Just Dial IPO Analaysis – Absolutely Amazing Business

Just Dial IPO Analysis

This would be an analysis of Just Dial IPO which was refiled with SEBI in August 2012. The earlier one was in 2011 but was cancelled due to adverse market conditions. This post will be a bit long but worth reading because of unique business of Just Dial .

First some disclaimers– If you read this and invest in IPO when it comes out and LOSE money don’t sue me. If you make money contact me on my email/blog and I will try to take 1-2% of your Profits J (how is that for free advice). If everything fails and you really want to sue me GO ahead. This is a country where Kasab is still alive, hale and hearty, eating biryani from tax payer’s money and no sight to be hanged. What do you think you can do by suing me?

I had been an employee of Just Dial for around 9 months which was the best learning experience of my lifetime as I had the privilege to interact with Mr. Mani and his brilliant senior management team of Just Dial. This gives me unique insight in one of the really different businesses not just in India but in the whole world. There is a not a single business on the planet which works almost exactly/close to how Just Dial makes money on that scale. (Rs. 250 crores odd revenue and Rs. 50cr worth profits last yr with 0 debt and return on capital close to 40+% for last 3 years).

My analysis will be primarily based on the basic parameters on how Buffett would like to invest in a company like

If you are more of financially inclined person Financial Data and Calculations Just Dial with all the numbers and you can directly   see that pristine looking financial statements and ratios people dream of.

Here is a one line business model of Just Dial – When people need to buy something (goods or service) from some shop/business they call up Just Dial which in turn provides that data (business phone number, address) free of cost to person calling but Just Dial charges the business owners to make sure their phone number/address goes to the caller. How simple yet how difficult to beat.

I have put ratio analysis right at top so that you have a basic idea about financial strength of the company and no need believe in some kind of ‘STORY’ as it generally is with overhyped losing businesses (aka organized retail , Suzlon , Infra , DTH) .

Ratio Analysis (A dream for any CEO)

Liquidity Measurement Ratios
FY08 FY09 FY10 FY11 FY12
Current Ratio 1.3 1.3 1.6 1.5 1.3
Quick Ratio 1.3 1.2 1.5 1.4 1.3
Days Inventory Outstanding(DIO) 0 0 0 0 0
Net Sales Per Day 1.9 2.5 3.6 5.1 7.5
Average Trade Receivables 4.2 0.5 5.6 5.4 0
Days Sales Outstanding(DSO) 2.1 0.2 1.5 1.0 0
Cost of goods sold (taking it as total expenses)/365 1.8 2.2 2.9 3.9 5.5
Average Accounts Payable 24.3 25.3 40.3 47.0 21.9
Days Payable Outstanding(DPO) 12.9 11.2 13.8 11.8 3.9
Cash Conversion Cycle = DIO+DSO-DPO -10 -11 -12 -10 -3
Profitability Indicator Ratios
Operating Profit Margin 4% 10% 21% 23% 26%
Net Profit Margin 2% 8% 14% 15% 19%
Return on Capital Employed (PAT/Total Capital) 2% 7% 15% 15% 21%
Return on Net Worth(PAT/NW) 5% 16% 29% 31% 51%
Debt Ratios
NA as it’s a debt free company
Cash Flow Ratios
Operating CF to Sales 20% 7% 26% 32% 33%
FCF Return on Net Worth 23% 0% 39% 44% 65%
FCF to Operating CF 60% 0% 72% 68% 74%
Valuation Ratios still mystery as no price declared

Imagine its 1996-. —Less than 1.5 crore landlines in India for a population of close to 100 crores. (http://www.pluggd.in/mobiles-have-killed-the-landline-business-in-india-297/)

You are running a very small yellow pages kind of business which barely makes enough money to break even and keep your family alive. But you dream of a day when all the info would be available instantly to anybody by a single phone call. How would you do it? The dot com boom in India was just picking up. Will a VC finance it? How will people call to get the info with such less telecom penetration and such high call rates? Wont people just buy a big book and look up the contact address of any business they want to know about? Why should you change something which has been in existence for over 100 years and remained SAME even in all developed countries? (Trick question – can you think of anything today which has remained same even in developed country and you could improve it starting from India and build a profitable business around it).  Shouldn’t you just start a business of Outsourcing or just join these outsourcing companies and solve the Y2K bug and hope that 10 years from now become a project manager/Delivery Manager in a IT company—and live one of the most boring high paid jobs you can ever dream off?

Now come back to Reality – Its late 2012. You know exactly what Just Dial does and how it does it. What would you do to beat it? Start an online portal with business addresses and hope businesses will pay to you to get listed there? Advertise a phone number all across India where people can call and get the info? How much will be needed to make people change their favorite FREE (almost always accurate) info service provider to come to you? Ah get a stupid VC with some dollars to fund your amazing advertising blitz that your business listings are better than Just Dial’s. How will you get 70 lakh+ India business addresses which Just Dial has meticulously collected over last 12+ years? (Trick question – Just think logically how can you get 70 lakh+ business addresses and persuade millions or thousands of people to ditch Just Dial and call you instead–. Work your brain a bit assuming of course you don’t just cheat your way out.) Would it help you if you know some politician to beat Just Dial(this is one of the most used routes to becoming filthy rich in India – check out the Nifty 50 stocks and tell how many are there because of some license leading directly to willingness of politicians to say Yes ?

Just Dial in one word is synonymous with its founder VSS Mani. I cannot emphasize enough of this no matter how much I try.

