Вы находитесь на странице: 1из 22

HK1075

t
os
SHAILENDRA K. RAI
SHELLY SINGHAL

rP
JUST DIAL’S IPO
On March 20 2013, seven months after refiling its draft red herring prospectus (DHRP),1 Just
Dial finally got the green light from the Securities and Exchange Board of India (SEBI) to
proceed with its initial public offering (IPO). This was after five previous unsuccessful
endeavours - twice from the NASDAQ, two aborted filings from the National Exchange and
one on a smaller exchange.2 However, just a few days before the launch of the IPO, many

yo
negative views were circulating in the market regarding Just Dial’s overvaluation. The issue
was expected to have a price band from Rs 470 to Rs 530.3 On the upper price band, the
company was valued at Rs 37000 million with a price earnings multiple of 60, based on a FY13
expected net profit of Rs 620 million. The business model was completely new and there were
no industry comparables in order to do a fair valuation of Just Dial. Analysts in the market
repeatedly warned investors and suggested that they avoid the IPO because it was overvalued.
4 With this prevailing perception in the market should Just Dial consider delaying the IPO or

lowering the price range, thus reconsidering its valuation options?


op
Introduction
In India search services based over phone was first launched by Just Dial in 1996. Initially, Just
Dial provided updated information across India on all products and services in the B2B and
B2C segments on a single national number, 08888888888 (now revised to 69999999).
tC

However, over time several platforms, such as the telephone, text SMS, the Internet, mobile
Internet were used to provide information/services.5 Just Dial also provided a platform for
companies that wished to promote their brand in addition to reaching millions of people, who
were actively seeking information about various products and services. Selling advertisements
and qualified leads were the main sources of Just Dial’s income. By the end of December 2012,
No

1
A preliminary document issued to the prospective investors at the time of public offering of securities that gives information
about the company including use of proceeds from the offering, market potential of product service etc., financial statements,
pending Litigations etc. It does not contain details on the size of the issue and price at which the securities would be offered.
2
“Wait ,Don’t Just Dial,” 17 August 2013, http://business.outlookindia.com/article_v3.aspx?artid=287249 accessed on 20
April2014
3 “ Just Dial IPO to raise up to 950 Cr,” May 13,2013,

http://www.livemint.com/Companies/ZBJ3DBVqnCPwVPtTyBohqO/Just-Dial-IPO-to-raise-up-to-950-cr.html accessed on 15
April 2014
4“Just Dial: Too expensive, not recommended,” May 20,2013 ,http://m.indianotes.com/buy/Justdial-Too-expensive-not-

recommended/182377/141/IOaccessed on 15 April 2014.


5http://cms.justdial.com/overview accessed on 10 April 2014.
Do

Shelly Singhal and Professor Shailendra Kumar Rai prepared this case for class discussion. This case is not intended to show
effective or ineffective handling of decision or business processes.
© 2015 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or
transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the internet)—
without the permission of The University of Hong Kong.
Ref. 15/564C

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

the turnover of the company was around Rs 2500 million with 267.2 million search requests

t
[See Exhibit 1]. 6

os
About the founder
V.S.Mani, CEO of Just Dial and a first-generation entrepreneur, hailed from a traditional ‘Tam
Bram’ family that placed importance on a professional career. For this middle-class south
Indian family, business was a bad word.7 The eldest of three brothers and a sister, he started
working early and dropped his chartered accountancy course in order to start contributing to

rP
the family’s income. In 1987, he got a sales job in a Delhi based company called United
Database India (UDI) and started selling advertisements and listings for its yellow pages.8
While working there in the 1980s, the idea occurred to him that this service could be offered
over the telephone by a local search service provider.

Initial ventures
In 1989, Mani and his friends started a company called Ask Me.9 At that time, the idea did not

yo
take hold because of the low penetration of telephones in India. The concept was good, but the
environment was unfavourable. Another major reason for the failure of the business was the
bad choice of number. People had ‘Ask Me’ on their lips but when they were asked about the
number, none of them could recall it.10 In 1992, Mani quit the venture but he still had faith in
his ideas and business model, and he continuously searched for ways to implement it.11 Because
the venture was not successful, his family wanted him to finish his studies, which he had quit
midway in 1987. However his heart was set on implementing his business idea.12 In the next
four years, he worked in various enterprises in order to save money and then launched the
op
phone-based search engine, the venture that was closest to his heart.13

Just Dial start up


In 1996, when Mani landed in Mumbai to launch Just Dial, he had experience but only Rs
50,000. He launched Just Dial with a team of five employees, rented computers and some
borrowed instruments in a 27.871 square metre garage in Malad, Mumbai.14 Because people
tC

were interested only in authentic and quick information, he wanted to keep things simple. His
experience at ‘Ask Me’ made him realise the importance of an easily remembered number in a
phone-based search business. Therefore, his focus was on getting an exclusive number that
would get permanently marked in the minds of customers and create a brand for Just Dial.15 In
1996, he persuaded the General Manager of Mumbai's Kandivali telephone exchange to allot
the unique number, 0888 8888 888 to him.16 However, the operations of the company could not
begin for another year because the business did not have the Rs 15,000 to get an MTNL
(telecommunications service provider) connection which was crucial for the functioning of
No

6“Just Dial Red Herring Prospectus,” p. 140. 8 May 2013


http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014.
7 https://www.youtube.com/watch?v=mW5et6NouN4accessed on 15 April 2014
8
“Dialing Success,” October 4,2009 ,http://businesstoday.in/justdial accessed on 15 April 2014
9“Dream with just 50k in pocket,” http://howbusinessstarted.wordpress.com/how-it-started/computers/dream-with-just-50k-in-

pocket-justdial-com/ accessed on 17 April 2014


10 Ibid.
11 “VSS Mani, the man who dialed the right numbers,” 11 April2011,

http://articles.economictimes.indiatimes.com/2011-04-11/news/35750571_1_unique-number-wrong-number-business-
Do

planaccessed on 15 April 2014


12
Ibid.
13
Ibid.
14
Ibid., p. 3.“Wait ,Don’t Just Dial,” 17 August 2013 , http://business.outlookindia.com/article_v3.aspx?artid=287249accessed on
20 April2014
15
Ibid
16
Ibid., p. 9. “Dream with just 50k in pocket,” http://howbusinessstarted.wordpress.com/how-it-started/computers/dream-with-
just-50k-in-pocket-justdial-com/ accessed on 17 April2014

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

business at that time. During this period, the employees of Just Dial went door to door to collect

t
numbers for the database.17 Although it was an uncertain time for Just Dial, Mani had full faith
in his idea and never thought of quitting the venture.18 Despite these challenges, it was his

os
entrepreneurial spirit and passion for his dream that kept Just Dial operating.

