enables a

transaction by providing a common platform, wherein: a) vendors connect with buyers, b)

buyers can interact with other buyers to have a view on vendors as well as their products,

c) avail of various other options of a vendor.

JD is a B2C digital medium enabler of local commerce. The B2C segment can be further

categorized domain-wise into: travel, entertainment, apparels, jobs, marriage, dating, etc.

While JD is a general B2C enabler, most of its peers are domain-specific, for example,

Naukri.com (Job), Zomato.com (restaurants), and 99acres.com (real estate).

Vendors generate their revenue mainly from transaction fees and margins on products sold

through their websites. On the other hand, enablers revenue is generated through vendor

charging them a listing fee and for advertisement banners, both are part of the classified

industry. Some enablers such as LinkedIn also generate revenue from buyers for availing

of quick access to the premium listing of sellers.

Netscribes, a renowned digital world research agency, has estimated the classifieds

market in India at Rs 30bn in 2011, which is expected grow to Rs 84bn by 2016. Of

this, the online medium, which had a share of 41% in 2011, is forecasted to grow to

47% in 2016. To put things in perspective, the potential market for JD would increase

from Rs12.3bn in 2011 to Rs39.4bn in 5 years, clocking a CAGR of 26%.

Exhibit 1: Broad Categorization of Local E-Commerce Industry with some examples

Source: Emkay Research

Local E-Commerce

Enabler

Just Dial

Naukri

TripAdvisor

Linkedin

Shaadi

B2C

Vendor

MakemyTrip

Flipkart

Groupon

Companies

Captive Sites

Amazon

Enabler

B2B

Vendor

IndiaMart

TradeIndia

None

Enabler Vendor

OLX Ebay

C2C

Quikr


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Just Dial service offering is far superior to competitors

JD competes with newspapers, online B2C general classified websites and Google. While

newspaper is a conventional medium, with pages dedicated to classifieds, the digital

medium has dedicated websites and mobile apps. Arguably, Google, the search engine, is

the biggest enabler of digital commerce globally, as it enables or rather directs the user to

local enablers and vendors platform.

On the conventional side, JD competes with all daily newspapers, while on the digital front

it competes with askme.com and asklaila.com. With Google, JD competes with its two

platforms: Google Places and Google Adwords. Google Places is a platform that allows

vendors to post free listings, while Google Adwords is where vendors pay for getting top

listings during the search. JDs offering is superior across the parameters and largely

benefits to users/consumers and vendors.

JDs pricing methodology is much more dynamic than print media, as it considers the type

of business and location. Hence, for example, it factors in that a dentist in a city centre

would be charged more than the one on the outskirts of the city or a restaurant service in

the city centre would be charged more than a garage in the similar location. On the other

hand, print media differ on the size of the listing and location, which are more city-specific,

rather than on micro-locations in a city. Google Adwords differentiates the pricing on

multiple parameters, which are high algorithm driven. It charges a customer based on per

click or per impression and the vendor could also choose a particular hour for its search

listing.

On a user interface basis, JDs search results are much more objective and have

comparable vendor parameters of ratings, pricing and location photos vis--vis Google

Adwords.

Exhibit 2: Service offering Comparison

Just Dial Print Classifieds Google Adwords Comments

Pricing

Free Listing Yes No Yes Free listing on JD and Google Places

Pricing ParametersBusiness Type,

Location, Days

Size, Location,

DaysMultiple, Hourly

JD has better pricing methodology than print

media, while Googles pricing methodology is

much more dynamic

Pricing / eyeball - Relative Low High Not measurable

Consumer Benefits

Search Outcome Diverse & Highly Objective Only Paid listingsDiverse & Less

Objective

Vendor Ratings Yes No NoUser can be aware of past experience of other

users

Vendor Pricing Comparison Yes No No User can compare vendors' pricing

Photos Yes No NoUser can be aware of ambience & interiors of

vendors' service area

Accessibility High Low MediumBuyers can access information on Voice

platform, which is missing in Google Adwords

Connecting the Vendor Yes No No Users can avail vendors connecting them

Location Direction Yes No YesVendors' location can be looked through pre-

directed maps

Paying Vendor Benefits

User Accessibility Yes No NoJD shares users search trail with vendor in

Voice as well as web (users choice) platforms

Source: Industry, Company, Emkay Research


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JDs service platform and content base are diverse, up-to-date and way ahead of

competition; User experience on JDs local search service is unmatched

According to estimates, in FY13 JDs business listings were at 9.1mn, with accessibility

across three platforms: voice, web and mobile. The company has a presence in most cities

and towns of India, with hotline facilities in nearly 250 cities and towns.