List of things to be right before you try to beat Just Dial

Should I try to show how tough it is to beat Just Dial.? 2 ways – show exact steps what an entrepreneur would do and discuss each item in a bit detail as to its toughness or easiness.

How can you beat Just Dial or what will it really take to beat Just Dial.

I will try to rank the items based on difficulty levels with 1 being the easiest and becoming harder as you go down. Of course this is not a hard and fast ranking but 6th and 7th are THE HARDEST without any doubt!!!!!

  1. A team of Software and telecom specialists (who can handle 1 lakh+ calls a day). Would need a good DB architect. (Not sure but Just Dial has approximately 150+ in IT Telecom).
  2. A large talented sales force who would call up businesses and persuade them to sign up (read pay) to get them listed with them. (Just Dial has more than 3000 sales people).
  3. A team which will do Data validation/update things like updating movie ShowTimes across India every Friday.(Not sure of exact number of team but at least 50+ )
  4. A huge list of local database listings in at least top 8 cities which is preferably better than Just Dial.
  5. A group of Senior Management team who are as talented ,motivated and passionate as Just Dial (at least 12-15 people for each function viz Marketing, Sales , Operations, HR , IT ,Customer Care, etc )
  6. Somehow persuade millions of people to call YOU to get info rather than Just Dial.
  7. Get a CEO/MD who can be a match to Mr. VSS Mani. (Next to Impossible!!!)

High return on capital employed, Zero debt, Strong free cash flow and Pricing Power.

High Return on Capital with Zero Debt

I will start quoting Buffett on 3 kinds of Savings Account –

“When returns on capital are ordinary an earn by more by putting up more record is no great managerial achievement .You can get the same result while operating from your rocking chair .Just quadruple the capital you commit to savings account and you will quadruple your earnings… A savings account in which interest was reinvested would achieve the same year-by-year increase in earnings – and at only 8% interest, would quadruple its annual earnings in 18 years” Buffet in annual shareholder letters.
“To sum up there are 3 types of savings account. The great one pays extraordinary high interest rate that will rise as years pass. The good one pays attractive rates of interest that will be earned on deposits that are added. Finally the gruesome account pays and inadequate rate of interest and requires you to keep adding money at those disappointing returns.””

“Leaving the question of price aside, the best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.” – Warren Buffett, 1992 Berkshire Hathaway Shareholder Letter

Basically I also look at businesses the way Buffett would whereby I would start looking at the return on capital/equity employed by the company. If it’s pretty high without too much arcane accounting maneuvers and zero debt, my eyes light up. This is exactly what Just Dial has. A high return on capital employed with zero debt. (It has Return on Net Worth in 2007 was 14% and currently it is at around 50 %+). And there would be no change in Net Worth after IPO as the Offer is by way of offer for sale by the Selling Shareholders. This tremendous return on equity has been achieved without leverage and without any trouble to business (a company emerging from bankruptcy may have huge return on equity). The kind of return of 50% at a scale of Net Profit being Rs. 50 crore would put Just Dial in leagues of truly extraordinary business and surely in top 20 of RONW rankings for companies.

If you do not know anything about investing and want to see which companies over last 20 years have gave great shareholder returns then you can just check out the highest Return on Capital Employed companies and inevitably those will be the ones which have had greatest share price increase . You can use converse as well!!

Free Cash Flow and FCF RONW

Now here is a business whose highest expense category is employee’s salaries – around 63% of total cost. If you want to see a clean and lovely cash flow statement you have got to see it.

Here are things it does not have to do –

  • Zero capital tied up in any kind of inventory.
  • Zero receivables (It has negative working capital comfortably) – Paid advertisers make payments in advance of their campaigns, Zero Credit risk, zero bad debt/advances and no problems of working capital.
  • Capex is limited.(Avg Capex of only 12cr over last 5 years )
  • Zero Debt and hence no problems of interest charges.

The business last 3 years had average Networth of around 85cr but it generate profits of average 33cr per year which gives it a RONW value close to 40%. But the crucial part is the substantial portion of profit it generated NEED NOT be going back into the business to keep it running. That is where the Free Cash flow comes into picture.

Here is the basic Free Cash Flow over last 5 years for Just Dial:

Free Cash Flow
In million Rupees 2008 2009 2010 2011 2012
Cash Flow From Operations 141.9 61.41 349.83 604.67 902.02
Capital Expenditures -56.81 -61.58 -99.11 -191.83 -230.84
Free Cash Flow 85.09 -0.17 250.72 412.84 671.18
Cumulative Free Cash Flow 85.09 84.92 335.64 748.48 1419.66
Net Worth 365.52 438.97 638.21 931.57 1033.67
FCF Return on Net Worth 23% 0% 39% 44% 65%

Absolute dream of a free cash flow return on Net Worth

Just the way most entrepreneurs would dream. If you look at the Cumulative Cash flow values and make it Negative bingo you have exact cash BURNT by all those so called hyped up, sure to lose, mushrooming, online retail ventures , alternative energy and Cloud tech businesses  of India . But you cannot get to see those ‘sacred’ RED colored financial documents of those   companies unless they want to come out with IPO which maybe NEVER.