Eventually by 2004, with the rise in telephone and mobile penetration, the dial based
information service began gaining importance among consumers. Just Dial moved from a
27.871 square metre rented garage to a 3,716.122 square metre owned office in the outskirts of
Mumbai.19 The strength of the staff increased from five employees to 4,000.20 With the

rP
increased penetration of the Internet, Just Dial also launched its Internet-based services in 2007.
More importantly, Just Dial was not limited to the mobile phone; its services were accessible
on multiple platforms like SMS, Net and WAP. According to analysts, of the total 19 million
search requests recorded by Just Dial across the country, 17 million or around 90% were from
the top 11 cities only.21 However, the penetration level of Just Dial was still only 38% of the
potential market of these 11 cities.

yo
Company Overview
Business model
When people needed to purchase a product or use a service but did not have information about
the product/service provider, they called Just Dial, which provided that information (business
phone number, and address) free of cost to the person calling.22 During fiscal 2012, Just Dial
had 586,324 SMS searches representing a growth of 93% from 2009. Due to the subsequent
op
rise in cellular penetration, mobile internet searches reported the highest growth rate of 127%
and reached 23.8 million. During the same period, there were 115.9 million voice searches and
124.3 million Internet visits representing a growth of approximately 93% and 64% respectively.
Just Dial also enabled its new users to make informed decisions by providing access to previous
users’ experiences, their reviews and ratings. By using ‘reverse auction’, a user could put up a
call for quotes by many business listings for her/ his service and product requirement.
tC

Users/callers were not required to pay anything and service providers (mainly small or medium
enterprises (SMEs)) initially listed with the company free of cost. However if the service
provider wanted to be listed at the top, a subscription fee was charged and free listings are
converted to paid listings. Paid listings were further divided into three categories: silver, gold
and platinum with weekly, monthly, quarterly, or annual packages [See Exhibit 2]. The cost of
a silver subscription was least at Rs. 2,000 per month, and it placed the appropriate company's
name at the top of the search list. The gold listing, which placed the company at top in at least
No

first three search queries, came at a cost of Rs. 5,000 per month. There were no fixed charges
for the platinum because it was a custom-built offering and the fee was determined after
verifying the subscribers’ needs. All three paid listings came with a JD-verified stamp.

17
https://www.youtube.com/watch?v=6Lgc5dl6S3Y accessed on 15 April 2014
18
Ibid., p. 13.“VSS Mani, the man who dialed the right numbers,” 11 April2011,
http://articles.economictimes.indiatimes.com/2011-04-11/news/35750571_1_unique-number-wrong-number-business-
plan.accessed on 15 April 2014.
Do

19
Ibid., p. 11. “Dream with just 50k in pocket,” http://howbusinessstarted.wordpress.com/how-it-started/computers/dream-with-
just-50k-in-pocket-justdial-com/ accessed on 17 April 2014.
20
Ibid., p. 13.“VSS Mani, the man who dialed the right numbers,” 11 April 2011
http://articles.economictimes.indiatimes.com/2011-04-11/news/35750571_1_unique-number-wrong-number-business-plan
accessed on 15 April 2014.
21
Ibid., p. 3. “Wait ,Don’t Just Dial,” 17 August 2013 , http://business.outlookindia.com/article_v3.aspx?artid=287249 accessed
on 20 April 2014.
22
“Just Dial IPO Grading by CRISIL,” April 16,2013 ,http://www.crisil.com/Ratings/Brochureware/News/CRISIL-
Research_ipo-grading-rat_just-dial-2013.pdfaccessed on 17 April 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

Initially, conversion rate was low but it went up steadily with the growth of SMEs. According

t
to the Ministry of Micro, Small and Medium Scale Enterprise (MSME) Annual Report (2011),
their gross output recorded a CAGR of 11.5% and increased gradually to 9,829 billion in 2009–

os
2010 from 7,094 billion in 2006–2007[See Exhibit 3].23 Though the Just Dial’s total listing
grew to 9.1 million from 5 million and the number of paid subscribers grew to 206,500 in March
2013 from 62,000 in March 2010,24 the proportion of paid subscribers was still very low at only
2%.

Database

rP
Just Dial had developed a database in order to maintain a record of MSMEs which provided
products and services. Details of the service providers (offerings, contact details, logos, images,
videos, etc.) were collected by an in-house team of employees which included tele-sales and
‘feet-on-street’ executives.25 These executives marketed the services of Just Dial so as to invite
businesses to provide information about their products and offerings and then tried to convert
these free listings into paid advertisers. Initially the tele-sales executives contacted the
prospective paid advertisers via telephone. Once the potential advertisers express an interest,

yo
‘feet on street’ executives were sent to meet them and to assist in choosing the appropriate
membership package. By March 31, 2013, Just Dial had a total of 3,651 sales and marketing
executives which included 2,707 tele-sales executives and 944 ‘feet on street’ executives. These
executives were located in and around Ahmedabad, Bengaluru, Chandigarh, Chennai,
Coimbatore, Delhi, Hyderabad, Jaipur, Kolkata, Mumbai and Pune.

Just Dial facilitated business owners to list their businesses online or through mobile internet
op
platform for free on its database. Additionally it also allowed its employees to submit data by
using the data input facility which was available company-wide. Another source of contribution
to the database used to come from the users who called up to seek information about a business
and in case the business was not listed and information of the business was not available, these
callers also provided some preliminary information. The service provider was classified as a
business listing only when it became part of Just Dial’s database.26 On the basis of the location
of the service provider, each listing was tagged with a ‘Geo-code’.27 These were then marked
tC

on a map of the relevant area and were used to calculate the distance of the user from the service
provider. Based on these codes the user could also find the exact location of the service
provider. Just Dial also started a ‘reseller programme’ in which a third party, whose team was
trained by Just Dial executives, provided updated and reliable new business details in return for
a payment. This helped them in cost reduction by getting new entries that could be potential
paid advertisers without requiring additional manpower. Just Dial’s database of 9.1 million
listings varied from restaurants to schools and colleges to gifts to computer repairs across
various towns and cities in India.28The database was also verified periodically by an internal
No

database verification team and through customer feedback.

23 Ministry of Small and Medium Enterprises: Annual Report 2010-11


http://msme.gov.in/MSME-Annual-Report-2010-11-English.pdf accessed 15June 2014.
Do

24 “Just Dial : Riding the change,” by SatrajitSen, 09 October 2013 , http://www.afaqs.com/news/story/38908_Justdial:-Riding-

the-changeaccessed on 15 April 2014.