Askme is the closest competitor considering its presence across the three platforms. But in

terms of website rankings by alexa.com, no other local search engine is big enough to be

JDs competitor. We believe the kind of legacy JD has built in more than 17 years of

existence and top-of-the-mind brand recall, no competition can be a threat. While we are

not aware of the listing data of askme and asklaila, we firmly believe that they are way

behind.

Exhibit 3: Listing content with accuracy is key to users revisit

5.87.2

9.1

0

2

4

6

8

10

FY11 FY12 FY13

Source: Company, Emkay Research

Exhibit 4: Justdial is superior among the online classifieds peers

Parameters Justdial burrp askme asklaila

Since 1996 2006 na 2007

Voice Yes No Yes No

Web Yes Yes Yes Yes

Mobile App Yes Yes Yes No

alexa.com Ranking 36 409 878 149



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Users and Usage are revenue growth drivers, not paid listings

JD, part of the local commerce industry, enables B2C transactions through its search

engine developed on voice, web and mobile app.

JD earns its revenue by charging premium listing fees from its clients. The clients would

pay only when there is strong user traffic on JDs platform for inquiries, which can help

them to convert the same into business. JDs revenue model factors in one single variable:

the number of searches done across the platform. Hence, higher searches would lead to

higher potential business for clients, which, in turn, should further lead to an increase in

premium listings and/or rise in average listing fees.

A simple comparison of this model is with a mall space leaser. The leaser will get more

lessees and also more rentals from lessees if it gets more footfalls in its malls.

Exhibit 5: Increase in Usage will increase the number of Paid Listings of Average charges / listing


Also, with increase in JDs user-base and usage frequency, the marginal cost of acquiring

premium listings would decrease, as clients themselves would want to part be of the

premium listings.

Evidently, JD needs to increase this user-base and penetrate deeper, besides increasing

the number of average usages/users. The same could be achieved through Internet factors

such as enhancing user experience, and through external factors such as improvement in

user (current and target) lifestyle and newer data access platforms.

Exhibit 6: Factors which can increase Usage leading to increase in JDs revenue


INCREASE IN

USAGE

Increase in

User Base

Enhancing User

ExperienceImprovement in

Users Lifestyle

Improving User

Access

Increase in

Usage / User

Improvement in

EconomySize & Accuracy of

the data / contentSharing / Suggest Increase in internet &

Smart phone Usage

Increase

in Potential

Business

Increase

in Usage

Increase

in Paid

Listing

Increase

in JDs

Revenue


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Understanding the User-base and Usage/User

JDs 93% revenue accrues from top 11 cities, while 44% revenue from NCR and MMR.

This data does show that the companys revenue model is an urban phenomenon.

As per Census 2011, top 11 cities, where JD has a strong presence, have a total

population of 78mn. MMR and NCR have a population of 15mn each. Of the 78mn

population, the addressable market (age 15-55) for JD would be around 45mn taking intoaccount 58% of Indias population falls in this age category. For MMR and NCR, the

combined addressable market would be 18mn.

We believe that JDs platform is accessed by around 19mn unique users across India, of

which top 11 cities should have about 17mn users. On this user-base, the company has

penetrated around 38% of the total addressable market in top 11 cities of its

presence.The addressable market has increased from 27mn in 1991 to 36mn in 2001 to

45mn in 2011, a growth of 32% in 2001 and 27% in 2011. Assuming a growth of 10% by

2016, the addressable user market would be 50mn.

Exhibit 7: JD has penetrated 38% of its user base in top 11 cities of its operation

Source: Company, Census Data, Emkay Research

As on 9MFY13, 227mn searches/usages were done across three platforms of service

delivery. Assuming there is no seasonality in usage, the total usages would be around

303mn in FY13 (annualised). Nearly 90% (since 93% revenue is contributed) of usages

would have been done in top 11 cities, leading to total usages of 273mn in these cities.