Huge Pricing Power

One of the most important aspect of any business is how fast can the company raise the prices of the products without reducing the customer demand/sales .The best businesses in the world have pricing power and are not at the mercy of customers. Think about Apple, GOOGLE, McDonald, Coke, Nike, most cigarette companies.  Now Just Dial is in   a sweet spot of huge pricing power because the SMEs who sign up with Just Dial do not have any other mode of value for money, targeted advertising option at all. Most SMEs may not even advertise more than once or twice in a Newspaper/Billboard in a whole year. How many times have you seen an adv for a packers and movers in Newspaper?

Where will the packers and a mover who has been getting leads from Just Dial go if Just Dial comes next year and says we have increased rates by 15% or 20%? Mind you Just Dial can raise price by also saying that there is a new competitor who is ready to pay more than you for Platinum listing (top listing). So you pay me more to be at top. You see how the game is played. It’s not just the price increase per se but also competitive rivalry based price increase.

Just Dial is the king here and has a great pricing power which it can just keep nudging up every year until a REAL competitor can emerge. Let me know if you can find any company which have this much of flexibility in raising prices (not from tobacco, alcohol or food business).

One of the most important reasons of pricing power is listing on their search service provides businesses with exposure to users at a time when the users are making a purchase decision. What more can an advertiser ask for. Hence he will pay for it even if the price keeps increasing every year.

Predictable earnings/industry

Ok there may be huge debate about this whether 5-10 yrs from now some new tech may come and clean up Just Dial but guess what I can still say even in next 5-8 years Just Dial is going to be able to keep making enormous amount of money because mobile phone  based calling is not going to change . Internet based searches on smartphones in India is highly overrated primarily because of language difficulty and crap phones. Believe me you are wrong when extrapolate the phenomenal growth in mobile connections to similar adoption of Internet based smartphones searching for business address. Time will tell but you can see now how almost all operators are stuck with high paid 3G spectrum and no cash flow from usage of Data services because of pathetic adoption.

Crucial part of these predictable earnings is that Just Dial will NOT have to put in every increasing amount of capital in the business to grow the earnings. Unlike crap businesses which keep needing capital to grow Just Dial will be able to keep growing and throwing off cash without needing injection of capital.

As for other competitors killing Just Dial I believe that just is not happening in near future.

Available at a fair price

Unfortunately the price at which Just Dial is available is not disclosed as yet but Sequoia guys bought from Just Dial shares priced at Rs. 488 in July 2012. I will try to put the valuation analysis for Just Dial once the actual pricing figure is out after the Book Building Process and other regulatory things are completed. But do not expect low book value or price to earnings for this issue. Remember great companies even if bought at a fair price will give you good returns but crap companies even if bought at huge discounts will not give you enough returns which you would have wanted.

Competitive Advantages of Just Dial –

I do not have the breakdown of how much money Just Dial makes by advertisers on phone vs web but I would assume that it would be more on phone than web. India is still a phone based country and will remain more or less phone (internet less) based country in the foreseeable future. (If you don’t believe me just research as to how badly the 3G is going for the telecom companies in India and such a low penetration of users for 3G)

Just Dial has a big castle and wide moat which will keep increasing in near future as I can trust the managers to make it difficult for other businesses to penetrate.

The only company which matters as a Phone based info provider for Customers

Whenever people want to know some businesses’ phone number they can think of only Just Dial. Just Dial serves more than a million (verify this) phone queries a single day from across India and it keeps growing because of fantastic service. One call does it all.  This is such a powerful competitive advantage that it almost is well neigh impossible to break it. How did it reach upto this level? Please go and ask Mr. Mani about it!!!!  Naysayers will say its luck. But whichever way you look at it it’s so tough to break that not many companies even seem to be trying seriously to fight it out with Just Dial. You know as they say MAN to MAN.

(Cannot in the following may mean- not quickly enough or may take too much time, money, effort or resources that it almost cannot be done. I won’t deny that nothing is impossible but some things are almost too difficult that you can almost label them impossible.)

  • With a billion dollars in bank – you cannot beat Just Dial on customers calling it for info.
  • With a great VC backing you – You cannot beat Just Dial on customers calling it for info.
  • With all IITans and IIM team in your start up – You cannot beat Just Dial on customers calling it for info.
  • You know some politicians still — You cannot beat Just Dial on customers calling it for info.
  • You know some really big business man backing you with oodles of cash — You cannot beat Just Dial on customers calling it for info.
  • You can hire smartest guys on planet still –You cannot beat Just Dial on customers calling it for info.
  • You hire Ogilvy and Mather for great advertisement — You cannot beat Just Dial on customers calling it for info.
  • Finally –You can think of almost anything “here” — You cannot beat Just Dial on customers calling it for info.

With some businesses it is such that once a company gets it first it becomes just too tough for competitors to beat it. The leaders take it all. And the wannabes keep trying hard till they finally stop. The best example for this will be Google. People have got a habit now of searching meaning googling. No matter how much billions Microsoft or Yahoo spend Google is almost going to beat them for a long period of time.  In Short Classic example of First Mover Advantage.

Or look at the social networking where Facebook and Twitter rule. Google has best engineers but it just cannot make a G+ which is as popular as FB is .Arguable there are many reasons behind FB, Twitter, Google search to be almost unbeatable but primarily it is that once people make a habit of using free service (key word is FREE) then it becomes very tough for competitors to break in the monopoly (Ceteris paribus).

Of course I don’t mean to say that Google Search , FB or Twitter is impossible to beat in their core competency but that it’s too demanding in terms of resources , effort , money and TIME that competitors are better not to attempt that or they will keep losing tons of money . Don’t believe me check out this — Microsoft has lost $5.5 billion on Bing since the search service launched in June 2009.