25 Ibid., p. 7. “Just Dial Red Herring Prospectus,” 08 May 2013, p. 145. accessed on 15 April 2014.

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014.


26 Ibid,p.146.
27 Ibid, p.139.
28
Ibid, p. 23. Just Dial IPO Grading by CRISIL,”16 April 2013 ,http://www.crisil.com/Ratings/Brochureware/News/CRISIL-
Research_ipo-grading-rat_just-dial-2013.pdfaccessed on 17 April 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

Financial performance

t
Just Dial had been profitable since year 2002. On December 31 2012 the firm’s PAT (profit
after tax) as a percentage of total revenue (from continuing operations) was 18.9%. The firm’s

os
target was to grow solely by increasing its operating efficiency, without an increase in debt.
Just Dial earned most of its revenues from paid advertisers. It received most of the fees in
advance; therefore, the working capital cycle was almost negative. It had outstanding trade
receivables of Rs 4.0 million from the customers as of December 31 2012.29 Just Dial had huge
cash reserves of approximately Rs 4750 million without any debt or long term borrowings

rP
which indicated the firm was growing without relying upon external sources of funding. 30
The company's balance sheet looked attractive because of the company’s debt-free, cash-rich
position [See Exhibit 4].31 In order to get operational leverage and to minimise costs, Just Dial
was operating with minimal asset base. To save time and money, even new data collection was
outsourced to a third party.32

The total revenue of the firm increased to Rs 2,770.2 million in 2012 from Rs 716.0 million in
2008, recording a CAGR of 40.2 percent. The profits after tax jumped to Rs 522.8 million in

yo
2012 from Rs 17.1 million in 2008, recording a CAGR of 135.1%.33 Just dial recorded a rise of
69% in net profits from Rs. 166 million during April-June 2012 to Rs. 280 million in April-
June 2013. The operating revenues of the firm were also up by 28 percent from Rs. 817 million
in the previous year to Rs 1046 million in 2013.
Additionally the financial ratios of the firm were also attractive. The operating profit margin
ratio improved from 9% in 2009 to 25% in 2012. Along similar lines, the net profit margin ratio
improved from 8% in 2009 to 18% in 2012. As the firm was operating with a minimal asset
op
base, therefore the asset turnover changed only 0.5% from 2% in 2009 to 2.5% in 2012 [See
Exhibit 5]. The business was expected to grow at a rate of 60% on average for the next five
years, and the beta of the company was expected to be 1.2.

Competitors
In the online local business search segment, various competitors had similar types of
product/service offerings. Competitors such as Sulekha, Asklaila, Getit, and Askme operated
tC

within the same space [See Exhibit 6]. Getit was the oldest player in the market, operating
since 1986. Just Dial entered in 1996, followed by Sulekha in 1998. Asklaila and Askme entered
the market in 2007 and 2011 respectively. The database of Just Dial covered details of product
and service providers for more than 1500 cities and towns in India. Its competitors Asklaila and
Askme were present in 1,200 and 525 cities and towns while Getit and Sulekha were present in
only 35 and 60 cities respectively. [See Exhibit 7]. Askme’s database was more than 3 million
providers and Sulekha.com had a database of 2 million. In terms of ranking among Indian
No

websites Sulekha, Asklaila, Getit, Askme and Just Dial were ranked 47, 195, 952, 683 and 58
respectively. Just Dial catered to the needs of 2.6 million Indian users while Sulekha addressed
3.1 million Indian users. In terms of financial performance across the web, Just Dial had the
maximum amount of capital worth 132% employed in the form of cash and marketable
securities, while its peers had a minimum cash of 2-5%. Sulekha’s accumulated loss was the
highest and 94% of the capital was employed while it was 74%, 40% and 47% for Getit, Askme

29 Ibid, p.7.“Just Dial Red Herring Prospectus,” 08 May 2013, p.136. accessed on 15 April 2014.
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014.
Do

30
Ibid,p.137.
31 31“All you wanted to know about the Just dial IPO,” 20 May 2013

http://profit.ndtv.com/news/market/article-all-you-wanted-to-know-about-the-justdial-ipo-322396 accessed on 17 April 2014


32 Ibid, p. 3. “Wait ,Don’t Just Dial,” 17 August 2013 , http://business.outlookindia.com/article_v3.aspx?artid=287249accessed

on 20 April 2014
33 “Just Dial Red Herring Prospectus,” 8 May 2013,p. 134

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

and Just Dial respectively [See Exhibit 8]. In addition, global giant Google was rapidly

t
increasing its presence in India.34 In the year 2011 PAT margins of Google and Just Dial were
16.1% and 15.7% respectively [See Exhibit 9]. However, the company did not have any

os
directly comparable peers that were listed on the Indian stock market and had a similar business
model within the local search domain.

Future Market Potential


Although the Indian Internet market was still nascent, it had a high potential to grow

rP
exponentially. According to Internet World Stats, internet penetration in the USA was 78% but
only 11.4% in India, as of June 2012.35 India had the third largest population of Internet users,
approximately 137 million, after China and USA. According to TRAI, as of March 31 2011,
overall tele-density rate of India was 68% with a total of 811.6 million wireless subscribers.36
This number had increased from 391.8 million in March 2009, thereby representing a CAGR
of 43.9%.

60% of mobile Internet users in India were under 24 years of age, and the

yo
number of mobile subscribers in India expected to exceed 1,000 million by
2014.
- Report of Mobile Marketing Association (MMA) and Vserv.mobi

According to a CRISIL Research Report, 3G subscribers in India were expected to increase


from 3 million in FY11 to 236 million in FY16. The drivers of such growth would be growth
of 3G networks and reasonable priced 3G-enabled handsets and data plans.
op
We see a huge opportunity because of the mushrooming of Internet-enabled
smart phones for as cheap as Rs. 5,000 at the lower end. 37
- Mani, CEO of Just Dial

Advertisements and online digital content in the form of picture sharing, video sharing,
tC

uploading, downloading and voice/audio sharing satisfied information-hungry youngsters.


According to a report ‘Online Advertising Market - India, May 2012’ by Netscribes, advertising
on the Internet was expected to demonstrate robust growth of 51% from 2011 to 2012. The
increase in online advertisement was driven by a number of favourable variables such as the
growing Internet, mobility, availability of cheaper android cell phones and the increasing
popularity of social media-networking platforms.