On a unique user-base of 17mn in the top 11 cities, the average usage/user annually would

be 16 times. Over the last 3 years, the usage in top 11 cities has increased from 163mn to

273mn in these top 11 cities. This, we believe, would be mainly driven by the average

usage/user, which as per our estimation has increased from 10 in FY11 to 16 in FY13E.

Exhibit 8: As per our estimation, average usage/user has increased from 10 to 16 in 2 years

0

75

150

225

300

FY11 FY12 FY13E

0

2468

1012

1416

18

Usage in top 11 cities Usage / user (RHS) Source: Company, Emkay Research

Population in Top 11

cities of JDs

presence

78mn

58% of Population

in Top 11 cities of

JDs presence in

15-55 years age

bracket

45mn

Unique Users

in top 11

cities on JDs

platform

17mn


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Technology will enable better access and engage the user

As per our estimates, the user, on an average, searches online 16 times in a year. The

average over the years has improved and will continue to grow with better engagements.

The user would be mainly engaged to use JDs services due to two factors: a) technology

improves access to JDs data through multiple platforms, and b) user experience improves.

Technology plays a pivotal role in engaging the user and hence increases the usage/usersas well as broadens the user-base. Along with voice platform (JDs service delivery

platform is available on web and mobile), the access will also improve. Over the last 6

years, the usage has improved substantially, especially on these two new platforms. Going

forward, as the penetration of internet (on PC and mobile) improves, usage of JDs services

will continue to increase. Some of the recent surveys highlight how the Internet and smart

phone will penetrate in India over next some years.

As per a Neilson survey, India has 900mn cell phone users, of which 40mn aresmart phone users in urban areas (towns with more than a 0.1mn population); 24mn

smart phone users use it for running online searches.

As per the IDC Worldwide Quarterly Mobile Phone Tracker report of March 2013,Smart phone shipments to India are forecast to rise to 155.6mn units in 2017 from

the current 27.8mn, accounting for a 10.3% share of the global market behind the

projected 30.2% share of China and 12.1% of the US 12.1%.

As per Kleiner Perkins Caufield & Byers, India has 137mn Internet users as on2012, recording a 26% growth yoy. The population penetration rate for the Internet

usage in the country is at 11% at the end of 2012. China continues to have the

highest number of Internet users with 538mn users, adding 282mn users during

2008-12, with a population penetration rate of 40%.

According to Ciscos Visuals Networking Index (VNI) forecast (2012-17), there willbe 348mn Internet users in 2017, up from 138mn in 2012, CAGR of 44%. Portable

devices such as smart phones and tablets will contribute 40% to IP traffic in 2017

from 3% in 2012.

A report by Boston Consulting Group (BCG) says, the number of Internet users inIndia is expected to nearly triple from 125mn in 2011 to 330mn by 2016.

Voice-to-Internet: Pros and cons

JDs service delivery platform mix has moved from voice-based to internet-based, wherein

more and more users are availing of the information through website or mobile apps, rather

than calling the just dial # 88888888. The transformation has its own pros and cons

considering various factors such as costs, point of touch and user analytics, among others.

These changes will have a significant impact JDs business model, operations and,

eventually, on its financials. We believe this transition has more advantages than

disadvantages; JD has tried to address the disadvantages

Advantages of shift in usage platform from Voice-to-Internet; Internetplatform gives more diverse interaction opportunity

The Internet platform over voice platform upgrades the user search experience to a higher

and better level. The user, on the internet platform, can inquire not only about the

product/service/vendor, but also can view photos, expensive index, ratings of other users

and map of the location. This assists the user in decision-making pertaining to factors such

as cost, quality, location and ambience. All of these are totally absent on the voice platform.

The Internet platform takes the search service a notch higher from to Assist, which we

have mentioned in Exhibit 3.

High operating leverage

JDs 65% costs are fixed in nature, while 35% are linked to the topline. As the users

search platform mix moves from voice to internet-based, the blended cost of servicing

would deplete to a large extent. The company has to incur costs on infrastructure,

employee and administration to service voice searches, while for web and mobile apps the

costs are less variable in nature considering the platform is self-access.


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As the user base mix shifts from voice to web with absolute increase in visits, growth in

EBITDA would be at a higher rate than growth in revenue as seen also in the past.