Only Microsoft could keep losing billions every year to try and fight Google and still lose. NO ONE ELSE CAN. And by the way when was last time you used Google+?? I don’t know how much Google has or will lose on its social effort but I am sure it will not be small sum even by Google’s Standards.

Coming back to Just Dial what happens here is that it’s too tough to persuade people to stop using Just Dial and instead start using a new phone based search service. Suppose your whole backend is ready with the product, business data and call centre. Now what? Advertising and Marketing departments do not have unlimited budget. What will they say to the prospective customers?? Call us on XYZ to get better info? There already are some small local companies doing that but the critical mass will need too much advertising bleed without the guarantee of success.

Business Model to Generate Revenue is Chicken and Egg problem for Competitors

Just Dial makes money because thousands of customers call up to ask for businesses addresses/contacts. In turn Just Dial tells business owners—Look here, there have been 30000 calls for say Packers and Movers in last month in Mumbai. Why don’t you pay me say Rs. 50 per call and I will send your name as the 1st one when people call and you will get the business. Of course lots of business will gladly agree to this amazing advertisement opportunity of their business.

But if you are a new Just Dial competitor what will you say to your Maai Baap i.e. the business owners— Look no one calls me(or a negligible amount of customers) but you need to pay me to get listed as the 1st phone number I will send if people call for packers and movers ?

Business men will not pay you until you have lots of customers calling for that category or the business itself. Hence you will not be able to start your revenue stream until you have big customer base of callers. But customers calling you will not pick up until you advertise a lot, create awareness and spend money crazy draining your finances and keeping you in red. Chicken and Egg?? Sounds familiar?

Ok you will sign them (biz owners) up initially for free and hope to generate money later when enough customers have started calling you or visiting your site in large numbers.  Realistically speaking for how long will you wait before the number of callers become good enough for you to charge money? How sure are you that the biz owners will not directly register themselves with Google/Just Dial instead of going to you?  Why should a new packer and Mover pay you instead of already established leader Just Dial?

I can imagine that this generally is a problem for startups but it’s a peculiar problem only for those businesses where the ultimate users of service get it for free (i.e. here the callers don’t pay anything to Just Dial).  Just like Google, FB, Newspapers whose business is to advertise and provide service for free (almost free for newspapers) it becomes very tough to break in. For any other business you can start small and keep giving discounts or improving products or cutting costs but for ads based business (freemium) business it becomes doubly difficult when you do not have a critical mass of users so that you can show them and then turn around to charge money from business owners to advertise for these free using clients.

Advertising Spend to Beat Just Dial is Prohibitive

How about building a business from ground up with around 50 cr net profit on sales of 250 odd cr  with zero debt and NEGLIGIBLE spend on advertising for last decade ??

Fact is Just Dial has become an info provider with almost negligible amount of advertising spend. It is known brand purely by word of mouth. Just in last couple of years it has had some advertising on TV and online but by and large it just kept growing without too much of above the line advertising. Purely by word of mouth. Of course that took time but if you are an entrepreneur who wants to beat Just Dial you have to spend huge amount of money on advertising.

Just Dial has Amitabh as advertising icon now. Whom will you choose if you were to fight it out with Just Dial and how much will you pay? Just Dial paid Amitabh in stock as well – 62794 stocks IPO page-87.

If you advertise on TV and set aside 5 or 10 crores do you think people will suddenly start calling you for info? Maybe yes but it will need too much of integrated marketing campaign that not many VCs will be ready to finance it/approve it.  And to top it all there is no way even salesmen from advertising companies(JWT , O&M et al) can be sure of how much the traffic to you will increase if you advertise X amount . Most purely internet companies who advertise on TV are the guys who have got some VC money and are going to be around for 2-3 years no matter how much they bleed (though there are exceptions) .

ATL, BTL, internet ads, Paper ads, you name it, you can have it. But the budget for a start up for advertising goes like this — Hey Marketing Dept you have to increase awareness of service and we don’t have budget. Do it.

The business is not kind of Sexy!!!

How about a business where you as a CEO have to pitch and deal with Packers and Movers , Home Delivery Restaurants , Hardware and Electric equipment repairmen , Real Estate Agents , Advocates  , Insurance Advisors, small practicising doctors/clinics , etc on a DAILY basis ??  Does that sound exciting to a talented guy say fresh from IIT or IIM or any college? Naa .

Is the business going to change the way the world works?? Naa it’s already been done by some guy called Mani by some company Just Dial.

Is the business related to e-commerce, simplifying payments, Apps, Cloud, alternative energy??  Naa

(Today if you throw a stone at an entrepreneur’s conference 99% chance it will fall on any of these 5 types of businesses. I have come to realize that there are no other problems serious enough to be solved by entrepreneurs- everything is already solved except those 5 biz. They need to look at what Bill Gates is doing and he is 2nd richest person even now). And guess what there are various reasons for it primary being the fact that somehow with all those 10 yr rates in US being below 2% has given PE guys the love for the 5 businesses –it’s Moolah for you if you are in any of these 5 businesses.)

So how is anyone going to tell his friends or family or brag about something which is –well – Just does not put the adrenaline going in anybody’s blood – Just Dial competitor Yuck !!!!!!  I am burning the midnight oil and working 20 hrs a day 6-7 days a week so that people can call on phone or on web and get a movie time or restaurant address or packers and movers …. EEEEEiiiiiiiiiiii  No ..