Just Dial was only a part of the larger ecosystem built around telephony and the Internet. Along
No

with the projected growth of the Indian middle class as well as growing Internet and mobile
usage, the major chunk of potential Just Dial users was still unexploited and offered huge
growth potential.
Do

34
“Just Dial: Sell” 26 January 2014
http://www.thehindubusinessline.com/money-wise/stock-insight/justdial-sell/article5620397.ece accessed on 1 June 2014.
35
Internet World Stats: Usage and Survey http://www.internetworldstats.com/stats3.html accessed on 20 June 2014.
36 Telecom Regulatory Authority of India: Annual Report 2011-12

http://www.trai.gov.in/WriteReadData/UserFiles/Documents/AnuualReports/TRAI-English-Annual-Report-
10032014.pdfaccessed on 20 June 2014.
37
Ibid, p. 24. “Just Dial : Riding the change,” by SatrajitSen, 09 October 2013
http://www.afaqs.com/news/story/38908_Justdial:-Riding-the-changeaccessed on 15 April 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

Indian Economy Outlook

t
In the previous few years, the Indian economy had exhibited robust growth. As per the report

os
of the Ministry of Statistics and Programme Implementation (MOSPI), the gross domestic
product (GDP) growth rates of India were hovering between 6.9% and 8.6% during 2010-12
[See Exhibit-10].38 According to The World Factbook published by the CIA in 2012, the Indian
economy was the fourth largest economy in the world with an estimated GDP of approximately
$4.8 trillion based on purchasing power parity (PPP).39 During global recession, when the
economies of the world were trembling down, the Indian economy bounced back strongly and

rP
grew at over 8% year-on-year. This growth was mainly backed by huge domestic demand.
However, growth in GDP moved down to 6.5% in 2012. Nevertheless, during 2014-18, the
economy was expected to grow at the rate of 5.9%.40

The country’s income pyramid was expected to change, and India’s middle
class was expected to grow by over 11 times from 50 million people in 2005 to
583 million people by 2025.41

yo
- McKinsey report

The favourable demographics of the Indian economy were another factor which contributed to
Indian economic growth. According to The World Factbook, the Indian economy was one of
the most populous economies, representing 17.2% of the world’s population. In 1991,
liberalisation of the Indian economy started the transformation of Indian demographics by
increasing income levels and changing consumption patterns. The Indian middle class was
op
expected to increase ten times by 2025 to reach 583 million people as per the McKinsey report.
With the rise in the middle class and the accompanying income levels, the discretionary
spending of average households was also expected to increase from 50% to 70% in 2025. The
report also pointed out that if the Indian economy continued to rise at the same pace, a huge
transformation would be expected to take place in consumer markets and it was expected to
become the fifth largest consumer market by 2025. Consumption was expected to reach Rs 69.5
trillion with an increase of 7.3% annually by 2025.
tC

Additionally, growth of SMEs in India also contributed to economic growth. These SMEs
favourably affected industrial production and promoted exports and employment generation.
MSMEs production had shown a CAGR of 11.5% and became 10,958 billion in 2010 – 2011,
from 7094 billion in 2006 – 2007 according to the Ministry of MSME. The Industries Act 1951
also favoured policies that promoted the development of SMEs. SMEs in India contributed 45%
and 40% to manufacturing output and exports respectively. This sector employed 73.2 million
No

people throughout the country and exhibited a higher growth rate than the rest of the industrial
sector.

After huge setbacks in investors’ confidence between 2007 and 2008, markets started
recovering and SENSEX (a figure indicating relative prices of shares on the Mumbai Stock
Exchange) once again exceeded 20,000 [See Exhibit-11]. After the 2008 crisis, the number of
IPOs in the primary market had declined and started rising again during 2010. However,
because of investors’ low confidence which prevailed in the market, the numbers declined in
Do

38
Ministry of Statistics and Programme Implementation: Annual report 2011-12
http://mospi.nic.in/Mospi_New/upload/mospi_annual_report_2011-12.pdf accessed on 15 June 2014.
39
Central Intelligence Agency: The World Fact book 2013
https://www.cia.gov/library/publications/download/accessed on 15 April 2014.
40 ShwetaPunj (2013) “India to grow below 6% from 2014 to 2018”

http://businesstoday.intoday.in/story/india-growth-projection-oecd/1/199401.html accesses on 25 June 2014.


41
Ablett et al. (2007), “The Bird of Gold-The Rise of India’s Consumer Market” p.10
http://www.mckinsey.com/insights/asia-pacific/the_bird_of_gold accessed on 18 June 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

2011 and 2012. In 2013, almost 5 years after the crisis, investors’ confidence started building

t
again, as evidenced by the bullish market, and the number of IPOs started to increase [See
Exhibit-12]. The last one-year average market return of SENSEX was 19.5%,42 and the interest

os
rate on 10-year government securities was 7.49%.43 Market analysts believed that the bullish
run of the market had just begun and would continue to show an upward trend in the foreseeable
future.

Just Dial’s IPO

rP
As Just Dial’s operations grew in scale and volume either through offering innovative products
and services or expansion into new markets, it required more funding. In response to the
growing need for capital, Just Dial began to look for fundraising options from the market and
considered going public. Before its IPO, Just Dial’s operations were funded by private equity
investors [See Exhibit13].

In August 2011, Just Dial filed its DHRP with SEBI with hopes to raise Rs 3.6 billion. However,

yo
due to bearish trends in share markets, the company deferred/postponed its plans.44 In 2012,
Just Dial re-filed for an IPO of Rs 9.5 billion. In addition to the primary issue of shares worth
3.6 billion, the IPO also included a secondary offering of 10.64 million shares by private
investors and promoters, which was set to give them an exit route from the company. This
included 4.03, 2.51, 1.55, 1.04, 0.35 and 0.64 million shares held by SAIF Partners, Tiger
Global Four JD Holdings, Tiger Global Five Indian Holdings, Sequoia Capital, EGCS and SAP
Ventures respectively [See Exhibit 14]. SAIF partners were expecting returns of ten to twelve
op
times on initial investment while Tiger Global was also expecting to make a return of eight to
nine times on its investment [See Exhibit 15]. Just Dial was planning to utilize 1,013.01 million
from the IPO to enhance the company’s brand through aggressive multimedia advertising and
other brand-building activities. It also proposed to set up nine new offices in Delhi, Mumbai,
Bangalore, Pune, Coimbatore, Jaipur, Chandigarh and Chennai with an estimated cost of Rs
510.11 million. It proposed to upgrade its existing computer hardware with an estimated budget
of 994.60 million.45 It also planned to extend its products and services, such as daily deals,
tC

targeted marketing campaigns and outsource its database to various other businesses.