Exhibit 10: Search/ Usage Trend and Mix

0

75

150

225

300

375

FY10 FY11 FY12 FY13E

Internet Mobile Internet Voice Source: Company, Emkay Research

Exhibit 11: EBITDA margins expands with higher web & app search

0%

9%

18%

27%

36%

FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E


Disadvantages of shift in usage platform from Voice-to-Internet;

Lead-to-inquiry ratio may falter, affecting the paid listing

In the voice platform, every inquiry by the user is a potential business for at least 3-5 paid

listing with whom the users requirements are shared along with the contact numbers. The

client would pursue the users for any business by contacting them.

Clearly, on the Internet platform, this is missing. The user may only check, if at all, with one

of the listings. Hence, every enquiry does not lead to potential business for more paid

listings. The inquiry would lead to potential business for only one client, rather than for 3-5

clients. The company has tried to address this issue by asking for contact details on the

web, but the user may not fill in the same. Thus, the internet platform usage for search over

voice may impact the lead generation for the paid listings, which may impact JDs growth.

JD has addressed this concern by a pop-up on the web, which prompts the user to fill in thecontacts details that is later shared with vendors. The only issue with this is that the user

has to fill in his details, which he may not always do, unlike in voice platform, where the

user does not have to put in any effort (Exhibit 18).

Competition on the Internet platform relatively higher than Voice platform

It is easy to replicate the internet platform, of being an enabler of local commerce, rather

than voice platform. As stated earlier, the voice platform requires higher capital mainly for

setting up of infrastructure as well as to finance running costs of data collation and client-

servicing. These costs are much lower on the Internet platform and hence call for lower

capital requirement for setting up a business.


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Better lifestyle adds to the need for JDs services

JDs service offering has direct linkage to Indias growth story, especially with the countrys

consumerism growth story. The improvement in economy leads to the following:

Higher consumer spending and hence a higher need for vendor details. Forexample, with better lifestyle peoples frequency towards restaurant increase,

leading to more inquiries for new restaurants in the city, or with better lifestyle

people tend to spend more on newer services such as spa and leisure tours.

Higher local travel for business and hence a higher need for vendors details at thedestination. For example, increased local travel leads to greater number of inquiries

for local taxi service, restaurants, etc.

Higher urbanization and job mobility and hence a higher need for local serviceproviders. For example, the packers-and-movers category has the highest share in

JDs revenue at around 2.5%.

All these parameters tend to increase the user base as well as usage/user, leading to

an increase in overall usage as well as overall business potential for vendor and hence

overall revenue for JD.


11/20


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The typical Indian consumer would want to have knowledge about vendors service, but

may not make efforts to share his own experience. Besides, JD is perceived as an

information-deriving platform by users, rather than an information-sharing platform. JD

faces two challenges here: to make the user share his experience, and if he does it, then it

has to be on the companys platform.

JDs voice platform comes as a respite in mitigating these challenges and provides an edge

over its competitors. Through its voice platform, JD prompts for ratings of the vendor that

the user has last inquired about. This helps the company to build its rating scale across

users, which in a form Suggests vendor services to users on web and mobile app

platforms.

Thus, if anyone in India could get the Suggest parameter of online classifieds, it would

evidently be JD. This would justifiably give the company a huge advantage over its

competitors.

Increase in Paid Listings result in to Crowding Effect

As paid listings increase, they result in a crowding effect, wherein the lead that was earlier

shared with x number of paid listings is not shared with x+y number of members at the

same time. This crowding effect reduces the probability of converting the lead into a

potential business, since the user does not have many vendors to approach. Moreover,

growing competition among paid listings provide pricing power to users.

Hence, with crowding effect, though the overall paid listing base would increase, the

average listing price would decrease to maintain vendors return on investment. This issue

would only be resolved by an increase in users and usage, which would result in higher

generation of leads and a better lead-to-vendor ratio.

JDs business model thrives on the fees paid by its members for getting business to their

doorstep. The client would not renew his listing subscription with the company if the

payback for listing fees is not justified. At present, 70% of paid listing members of 0.2msf

are the ones who have paid JD is the past. This clearly points to the fact that the return on

their investment (fees) is high, though 30% of members have not renewed their business

with JD.