If you have come to read till this line you are one of fewest of guys who will ever read this and you are a thinker. Pardon me for all those expressions but just think for a moment will you want to put your life’s energy in trying to compete with Just Dial?? Or would you rather try your luck/hard work in one of the above 5 business? I am sure you are never going to even try and do what Bill Gates is trying to do.

This is a huge competitive advantage though it may not be apparent at first glance. The businesses which are boring , unsexy , bland , not hot , not in demand , no story behind it to make investors tongue wag are not the ones where the best of the talents will go . Precisely this is the advantage of Just Dial even though it has huge PE funding(boy with boatloads of free cash flow from 2007-08 onwards even I would have put money there unlike the profusely bleeding HOT e-tailers of today who are destined to go down). But this does not mean that great investor returns cannot be had from boring businesses. Infact most likely candidate for a great investor return would be generally the not so sexy, out of favor, boring business being run by terrific managers and available at a fair price.

Competitor Analysis for Just Dial

http://www.getit.in/ Getit – Started in 1986 and I could not find data for number of listings though it has PE investors in Helion and ASTRO group .

http://us.sulekha.com/ -Sulekha has around 2 mn listings but again it’s got its hands in far too many things that it is not focused enough to beat Just Dial . Again this also has some PE fundings from likes of Norwest Venture, IMG (NY).

http://www.asklaila.com/ This is the most serious competitor I guess and focused only on local search and run by ex Microsoft guys.

http://www.askme.com/mumbai It launched in Mumbai for voice service and yet to launch voice service in other cities as per their website. Won’t count it as a serious competitor.

http://www.indiamart.com/ It is again a specific B2B online only marketplace which is quite strong in its category and is a strong competitor to Just Dial in terms of internet searches but not at all in Voice based searches or non B2B searches.

Just Dial had rank of 39 and average time spent on website at 7 min which easily beat all the other competitors mentioned above.

Except Indiamart all competitors are having consistent losses.


Able and Honest Management

V S S Mani – The most dynamic, passionate, amazing man I have ever talked with. (Not that I have met too many exceptional people in my life) But  here is a guy who having no backing from big degrees/colleges (read IIT/IIM/ or any foreign ones) start from 0 and build a company which is having almost Rs. 50 crores net profit on a business model which doesn’t yet exist in this whole world . Just imagine the fact that how a guy who dropped out of B.Com and even CA can can build something so simple yet so profound and scalable. There was absolutely NO big degree holder in senior management from start till about I would say 2008-09. No one from big IIT or IIM or so called strategy consultants (read this as anything related to MKinsey or Bain or Booze Allen or what not) .

There is not a single place anywhere on this world where people call up for business info and some invisible guy (who is there for 24 hrs) answers and gives the correct info all within 60 seconds. To top it all the guy running this operation is making oodles of money with just Rs. 50000 as start up fund (and zero debt). The oodles of money is around Rs. 50 cr profits on sales of around Rs. 250 cr (put the capital employed value here).

If this kind of business model does not exist anywhere in the world then there is no question no one could have possibly done some kind of copy paste. Someone said there are 3 ways to make money – Be first, be smart or cheat. Well Mr. Mani was surely the 1st two and other guys will try to be 3rd.

Most of books like (Stay Hungry and Stay Foolish types) which focus on entrepreneurs start with something like this guy had a dream and no money but he preserved and against all odds did it. Created a great/large/big/profitable company and hence he/she is great. Well I won’t go into boring details of those as you can read about them anywhere. But bear with me.

Mani Created Business which didn’t exist

The crucial difference from every entrepreneur I am aware of is that this guy Mani has demonstrated that he can create a business which just doesn’t exist. Read the sentence again to think about it and let it sink in. Which great leaders come to your mind from India when you think of entrepreneurs?? Think about the business which they have created .Which ones come to mind?? Flipkart et al (Amazon), Infosys et al (standing on giants of MSFT , internet , Google and all), Any Bank guy (banks ohh they have been around for a long time where you get licenses for bank based on you know what ), Naukri.com, makemytrip, etc(age old biz in US), Zee Group, All organized Retailers , etc (all copies of world biz) , Adanis, Lancos , GVKs , Mallya , Gopinath(well less said the better from investor point of view) , ETC .  (Insert any business you can think of here and I am 99% sure it existed somewhere else especially in US). Of course I have utmost respect for any guy who has been successful in business or even tried his level best in creating a biz (it might fail that’s another thing) . I respect every guy who gave it all for creating a biz and jobs.

But I have more respect for guys who created something which just didn’t exist before – be it a product or be it a service.  Jobs, Gates, Google, FB, etc. These companies along with lots of others created product/services which didn’t exist. They could not copy. They won’t have to wake up one morning and say well let me make that product which is present there and just make some improvement (think about macbook in 1982-84.). They really innovated.

I won’t put Mani in same league as Jobs or Gates of course. But creating such a simple business –where people calls for info and get it instantly – is so hard to scale profitably that I have utmost respect and I am in awe of the guy. This guy has done which lot of people may have thought for sure once. You are on the road and want to know where the best restaurant is or fix the tire punctured or want a doctor’s address or movie show timing or just about anything related to any business info and shouldn’t there be someone to give the answer instantly on a local phone call.  Yellow pages had existed in this world for 100+ years in all countries. But nobody thought it could be implemented so successfully with mobile phones.

It’s not a huge technological thing to do. But it’s a helluva tough to get people to call you when you are just a yellow pages provider when you do not have advertising budget (which Just Dial was initially in early 2000). After all why will people start calling you??