The Just Dial IPO received approval from SEBI on 20 March 2013. CRISIL had given a rating
of 5/5 to the IPO, indicating the company’s strong fundamentals. However the IPO grading
considered only the company’s fundamentals, relative to its peers, and was not a comment on
the company’s valuation.46
No

According to SEBI, the shares were to be allocated, on a proportionate basis, as follows:

x 75% of the total offer must be allotted to Qualified Institutional Bidders


x 15% or less must be available for allocation to Non- Institutional Bidders
x 10% must be allotted to Retail Individual Bidders
x If the issue remains under-subscribed in non-institutional bidders and retail individual
bidders’ category, spill over from any other category or a combination of categories was
Do

42 Calculated by the case writer based on last one-year returns of BSE SENSEX.
43
http://banks-india.com/faq/government-securities-gsecs-india/ accessed on 10 August 2013.
44
“Just Dial gets SEBI approval for IPO,” Vikas SN, April 3, 2013, http://www.medianama.com/2013/04/223-justdial-sebi-
approval-ipo/accessed on 15 April 2014.
45 Ibid. “Just Dial Red Herring Prospectus,” 08 May 2013, p.134

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014.


46
Ibid, p. 23. Just Dial IPO Grading by CRISIL,”16 April, 2013. http://www.crisil.com/Ratings/Brochureware/News/CRISIL-
Research_ipo-grading-rat_just-dial-2013.pdf accessed on 17 April 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

allowed at the discretion of the selling shareholders and the company in consultation with

t
the stock exchange
x In case of oversubscription of issue, allotment of shares in the non-institutional bidders and

os
retail individual bidders’ category would be done on proportionate basis whereas the
allotment in the qualified institutional bidders’ category would be done on a discretionary
basis
x Regarding the revision of the bid, only retail individual bidders were allowed to revise their
bids during the offer period while qualified institutional bidders and non-institutional
bidders were not allowed to do so

rP
Additionally the offer provided a ‘safety net mechanism’ for the retail investors. Within six
months of listing, if the share price of Just Dial fell below its issue price, promoters had to buy
back shares from the original allottees at the issue price.47

The IPO planned to open for subscriptions between May 20 and 23, with a price band of Rs
470-543, and with an expected market capitalization in the range of Rs 32-37 billion.48 As soon

yo
as this information regarding the price band floated into the market, there was a general negative
reaction everywhere regarding the valuation, which was unreasonably high.49

On FY13 expected net profit of Rs 620 million, the company is expecting a


price to earnings multiple of value of 60 at the upper price band, valuing the
company at Rs 37000 million. This valuation is very high. A global giant like
'Google' is trading at a P/E multiple of 27, less than half of what the company
is demanding. Investors should avoid subscribing to this IPO.50
op
- Mr XX Valuation Expert

The IPO is not interesting as valuations are very expensive. At 50 times price
to earnings multiple, there are other established listed companies available. At
this price the market capitalization to sales ratio is also very high, so would
recommend investors to avoid.51
tC

- Mr Rajen Shah, Chief Investment Officer of Angel Broking Ltd.

Just Dial was going public after five previously failed attempts. It was critical that meticulously
evaluated steps were considered before they were taken. Even a very small mistake could ruin
the successful launch of this long-awaited IPO. Its valuation could be a challenge because it
was a unique venture in the Indian market with no benchmarks for comparison. The negative
No

views of market experts could cost the company dearly. These were just some of the variables
that Just Dial had to consider. Would investors be able to understand and trust the Just Dial
business model? Was it an appropriate time to bring an IPO to the market? Was the pricing
(hence valuation) appropriate? Would this IPO be successful in the market, and would it be

47 Ibid. “Just Dial Red Herring Prospectus,” 08 May 2013, p.134


http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014.
48
Ibid, p. 4.“ Just Dial IPO to raise up to 950 Cr,” May 13, 2013
http://www.livemint.com/Companies/ZBJ3DBVqnCPwVPtTyBohqO/Just-Dial-IPO-to-raise-up-to-950-cr.html accessed on
Do

15 April 2014.
49
“The repercussions of the Just Dial IPO for VC funded internet companies” 24 May 2013
http://www.moneycontrol.com/smementor/mentorade/infotech/the-repercussions-of-the-just-dial-ipo-for-vc-funded-internet-
companies-880756.html accessed on 25 May2014.
50
“Just Dial IPO unreasonably valued; investors should avoid” 21 May 2013 http://articles.economictimes.indiatimes.com/2013-
05-21/news/39418708_1_just-dial-ipo-upper-price-band-search-service accessed on 15 April 2014.
51
“Just Dial IPO set to open: Should you buy?,” 15 May 2013,
http://www.livemint.com/Money/F7Fm0tlY7T4LszrhaxcZQK/Just-Dial-IPO-set-to-open-Should-you-buy.html accessed on
15 April 2014.

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

able to meet the expectations of private equity investors, who had come a long way and had

t
supported the company at every step?

os
rP
yo
op
tC
No
Do

10

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 1: STATEMENT OF PROFIT AND LOSS OF JUST DIAL (IN RS MILLIONS)

t
os
Particulars 31-Mar-12 31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-08

Income from continuing operations


Revenue from operations
Sale of search related services 2,593.98 1,796.03 1,160.62 735.39 510.18
Yellow pages publication services 148.85 123.83 185.69

rP
Other operating revenues(revenue from
reseller) 26.63 43.3
Other income 149.63 37.26 38.56 58.92 20.16
Total revenue 2,770.24 1,876.59 1,348.03 918.14 716.03
Expenses
Employee benefits expense 1,308.37 947.17 668.82 522.77 420.54
Depreciation and amortization 90.23 67.88 52.53 40.81 26.66

yo
Finance Cost 0.17 0.29 0.04 0.05 0.14
Other expenses 639.47 438.29 343.17 260.7 240.21
Total Expenses 2,038.24 1,453.63 1,064.56 824.33 687.55
Restated profit before tax from continuing
operations 732 422.96 283.07 93.81 28.48
Tax expense/(income)
op
Current tax 205.96 119.24 35.17 41.87
Deferred tax charge/(credit) 3.26 1.49 98.82 -13.65 -33.27
Fringe benefit tax 2.89 2.78
52
Total tax expense 209.22 120.73 98.82 24.41 11.38
Restated profit before tax before minority
interests 522.78 302.23 184.25 69.4 17.1
tC