Vertical specific search engines gaining momentum; JD misses out on

being general

In the local content search or local Enabler industry JD is in General category unlike most

of the other enablers are very vertical / domain specific for eg Naukri for Jobs, burrp for

restaurants & entertainment, etc. Many of these searches are moving on vendors platform

which sells third party product eg. bus services on redbus.in. If more and more of these

SME products and services get vertical-specific on the web then search for those will move

of JDs platform to those vertical-specific platforms. This will affect the usage traffic on JDs

platforms.

As per JDs management, going forward, there will be a too many apps for various service

offerings and hence people will be confused and would prefer a single app which will do allthe content search. Also, we believe that there are a lot of services which cannot have a

vertical-specific web platform like yoga classes, plumber, garage, doctor, courier services,

etc. For all these services search JD will remain the only touch point, although the

frequency of search traffic for them is lower than of restaurants or travel. JD has a

challenge to make convert and maintain search traffic towards these services to be

dependent for services which have vertical-specific search platforms.


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Working Capital (excl. cash) days will decrease

In FY12 and 9MFY13, JD had negative working capital on account of inadequate current

assets and high current liabilities because of higher customer advances. The company bills

and collects revenue in advance from paid-listings vendors before listings are advertised.

Earlier, the duration of contracts was longer than 90 days, but in order to boost paid-listing

members and revenue, JD has launched service contracts of duration as low as 1 week. At

present, 50% of paid-listing contracts are of 1-year tenure and the balance 50% of lower

than 1 year.

Most new listing contracts are of less than 1 year, since vendors would be looking for

benefits of their listings and would not wish to block capital in spite of lower pricing. Hence,

the company is foregoing the advances for revenue growth, which would results in lower

negative working capital days.

Over the next 2 years, growth in FCFE would be lower than that of PAT.

Exhibit 16: Negative Working Capital (excl. Cash) will deplete with Growth

-160

-150

-140

-130

FY10 FY11 FY12 FY13 E FY14 E FY15 E

Days



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TP of Rs 700, Valued at 3% FCFF yield on FY15E

JDs model will generate cash from all areas with growth:

Due to high operating leverage, PAT growth would be higher than revenue growthAlthough customer advances will deplete, negative working capital would sustain and

hence generate cash Less capex-intensive business will ensure no dent in cash-flows High treasury income on growing cash balance, though not part of FCFFWe have valued JD on an FCFE yield basis, valuing the company at a yield rate of 3% on

FCFF estimate of Rs 1.45bn in FY15. At the TP of Rs700, the P/E for FY15E comes to 35x

and derived terminal value at 86% of the total estimated value.

Exhibit 17: FCFF Trend (Rs mn)

237420

678 703

1044

1454

0

500

1000

1500

2000

FY10 FY11 FY12 FY13 E FY14 E FY15 E


Exhibit 18: Valuation Break-up at TP

86%

9%

5%

Net Assets Free Cash (FY2014-15) Terminal Value Source: Emkay Research

Peer comparison

We have compared JDs valuations on two categories: the companies that have a similar

business model in India and the US, and the companies that have a similar financial modeland valuation. This means in the listed space, the two closest comparable peers to JD are

Yelp Inc. and Info Edge Ltd. While the former is a US-based NYSE-listed content search

service provider, the latter is an India-based listed player that makes money from operating

sites such as naukri.com, jeevansathi.com, 99acres.com and shiksha.com, among others.

Yelp is the closest comparable in terms of business, while in India, Info Edge, part of the

classifieds market, is the closest peer in the listed space. Yelp is trading at a huge premium

to JD, giving us a sense of potential for this medium.

Exhibit 19: Comparison with companies in similar business model or are trading at higher valuation multiples

Company Net Cash Net Assets FCFF Yield @ TP P / E @ TP TV @ TP TV @ TP

TP FY13 FY13 FY13 FY14E FY15E FY13 FY14E FY15E & NA & NC

Rs Rs Mn Rs Mn % % % times times times % %

Just Dial 700 5254 4371 1.4% 2.1% 3.0% 71 50 35 86% 84%

Info Edge 406 4634 5273 0.0% 3.2% 3.8% 48 36 28 81% 82%

Yelp (in USD) 32 95 166 -0.4% 0.1% 1.2% -236 189 72 90% 94%

Asian Paints 4610 8149 33462 1.2% 2.7% 3.3% 38 33 27 86% 92%

Colgate 1328 4500 4904 2.4% 2.5% 3.1% 37 32 27 92% 92%

HUL 514 34398 26311 3.4% 3.2% 3.8% 34 31 28 91% 90%

Jubilant Foodworks 1018 1521 4362 0.4% 0.8% 2.2% 49 37 26 90% 95%

Source: Bloomberg, Emkay Research, NA: Net Assets, NC: Net Cash


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Brief company profile

Just Dial (JD) was founded and incorporated by first generation entrepreneur V. S. S. Mani.