This is where the genius and perseverance of the guy lies. One could explain the whole Just Dial business in 1 min. But to do that on a scale that makes business sense is just too tough.  As Buffett always said he wants a management in place already when he is investing in a company. Mr. Mani is the best MD, CEO which Just Dial can have.

He knows everything about the company and I am not talking the way so called CEO of 6000 odd employees would say. I am talking about every small system, process and functionality which is present which can be oh so small in significance. If it’s there he knows it. The ins and outs. He himself had designed, spec-ed out , put in the requirements for almost every single process which is needed to churn out close to Rs. 50 cr of profits in a year. Every single process .  One of the sharpest guys who makes lightning quick decisions which astounded me initially.  Infact every day he takes so many decisions which a typical VP or Sr Manager or Partner of a typical large IT/consulting/FMCG company guy would take in a week or even a month . Crucially those decisions are the ones where the lower management level or staff has gotten stuck and may be do not know what to do . He would come on the call and provide solution to literally any problem within 5 min. And he would follow up even if there is no mail chain . If he calls you , you better be prepared to talk sense !!!

Meetings, bureaucracy is what the Just Dial management doesn’t like . Mani likes to do things rather than debate endlessly till everybody gets bored and head to next meeting . You have a problem –Solve it or tell how you are going to solve it . The go getter attitude is what defines him .  He has single handedly built the core of the Company Just Dial.

There can be no second Mr. V S S Mani .  He is the guy who is owner and behaves like an owner . The rest of management team is also amazing but I won’t describe them in detail as this guy can take Just Dial to where it should go . Other management personnel may come and go .

But I would like to mention specially two crucial cogs in Just Dial wheel . Mr. Sandipan(CTO) and Mr. Shakeeb Sheikh (DB head) . Mr. Sandipan is a brilliant tech cum business guy who has so much energy that he can literally build a system from scratch and take other software guys along with him to do the next thing. He is a real asset to the company . How important is he to Just Dial – here is page 41 of IPO

Pursuant to loan agreement dated June 5, 2012, our promoter, V.S.S. Mani has provided a loan of ` 30.00 million to Sandipan Chattopadhyay, one of our key management personnel, for the purpose of exercising certain employee stock options granted to him by our Company under the Just Dial Employee Stock Option Scheme 2008. This loan has been repaid by Sandipan Chattopadhyay.

The only guy whom Mr. Mani loaned money as disclosed in prospectus(and no he has no other relation to him at all other than fact that he is an employee ).

Mr. Shakeeb Sheikh is a young DB head guy who is the most talented multi tasker I have ever come across and who knows and crucially DOES the things himself even though he is at a VP level .  Anything related to DB of Just Dial he knows it . Amazing manager with amazing people skills with a long work background from D&B makes sure that when people call they get correct , up to date database of businesses. Seeing  his skills in access , excel , DB and hands on approach to work I would say there would be NO VP in any company of 6000 odd employees who actually does work rather than just making some ppt or giving lectures and useless meetings. You give a job for him to do and he will deliver . Mani once described him that if you want to learn something go to smart and sharp people like Shakeeb . I believe him. And he holds as of now 6600 equity shares as well though I would have preferred more equity options to him commensurate with the effort he puts in.

As Buffett has said he cannot supply management –it has to be in place. You can rest assured it is in place. And it does put in high hurdles for competitors to penetrate.

You would need passion almost to the point of madness to try to beat Just Dial at its game which Mr. Mani has .

Kind of biz buffet would buy.


Crucial Data Points from DHRP  and Other Sources

Year Event
1993 Incorporation of our Company as A&M Communications Private Limited
1996 Commencement of our Company’s search business operations in Mumbai with 8888-888 telephone number
2000 Secondary sale of 50% stake by our Promoters to Indiainfo.com Private Limited
2006 Investment of ` 546,947,470 by SAIF
2006 Change in name of our Company from A&M Communications Private Limited to Just Dial Private Limited
2007 Launch of our Company’s website http://www.justdial.com
2007 Investment of ` 40,140,750 by Tiger Global Four Holdings and Tiger Global Principals Limited and second round of investment of ` 8,283,839.58 by SAIF
2007 Launch of our search service through SMS and mobile internet
2009 Our website receives 25 million visits in a year for the first time
2011 Investment of ` 166,932,666 by SAPV and ` 166,932,666 by EGCS
2011 Demerger of activities and operations pertaining to IT-related testing and other related services of our Company to Just Dial Global
2012 Investment of ` 3,269,507,759 by Sequoia I and Sequoia II and second round of investment by SAPV.

In fiscal 2012, they addressed over 254.3 million search queries across our platforms. As of June 30, 2012, they were conducting approximately 181,000 campaigns for   paid advertisers. The number of campaigns increased from approximately 40,500 as of March 31, 2009 to approximately 181,000 as of June 30, 2012. They have a large database of approximately 7.7 million listings as of June 30, 2012.

Capital Employed
31-Mar-08 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12
Total Assets 841.09 955.03 1,234.65 1894.01 2477.75
Total Liabilities 475.57 516.06 596.44 962.44 1405.32
Share issue expenses
(to the extent not written off or adjusted)
Net Worth 365.52 438.97 638.21 931.57 1,033.67
Profit and Loss
31-Mar-08 31-Mar-09 31-Mar-10 31-Mar-11 31-Mar-12
Total Revenue 716.03 918.14 1,347.63 1876.59 2,770.24
Total Expenses 687.55 824.33 1,064.56 1453.63 2038.24
PAT 17.1 69.4 184.34 286.15 528.15

All figures in Rs. Millions.