Share in loss of minority interest 0.09


Restated profit after tax from continuing
operations (A) 522.78 302.23 184.34 69.4 17.1

Discontinuing operation
Profit/(loss) before tax from discontinuing
No

operations 4.16 -2.01


Tax expense/(income) of discontinuing
operations -1.21 0.07
Restated profit/(loss) after tax from
discontinuing operations (B) 5.37 -2.08

Restated profits for the year (A+B) 528.15 300.15 184.34 69.4 17.1

Source: “Just Dial Red Herring Prospectus,” 8 May 2013


Do

http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014

52 Expected tax rate is 34% for the future years

11

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 2: CLASSIFICATION OF BUSINESS LISTINGS

t
os
Platinum

Premium
Advertisement Diamond

rP
(16%)
Paid Category
(~ 2%) Non Premium
Listing Advertisement Gold
Unpaid Category (84%)
(~ 98%)

yo
Source: “Just Dial Red Herring Prospectus,” 8 May 2013 and Case writer analysis
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014
op
EXHIBIT 3: MICRO AND SMALL MEDIUM ENTERPRISE PRODUCTION IN TERMS OF
GROSS OUTPUT

Gross Output (INR billion)

10,958
tC

9,829
8,808
7,908
7,094
No

2006-07 2007-08 2008-09 2009-10 2010-11


Do

Source: Created by authors based on MSME Annual Report 2010-11


http://msme.gov.in/MSME-Annual-Report-2010-11-English.pdf accessed on June 15,
2014.

12

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 4: JUST DIAL-STATEMENT OF ASSETS AND LIABILITIES (IN RS MILLIONS)

t
os
Particulars 31-Mar-12 31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-08

A Non Current Assets


Fixed assets
Tangible Asset 326.98 253.94 181.94 136.85 115.43

rP
Intangible Assets 21.4 19.27 10.01 11.87 15.34
Capital work in progress 3.18
Intangible assets under
8.72
development
360.28 273.21 191.95 148.72 130.77
Deferred tax assets(net) 9.14 12.43 28.06 126.9 113.24
Long term loans and advances 203.5 145.87 78.21 31.75 23.35

yo
Other non current assets 0.28 0.26 7.24
572.92 431.51 298.22 307.37 267.36
B Current Assets
Current Investments 1568 1159.71 779.85 402.47 407.04
Trade receivables 10.99 0.35 0.69 7.71
Cash and Bank balances 237.35 201.18 121.19 204.32 137.66
Short term loans and advances 59 86.45 34.76 39.92 14.08
op
Other current assets 40.48 4.17
1,904.83 1,462.5 936.15 647.4 566.49
C Total assets(C=A+B) 2,477.75 1,894.01 1,234.37 954.77 833.85

D Non-current Liabilities
tC

Long term borrowings at 8.85% 1.49 3.16 0.29


Other long term liabilities 22.95 15.61 14.79 14.89 41.08
Long term provisions 15.27 14.95
22.95 17.1 17.95 30.16 56.32
E Current Liabilities
Trade payables 43.95 50.21 30.51 20.12 28.6
Other current liabilities 1,325.5 874.54 534.82 450.86 379.64
No

Short term provisions 12.92 20.59 13.16 14.92 11.01


1,382.37 945.34 578.49 485.9 419.25
F Total Liabilities 1,405.32 962.44 596.44 516.06 475.57

G Share issue expenses (to the 38.76


extent not written off or
adjusted)
Do

Net Worth(C-F-G) 1,033.67 931.57 637.93 438.71 358.28

Net Worth represented by


H Shareholders fund
Share Capital

13

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

t
Particulars 31-Mar-12 31-Mar-11 31-Mar-10 31-Mar-09 31-Mar-08

os
Equity Share Capital 519.08 519.05 8.56 8.56 8.56
Preference Share capital 11.64 1.96 2.52 2.52 2.52
Total Share Capital 530.72 521.01 11.08 11.08 11.08
I Reserves and Surplus
Capital redemption reserve 0.87 0.87 0.87

rP
Securities premium account 4.4 381.69 381.69 381.69
Stock option outstanding
8.83 3.24 22.67 8.69 6.14
account
General reserve 37.42 37.42 25.3
Foreign currency translation reserve -0.18 -0.39 0.11 -1.39
Net surplus/(deficiet) in the
532.88 403.1 183.45 -0.89 -58.17
statement of profit and loss

yo
Total Reserves and Surplus 541.71 410.56 625.71 427.89 354.44

J Non controlling Interest 1.42

Share issue expense (to the


K extent not written off or 38.76
adjusted)
op
Net Worth (H+I+J-K) 1,033.67 931.57 638.21 438.97 365.52

Source: “Just Dial Red Herring Prospectus,” 8 May 2013 and Case writer analysis
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014
tC
No
Do

14

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 5: RATIO ANALYSIS OF JUST DIAL LIMITED

t
os
Mar '12 Mar '11 Mar '10 Mar '09
Profitability Ratios
Operating Profit Margin (%) 25.65 24.67 23.19 9.23

Profit Before Interest And Tax Margin (%) 21.14 20.56 18.82 4.46
Gross Profit Margin (%) 22.21 20.98 19.38 4.76

rP
Cash Profit Margin (%) 21.59 18.97 18.04 12.39
Adjusted Cash Margin(%) 21.59 18.97 18.04 12.39
Net Profit Margin (%) 18.37 15.36 14.33 8.21
Adjusted Net Profit Margin (%) 18.37 15.36 14.33 8.21

Return On Capital Employed (%) 66.54 44.29 44.24 22.18


Return On Net Worth (%) 49.49 30.27 29.5 16.84

yo
Adjusted Return on Net Worth (%) 49.33 30.27 29.5 16.84

Return on Assets Excluding Revaluations 19.69 18.34 764.89 522.86

Return on Assets Including Revaluations 19.69 18.34 764.89 522.86

Return on Long Term Funds (%) 66.54 44.29 44.24 22.18


op
Management Efficiency Ratios
Debtors Turnover Ratio 8,735 3,872 2,517 204.58
Asset Turnover Ratio 2.58 2.28 2.36 2.09

Number of Days In Working Capital -131.51 -102.2 -101.32 -99.79


tC

Earnings per Share 9.74 5.55 225.7 88.07


Book Value 20.44 18.34 764.89 522.86

Source: Case Writer Analysis based on Annual report (2009-12)