The company is the brain-child of Mr. Mani, who conceived the idea of providing up-to-date

business listings 24x7 during its 2-year job stint with Yellow Pages during1987-89.

JD commenced its voice-based search business operation in 1996 in Mumbai. Today, the

company has voice data centre search services across 250 cities in India. It launched its

local search web services in early 2007, and added SMS and mobile Internet search

services in the latter part of the year.

In 2009, JD launched its services in the US to experience the market first-hand. With not

much development in the US, the company de-merged the same into a different entity with

JDs promoters and investors as its owners. It is no more a part of the Just Dial Ltd. The

brand, JustDial, is owned by Just Dial Ltd., and JD Global would pay royalty on using the

same whenever operations commence.

At present, JD has 7342 employees, of which 2707 employees are in sales, 944 are on the

field, around 1000 in the voice data centre, and the rest is employed in product

development, security, database management and administration. The employee cost, the

biggest cost incurred by the company, was pegged at 49% in its 9M FY13 results.

Exhibit 20: Profile of Key Management Personnel


Personnel Designation Profile

Mr. V. S. S. Mani Managing

Director

Mr. Mani is the founder of Just Dial Ltd. and has rich experience in the filed of classified. Prior to incorporating

JD, Mr. Mani was co-founder of Ask Me Services and also had a stint with United Database (I) Pvt. Ltd. He

has architect the informative medium of classified across platforms in India

Mr. V Krishnan Executive

Director

Mr. Krishan is co-founder of Just Dial Ltd. He operates from Delhi and looks after NCR region which is top 2

markets for JDs revenue. Along with Mr Mani, he looks after strategy, planning, expansion and operations at

JD.

Mr. Ramkumar

Krishnamachari

Chief Financial

Officer

Mr. Ramkumar joined Just Dial in 2010 as CFO. By qualification, he is Chartered Accountant, Certified Public

Accountant (CPA), USA and Certified Financial Analyst (CFA), USA. He has nearly 22 years of experience in

field of accounting and finance. Prior to Just Dial, Mr. Ramkumar has worked with Reliance Capital and RoyalSundaram General Insurance Allied Co. Ltd.

Mr. Sandipan

Chattopadhyay

Chief Technology

Officer

Mr. Sandipan handles crucial function of technology at Just Dial. Technology is an important area of operation

at JD considering the business is based on new tech medium platforms. He holds Post Graduate Diploma in

Computer Aided Management from IIM, Kolkata and has 16 years of experience in field of technology.


17/20



Exhibit 21: Search Comparison on Google and on Just Dial (an example, would be different for other category search)

ource: Emkay Research

Google directs the search

to justdial

Adwords listing doesnt

provide user ratings and

is less objective

Justdial search provides

each vendor rating and is

far more objective


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Exhibit 22: JDs website prompts for User contact details


Exhibit 23: Google has Product Listing Ads ahead of JDs Quick Quotes platform


Justdial website does

prompt for Users contact

info which is shared with

premium listings. The

same fills the gap of

getting users contact on

Voice platform

Google has launched

Product Listing Ads

wherein a product

specific search leadsto price quotes ads

from the listed vendor.

Just Dial is planning a

similar model which

would be local vendor

base rather than e-

commerce


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Key Financials (Consolidated)