All values in INR Million
2009 2010 2011 2012
Total search requests 82 133.00 180 254
Internet Search 28 57 76 124
Mobile Internet 2 4 10 23
Voice Search 52 72 94 115

Risks and Questions

Apart from normal risks mentioned in DHRP here are others which need more info/disclosures from company and would be material going forward.

Here are the important questions regarding Just Dial IPO. Most are related to business and a deeper understanding about it.

Mobile Vs Internet Searches-Same Prob as Facebook ?

  • What is the breakup of revenue coming from Mobile phone calls’ (voice search) campaigns vs Internet campaigns?
    • Reason – It is one of the most crucial elements of how the revenue will shape up given the growing usage of smart phones in India. Everyone is well aware of difficulties of Facebook in trying to monetize the revenue from ads on million of mobile phones because mobile users, see fewer ads than PC users. —
      • FB IPO page 14 However, we do not currently directly generate any meaningful revenue from the use of Facebook mobile products.
      • As mentioned on page 134 mobile internet search has had a 127% CAGR which was highest compared to voice and PC search. There is NO risk factor which says that people shifting the search from PC/phone call to mobile internet phones may reduce the chance for the company to make money selling ads(like banner etc) and due to less number of search results/ads displayed on phone . Is that a risk and if yes what is the company strategy to deal with it?
        • Reason 1- This is really crucial because Just Dial should be earning a lot of money via banner ads or other ads which you see when search on PC but these cannot be present when searched on Mobile phone leading to loss of revenue if more searches in future will happen through mobile internet.
        • Reason 2 – The number of search results (read it as paid ones) on the PC can be easily greater than 10-15 which means Just Dial can earn from them giving them a favorable placement but it cannot show more than 5-10 results on the screen of a mobile device which limits the growth opportunity.
          • Even Google back in 2004 mentioned that lot of people are using NON-PC devices to access internet as a risk factor. (This is 3 years before the iPhone came along and it was mentioned as a risk.)
          • Page – 134 – Company Searches represented approximately 68% of all searches over the telephone over the last fiscal year.Would like to know how much was company search on all medium/platform as in Internet PC , Mobile internet .
            • Reason – As declared on page 133 internet searches were almost 50% of total search queries .Also  Company searches results in lower (or no) revenue for company it is a very important metric . For e.g.: If I search on PC for Agarwal Packers on Just Dial website it cannot give first result of any other company and hence it results in lower revenue. Suppose I searched just Packers then Just Dial will earn money because it can put the highest paying guy on 1st result.


Users and Campaigns-Questions

  • Just Dial has a program where it is selling data in bulk at around Rs. 10 per business data which can be customized for a region. How is it not like hitting the axe on your own foot and what prevents competitors from just going to Just Dial(in disguise of course) , paying the money and competing with Just Dial ? http://data.justdial.com/theme1/index.php
  • With respect to reseller how much was paid to them for resellers providing the data to Just Dial ? (It ranges from Rs. 15 to Rs. 50 per New Valid business data)?
  • How many (% wise) searches done by people on Just Dial (mostly mobile calls) are for categories which are paid?? (Say I can call for specific movie timings for a theatre or ask for domino pizza number and Domino’s is not a paid advertiser. Or I can ask for a post office address or police station address. These are examples of non-paid category/searches.) What I basically want is how much % searches currently are monetized/monetizable ?
  • How much money (packages’ values) have been acquired by resellers selling the packages to businesses rather than Just Dial sales people pitching ? (This is crucial because reseller being almost a crowd souring initiative it may help Just Dial reduce sales costs as the reseller itself will become a proxy sales people of Just Dial).
  • As Just Dial USA is not a subsidiary of our Company since July 2011 apart from Management’s effort (which is listed as a risk) do the/some employees of Just Dial India work sometimes/fulltime for Just Dial USA? On whose payroll are the employees working for Just Dial USA present? Just Dial India or Just Dial USA, Just Dial Global? Are they sharing the same office and infrastructure? What about management bandwidth ?
  • Does the management think that the growth rate of searches/users/revenue will decline over time?
    • Reason – Even FB has mentioned on Page 19 – We expect our rates of growth will decline in the future vs may experience earnings declines or operating losses in the future Page- 31  as had Google in its IPO .
    • Company has leased an office space for research and development purposes in Bengaluru. Could you explain in a bit more detail as to what R&D can Just Dial be involved in and how much is the R&D investment/expense in Rupee terms? Is it material enough to be put in P&L as a % of revenue?
    • Page 135 – Does all explanation for Premium Advertisement Package and Non-Premium Advertisement Package apply equally well to mobile voice call search results, Internet PC search results and Just Dial app based search results?
    • Page 135 – I could not understand what is  meant by word ‘inventory’?
    • Page 135 – if a diamond member purchases 10% of the inventory, it will be featured second for 10% of the searches for the category. – Suppose current month is October. How does company determine that for a yearly package say from January to December , ‘X’ will be the number of searches for a category so that before the December month ends the diamond member will indeed be featured in 10% of X number of searches .
    • Page 135 – The number of leads, which is the number of times the business listing is displayed or featured to users, is proportional to the price of the package and the number of members in such category; the more expensive the package, the higher the number of leads generated.
      • What would be the actual meaning of the word  displayed or featured to users,when taken in context of voice call search results , Internet PC search results and Just Dial app based search results ?
      • With regard to PC/mobile search results Google uses cost per click as main way for advertisers to pay Google the money for featuring the ads but how does Just Dial ‘inform’ the advertisers that their result was actually displayed/(or displayed X number of times) ?
      •  If the result of advertiser came on 2nd page of Just Dial results on PC/mobile will this also correspond to ‘featured’?
      • Page 135 – Our non-premium advertisement package members currently pay annual or monthly subscription fees, which vary depending on the category, geographic region, number of leads and the tenure of the campaign . Would being displayed on 2nd or 3rd page of internet result will it also constitute a lead utilized?
      • Is the pricing of leads different for internet vs phone call based searches if yes in what way?
      • Page – 208 – Revenues from lead based contracts are recognized as per provision of leads to the customer.  What happens if the leads are not coming i.e. the number of searches did not happen in that category?