No
Do

15

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 6: COMPARISON OF LOCAL SEARCH ENGINE WEBSITES IN INDIA

t
os
Database
Year Of Coverage Listings
Name Inception Promoters Platform (Cities/towns) (mn) PE Investors
Getit 1986 Delhi based Voice, ~ 35 NA ASRO group, Helion
TEJ Bandhu Online ,Print Venture Partners
group
Just Dial 1996 Mr Voice, ~1500 ~6 SAIF,SAPV(Mauritius),Seq

rP
V.S.S.Mani Online ,SMS uoia Capital India
Investment III, Tiger Global
Four JD Holdings and Tiger
Global Five Indian Holdings
Sulekha. 1998 Mr Satya Online ~60 ~2 IMG (New York),Norwest
com Prabhakar, Venture Partners (Palo Alto,
Founder and Mitsui(Tokyo)
CEO

yo
Asklaila 2007 Mr Kiran Online, SMS ~1200 NA Matrix Partners, Light speed
Konduri, Mr Venture Partners, SVB
Shriram
Adukoorie
Askme 2011 Television Voice, ~525 >3 NA
Eighteen Online, Print
India Ltd
op
Source: Created by authors using CRISIL Research Report
http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Research_ipo-grading-rat_just-
dial-2013.pdf accessed on 17 April, 2014
tC

EXHIBIT 7: PERFORMANCE ON JUST DIAL AND ITS COMPETITORS ON THE WEB

Name of the Website Ranks amongst Time spend on Pages Views per Indian users (mn)
Indian Websites the website user
(min)
No

www.sulekha.com 47 3.2 3.6 3.1


www.asklaila.com 195 2.3 2.6 1.1
www.askme.com 683 6.5 6.4 0.3
www.getit.in 952 3 3.3 0.2
www.justdial.com 58 7.1 5.3 2.6

Source:www.alexa.com
Do

16

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 8: COMPARISON OF FINANCIAL PERFROMANCE OF LOCAL SEARCH

t
ENGINE WEBSITES IN INDIA (RS MILLION)

os
FY07 FY08 FY09 FY10 FY11
Sulekha 82 284 439 424
Accumulated losses as % of capital employed 29% 64% 99% 96% NA
Cash and Marketable Securities 165 149 10 10 NA
Cash as % of Capital employed 60% 34% 2% 2% NA

rP
Asklaila 91 181 316 423
Accumulated losses as % of capital employed 21% 42% 73% 93% NA
Cash and Marketable Securities 331 231 100 11 NA
Cash as % of Capital employed 76% 53% 23% 2% NA
Askme 0 0 480 797 1239
Accumulated losses as % of capital employed 0% 0% 33% 40% 79%

yo
Cash and Marketable Securities 111 199 65 79 44
Cash as % of Capital employed 7% 10% 4% 4% 3%
Getit NA 3 135 412
Accumulated losses as % of capital employed NA 2% 31% 74% NA
Cash and Marketable Securities NA 12 13 9 NA
Cash as % of Capital employed NA 7% 3% 2% NA
Just Dial 16 34 103 287 573
op
Accumulated losses as % of capital employed 25% 13% 33% 47% 62%
Cash and Marketable Securities 248 552 607 901 1216
Cash as % of Capital employed 370% 218% 194% 147% 132%

Source: Created by authors using CRISIL Research Report


tC

http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Research_ipo-grading-rat_just-dial-
2013.pdf accessed on 17 April, 2014
No
Do

17

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 9: COMPARISON OF JUST DIAL WITH INTERNATIONAL COMPETITOR

t
GOOGLE

os
Google India Private Ltd Just Dial Ltd

(Rs mn) CY 08 FY10 FY11 FY 09 FY10 FY 11


12 15 12 12 12 12

rP
month month month month month month
Revenue 6,649 7,793 8,520 859 1,309 1,839
PAT 1,448 980 1,374 75 193 288
PAT Margin
(%) 21.80% 12.60% 16.10% 8.70% 14.70% 15.70%

Source: Created by authors using CRISIL Research Report

yo
http://www.crisil.com/Ratings/Brochureware/News/CRISIL-Research_ipo-grading-rat_just-
dial-2013.pdf accessed on 17 April, 2014

EXHIBIT 10: INDIA’S REAL GROSS DOMESTIC PRODUCTION GROWTH RATES


op
12

10

8
tC

6
India's Real GDP Growth
4 Rates

2
No

Source: Created by authors using Ministry of Statistics and Programme Implementation:


Annual report 2011-12 http://mospi.nic.in/Mospi_New/upload/mospi_annual_report_2011-
Do

12.pdf accessed on 15 June,2014Indian Planning Commission Website

18

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 11: HISTORICAL PRICE MOVEMENTS IN SENSEX

t
os
SENSEX
25000

20000

rP
PRICES (INR)

15000

10000 SENSEX

5000

yo
Jan/07

Jan/13
Jan/08

Jan/09

Jan/10

Jan/11

Jan/12
Jul/07

Jul/08

Jul/09

Jul/10

Jul/11

Jul/12
Source: Created by authors using BSE Website
http://www.bseindia.com/indices/indexarchivedata.aspx
op
EXHIBIT 12: NUMBER OF INITIAL PUBLIC OFFERS DURING THE LAST SIX YEARS
tC

120

100

80
No

No. of IPO
60

40

20

0
2007 2008 2009 2010 2011 2012 2013
Do

Source: Created by authors using IPO reports on Chittorgarh website.


http://www.chittorgarh.com/ipo/ipo_reports.asp

19

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 13: FINANCING HISTORY OF JUST DIAL LIMITED

t
Round 1 (Oct-2006): 88

os
SAIF Invested INR 546.9 Million. PRIMARY INFUSION: (INR 166.9 Million)
Investment via SAIF II Mauritius. Issue of 6% 484,030 Series C CCPS to SAP Ventur
Pricing Details: es.
Series A Preference: FV Rs.10, Issue price Rs.2632 SECONDARY PURCHASE: (INR 56.5 Million)
.01 Purchase of 163,763 shares from Ramani Iyer (Pro
Issue of 6% 207,806 Series A COCRPS to SAIF. moter)
Conversion Ratio - 1:1 Bonus Issue in April 2010. (55:1)

rP
Post Conversion of Preference Shares, the Investors
Round 2 (April-2007): would receive such number of bonus shares in thep
INR 743.5 Million. reviously agreed ratio.
Tiger Global invested INR 703 Million Post Deal SHP:
SAIF invested INR 40.2 Million SAIF : 21.58% (13,777,232 shares)
Pricing Details: Tiger : 21.78% (13,903,120 shares)
Series B Preference: FV Rs.10, Issue price Rs.4600.9 Sequoia : 10.35% (6,608,784 shares)
6 SAP : 1.01% (647,793 shares)