Income Statement

Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E

Net Sales 2,594 3,636 4,583 5,962

Growth (%) 44.4 40.2 26.0 30.1

Expenditure 1,948 2,636 3,205 3,966Raw Materials 0 0 0 0

Employee Cost 1,308 1,763 2,151 2,625

Other Exp 640 873 1,054 1,341

EBITDA 673 1,000 1,377 1,996

Growth (%) 48.2 48.6 37.8 44.9

EBITDA mar gin (%) 25.7 27.5 30.1 33.5

Depreciation 90 136 223 325

EBIT 583 864 1,154 1,671

EBIT mar gin (%) 22.2 23.8 25.2 28.0

Other Income 150 150 322 373

Interest expenses 0 0 0 0

PBT 732 1,014 1,476 2,045Tax 209 311 487 675

Effective tax rate (%) 28.6 30.6 33.0 33.0

Adjusted PAT 523 703 989 1,370

Growth (%) 81.1 34.6 40.6 38.5

Net Marg in (%) 19.9 19.3 21.6 23.0

(Profit)/loss from JVs/Ass/MI 0 0 0 0

Adj. PAT After JVs/Ass/MI 523 703 989 1,370

E/O items 0 0 0 0

Reported PAT 523 703 989 1,370

PAT after MI 523 703 989 1,370

Growth (%) 81.1 34.6 40.6 38.5

Balance Sheet


Equity share capital 519 694 694 694

Reserves & surplus 542 3,677 4,260 4,817

Net worth 1,061 4,371 4,954 5,512Minority Interest 0 0 0 0

Secured Loans 12 0 0 0

Unsecured Loans 0 0 0 0

Loan Funds 12 0 0 0

Net deferred tax liability -9 2 75 182

Total Liabilities 1,063 4,373 5,030 5,694

Gross Block 348 606 881 1,283

Less: Depreciation 0 0 223 548

Net block 348 606 658 736

Capital work in progress 12 12 0 0

Investment 1,568 4,501 4,750 5,250

Current Assets 540 1,060 1,756 2,275Inventories 0 0 0 0

Sundry debtors 0 4 0 0

Cash & bank balance 237 753 1,453 1,972

Loans & advances 263 263 263 263

Other current assets 40 40 40 40

Current lia & Prov 1,405 1,805 2,134 2,566

Current liabilities 1,392 1,805 2,134 2,566

Provisions 13 0 0 0

Net current assets -865 -745 -378 -292

Misc. exp 0 0 0 0

Total Assets 1,063 4,373 5,030 5,694

Cash Flow


PBT (Ex-Other income) 556 864 1,154 1,671

Depreciation 90 136 223 325

Interest Provided 0 0 0 0

Other Non-Cash items 0 0 0 0

Chg in working cap 392 407 407 539

Tax paid -209 -311 -487 -675

Operating Cashflow 829 1,096 1,297 1,860

Capital expenditure -177 -393 -263 -402

Free Cash Flow 652 703 1,034 1,457

Other income 176 150 322 373Investments -408 -2,933 -249 -500

Investing Cashflow -409 -3,176 -191 -529

Equity Capital Raised -392 2,607 0 0

Loans Taken / (Repaid) 8 -12 0 0

Interest Paid 0 0 0 0

Dividend paid (incl tax) 0 0 -406 -812

Income from investments 0 0 0 0

Others 0 0 0 0

Financing Cashflow -383 2,595 -406 -812

Net chg in cash 36 516 700 518

Opening cash position 201 237 753 1,453

Closing cash position 237 753 1,453 1,972

Key Ratios

Y/E Mar FY12A FY13E FY14E FY15E

Profitability (%)

EBITDA Margin 25.7 27.5 30.1 33.5

Net Margin 19.9 19.3 21.6 23.0

ROCE 73.8 37.3 31.4 38.1

ROE 52.5 25.9 21.2 26.2

RoIC -97.6 -105.0 -111.8 -123.7

Per Share Data (Rs)

EPS 7.5 10.1 14.2 19.7

CEPS 8.8 12.1 17.5 24.4

BVPS 15.3 63.0 71.3 79.4DPS 0.0 0.0 5.0 10.0

Valuations (x)

PER 83.0 61.7 43.9 31.7

P/CEPS 70.8 51.7 35.8 25.6

P/BV 40.9 9.9 8.8 7.9

EV / Sales 16.0 10.5 8.1 6.1

EV / EBITDA 61.8 38.1 27.0 18.1

Dividend Yield (%) 0.0 0.0 0.8 1.6

Gearing Ratio (x)

Net Debt/ Equity -1.7 -1.2 -1.3 -1.3

Net Debt/EBIDTA -2.7 -5.3 -4.5 -3.6

Working Cap Cycle (days) -153.5 -150.4 -145.9 -138.6


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Documents

Justdial Initiating Coverage_280613