Huge discount to retail investors for the first time in any IPO
NEW DELHI, May 20: On the back of the largest discount of
10% for retain investors and the growing internet penetration in the country,
local search engine Just Dial Limited hits the capital markets on today with
its public offering targeting to raise Rs950 crores.
“This is for the first time that any company is offering
such a huge discount of 10% at the lower price band,” said Mr Arun Kejriwal,
director of KRIS. “What is also notable is the fact that Just Dial has set
aside only 10% for retail subscribers, coupled with a safety net and this is
bound to enhance retail investor interest in the issue,” he said.
Just Dial has already raised over Rs 208 crore through
issue of shares to anchor investors, including Goldman Sachs and HSBC, by
allocating 39.37 lakh shares to anchor investors at a price of Rs 530 per piece.
The anchor investors include Goldman Sachs India Fund,
HSBC Bank (Mauritius) Ltd, Birla Sunlife Trustee Company Pvt Ltd, DSP Blackrock
Opportunities Fund and Deutsche Securities Mauritius Ltd, the filing said.
The IPO would see promoters and other investors selling
17.49 million shares or 25.2 per cent of the paid up equity capital.
As per McKinsey & Company, India’s middle class,
generally comprising people with annual
income range of Rs 200,000 to Rs 1,000,000, is expected to grow by over 10
times to approximately 583 million people
by 2025.
According to Internet World Stats, as of June 30, 2012,
Internet penetration was at 11.4% in India, compared to over 78.1% in the
United States. There were approximately 137 million Internet users in India,
making it the third largest population of Internet users after China and the
United States. According to TRAI, the number of mobile subscribers in India is
expected to exceed 1,000 million by 2014. With the growth projected for India’s
middle class and for Internet and mobile usage in India, we believe our
potential user base remains largely untapped and offers significant potential
for growth.
Analysts say these augur well for search engines like
Just Dial which also plans to expand its bouquet of services.
Citigroup and Morgan Stanley are the book-running lead
managers to the issue and Justdial plans to list on the BSE, NSE and MCX-SX.
Recommending subscription to the IPO, GEPL Capital said,
with its unique, un parallel business model & strong brand recognition Just
Dial Is expected to maintain its dominant position in the local search market.
The company’s business model is “efficient as it promotes
continuity in subscriptions and cash flows”, GEPL said and remarked: “It is
also noticeable that such kind of model is difficult to be replicated due to
the challenge of establishing the requisite credibility and relationship with
paid advertisers.”
As of December 31, 2012, Just Dial had no long-term borrowings
which are a competitive advantage for the company and a platform to grow
operations without being constrained by significant reliance on external
financing sources, GEPL said.
HDFC Securities notes in its analysis that Just Dial search
service bridges the gap between its users and businesses by helping users find
relevant providers of products and services quickly while helping businesses
listed in its database to market their offerings. “Its search service is
particularly relevant to SMEs, which currently, do not have many other cost
effective options to access and advertise to such a large number of potential
consumers,” HDFC Securities says.
In its offer document Just Dial says it intends to keep
up with the latest in mobile Internet technology to provide its search
services. In collaboration with service providers and vendors, the company is
in the process of developing the ability for users to complete a number of
bookings and purchases which are integrated in the search results from our
website, mobile Internet WAP site and our Master App, including reservations at
restaurants, home delivery of, ordering groceries, booking doctors’
appointments and even taxi bookings.
The company is also in the process of developing a car
listings website in which users can research and rate car models being offered
for sale, list their cars for sale and receive price quotes from vendors of
both new and used cars.
Another new application called “Quick Quotes” will
provide prospective buyers with a price quote from multiple vendors and which
will be available 24x7.
Just Dial’s consolidated total revenue from continuing
operations increased from Rs716.0 million in fiscal 2008 to Rs 2,770.2 million
in fiscal 2012, representing a CAGR of 40.2%.