How Just Dial earns Money-Risk



There is just one official analysis document I could find which is CRISIL rating for IPO and its good. So for a different corporate kind of perspective on JD please have a look at the following


Here is the link to the DHRP of Just Dial


Final Words

In the end I somehow feel that the tremendous returns from this stock are yet to come depending of course on the pricing of the issue but nothing take away from the amazing team of Just Dial what they have achieved in such a short period of time . I would have liked it  better if more of the company was owned by the employees rather than Private Equity Guys because the employees are holding less than 1% of company .  The moment the pricing comes watch out for my valuation analysis .

Published by amitkumarblog

Will update later !!!!!!

8 thoughts on “Just Dial IPO Analaysis – Absolutely Amazing Business

    1. Hi Mahesh thanks . Yea I have also heard that they are indeed hiring lots of IIT guys in Bangalore and they have mentioned in prospectus that they have started a R&D centre at bangalore . Not sure what exactly they are working on but will keep you posted if my ‘birdies’ will give some info .

  1. Nice indepth anaylsis !!!! But my question is how much is the model like a call centre vis vis a search engine…And also how many of the clients are repeat customers… req data regarding that… coz i have read many complaints on blogging sites regarding results by using the Just Dial Service….

    1. Hi Abhir
      First thanks a lot for saying its good analysis . I absolutely agree that call centre based model may seem at first a bit disadvantaged vis a vis search engine but you have to dig a bit deeper to see that there are 2 aspects which you may have ignored :

      1. Search engines can only be accessed on internet either via phone or via PC .
      If you really think that somehow internet on PC or even smartphones is going to pick up at a huge level then I am sure you are mistaken . All telecom guys have reduced 3G rates by 70% at least after for 1 yr they just could not get ppl to migrate . Even after reduction in prices still 3G penetration is pathetic to say least .
      You did classic mistake of thinking like a crowd and going for obvious conclusions –
      see March 2011 article projecting 3G to be at 40% of india’s telecom capacity by 2015 —
      See reality after 1.5 years —
      its just 4% till now . No way it is going up . Here is my prediction it will NEVER cross 10% of subscribed base.
      You should never extrapolate your kind of lifestyle with what is actually present in India ie 8 hr plus net access on PC or a nice high end smartphone and high proficiency in English language .
      India has 40 cr ppl who are illiterate and I bet around 20+ crore just able to read numbers and their local language and of course operate a simple cell phone.
      The 4% of 3G adoption you see are the top 4 crore ppl of India who actually pay income taxes . Yes a country of 120 cr odd citizens only about 4 cr pay taxes.

      So why such a huge lecture — The just dial callers are from all walks of life and not just the ultra high educated FB type crowd . Search engines can never reach a person who does not have internet . And belive me those 4-8k so called smartphones are never going to be good enough that mass indians will jump n start using search engines to find data . Because smartphones except those over 15k are not really user friendly its much easy to spend 30 paise for a local call and get the answer within 1 min . And language problem no problem because Just Dial gives you phone numbers in sms which you can directly call and they will talk to you in your local language .

      2. Of course a lot of them will be repeat customers and there will be and are Huge complaints .
      Picture this — suppose you started a small packers company . Now you have to tell people to come to you instead of going to agarwal packers . So you go and put a ad in Times of India costing anywhere between 2k to 20k for last page small area .
      If no one new comes to you because of that do you complain against TOI ? NO
      Suppose you put ad on TV in between Big BOSS and absolutely not a single extra business came even though you spent close to 30k-1lakh for ad spot . But you dont complain right ?

      Fact is ppl do not complain against any advertising media except Just Dial because they CAN complain against Just dial . After all sales pppl are going to lie , which person doesnt ?? If you are a business owner you have to think about alternatives . and cricitally listen to sales people . Just dial is closest you can get to (perhaps excluding google) reaching customers the moment they have the need for that product or service .

      Of course nothing is guranteed and you may not get any leads at all but hey any advertising business is like that .And any service business there are going to be disgruntled customers because its not in Just Dial’s control to give people lead .

  2. Hi Amit Sir,

    JD got sebi nod…i am waiting to apply…as i can’t build another JD will follow Pay to play method 🙂

  3. Hi Amit,
    Your Blog is quite in detail, but appreciate if you able provide details on following points

    1. How exactly they earn their revenue.-from which category? REvenue break-up ?
    2. What is relevant market size of their business in revenue terms
    3. how big Revenue can grow in coming years. Past is o.k., but what it can become in future, specially considering big market cap demand in IPO valuation.


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