yo
Tiger Global made the investment via Primary Infusi
on and Secondary Purchase. Round 5 (June-2012)
PRIMARY INFUSION: INR 205.4 Million INR 3269.5 Million.
Issue of 0.1% 35,967 Series B NCOCRPS to Tiger Sequoia Capital India, via Sequoia Capital India Inv
Global. estment Holdings I and II invested INR 3046.2 Milli
Issue of 0.1% 8,713 Series B NCOCRPS to SAIF. on( 9% stake)while SAP Ventures invested INR 223
SECONDARY PURCHASE: INR 538.0 Million .3 Million ( 0.66% stake).
Tiger Global purchased 117,105 shares from the The deal was a combination of primary infusion and
op
Promoter Group. secondary purchase of shares from the promoters.
Conversion Ratio - 1:1 Pricing Details:
Post Deal SHP: Each share: FV-Rs.10 ; Issue/Sale Price-Rs.488.66
Tiger Global : 13.81% PRIMARY INFUSION ( INR 2510 Million)
SAIF : 19.53% Sequoia Capital subscribed to 5,136,486 equity shar
es.
Round 3 (July-2009) SECONDARY PURCHASE ( INR 759.5 Million)
tC

INR 789.1 Million. Sequoia Capital purchased an aggregate 1,097,276 e


Sequoia Capital invested via Sequoia Capital India quity shares from promoters V.S.S Mani, SandipanC
Investments II. hattopadhyay and Koora Srinivas.
SAIF invested via SAIF II Mauritius. SAP Ventures purchased 457,000 equity shares from
The investors made a Secondary Purchase of shares fro 15 people belonging to the promoter Group.
m existing shareholders. Post deal SHP:
Sequoia invested INR 384.0Million Promoters: 37.39% stake
Tiger invested INR 309.1 Million SAIF: 19.84% stake
SAIF invested INR 96 Million Tiger Global: 20.02% stake
No

Pricing Details: Sequoia Capital India: 18.5% stake


Equity: FV Rs.10, Purchase Price Rs.3253.92 SAP Ventures: 1.59% stake
Sequoia Capital purchased 118,014 shares. (10.64%) Others: 1.03% stake
Tiger Global purchased 95,018 shares. (8.57%) ESOP: 1.63% stake
SAIF purchased 29,503 shares. (2.66%)
Post Deal SHP:
Sequoia : 10.64% Source: Venture Intelligence Corporate
Tiger : 22.38% database accessed on 15 June,2014
SAIF : 22.19%
Do

Round 4 (June-2011)
INR 223.4 Million.
SAP Ventures made the investment via Primary Inf
usion and Secondary Purchase of shares.
Pricing Details:
Series C Preference: FV Rs.10, Issue price Rs.344.

20

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 14: JUST DIAL’S IPO DETAILS

t
Company Just Dial

os
Industry IT & ITES
Sector Online Services (Search - Local)
Website http://www.justdial.com
IPO Size (US $M) 167.11
IPO Price (Rs.) 530.00
IPO Valuation (US $M) 667.40

rP
Deal Period June-2013
Investors SAIF
Sequoia Capital India
Tiger Global
SAP Ventures
Investor Type Co-Investment
Exit Status Partial
Investor Sale in IPO? Yes

yo
Sequoia Capital India, SAIF, Tiger Global, SAP Ventures. Trilegal advised Sequoia
Selling Investors
Capital, SAIF and SAP Ventures.
More Details (Overall IPO) INR 927.37 Cr.

Public Issue of 17,497,458 shares at Rs.530 per share, comprising sale by promoters of 2,
807,976 sharesand an offer for sale of 14,689,482 shares by Sequoia, SAIF, Tiger
Global, SAP Ventures.

The SHP of the investors before and after the IPO is as follows:
op
Pre-IPO:

Sequoia I : 4.46% stake.


Sequoia II: 4.46% stake.
Sequoia III: 9.46% stake.
EGCS (Sequoia): 0.93% stake.
SAIF: 19.72% stake.
tC

Tiger Global Four JD Holdings: 12.28% stake.


Tiger Global Five Indian Holdings: 7.62% stake.
SAPV: 1.58% stake.

Post IPO:

Sequoia I : 4.46% stake.


Sequoia II: 4.46% stake.
Sequoia III: 4.87% stake.
No

EGCS (Sequoia): 0.00% stake.


SAIF: 11.2% stake.
Tiger Global Four JD Holdings: 8.26% stake.
Tiger Global Five Indian Holdings: 5.12% stake.
SAPV: 1.11% stakes.

IPO EXIT:

Sequoia via its Sequoia fund III sold 3,207,934 shares ( INR 170.02 Cr)
Sequoia via EGCS sold 647,793 shares (INR 34.33 Cr)
SAIF sold 5,951,231 shares (INR 315.42 Cr)
Do

Tiger Global via Tiger Global Four JD Holdings and Tiger Global Five Indian Holdings
sold 2,811,232 and1,742,996 shares respectively (INR 241.37 Cr)
SAPV sold 328,296 shares (INR 17.4 Cr)

Source: Venture Intelligence Corporate database accessed on 15 June,2014

21

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
15/564C Just Dial’s IPO

EXHIBIT 15: JUST DIAL IPO: VC STAKE AND RETURN MULTIPLES

t
Pre offer Pre offer Post offer Post offer Total Return

os
(No. of (Percentage (No. of (Percentage Stake Multiple*
Equity (%)) Equity (%)) Value
Shares held) Shares held ) (Rs Cr)*

1. SAIF 13,777,232 19.72 7,826,001 11.2 750 10-12x


2. Tiger Global 13,903,120 19.9 9,348,892 13.38 756 8-9x

rP
3. Sequoia III 6,608,784 9.46 3,400,850 4.87 360 9-10x
5. Sequoia I 3,116,88 1 4.46 3,116,881 4.46 170 At Par
6. Sequoia II 3,116,88 1 4.46 3,116,881 4.46 170 At Par
7. SAPV 1,104,793 1.58 776,497 1.11 60 1.3-1.4x

Source: “Just Dial Red Herring Prospectus,” 8 May 2013 and Case writer analysis

yo
http://www.sebi.gov.in/cms/sebi_data/attachdocs/1368445961783.pdf accessed on 10 April 2014

Endnotes
op
tC
No
Do

22

This document is authorized for educator review use only by Sarika Mahajan, University of Mumbai until November 2016. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860