Justdial files for IPO. But why?

Local search company Justdial is once again planning to raise money from the stock market through an Initial Public Offering. Anticipating tepid market response, the company had put its earlier IPO plans on hold.

In an abridged form, here is what you need to know about Justdial IPO plans:

Who?

The local search company was founded by VSS Mani at the Age of 29 in 1996 with a seed capital of Rs 50,000. SAIF Partners, Sequoia Capital, Tiger Global, EGCS and SAP ventures are investors in the company.

Why?

To facilitate an exit for its existing investors who have poured in a total of Rs 580 cr into the company so far. The Sequoia backed company will not get any money out of this IPO as the shares that will be sold through the offering belong to investors looking to exit.

“This IPO is purely offer for sale only (secondary sales by some of our existing shareholders) and there is no primary component, hence we don’t plan to raise any money in to the company through this IPO.” [Justdial CFO, Ramkumar Krishnamachari/source]

And why now?

Earlier in April, the company had filed for an IPO with the market regulator to raise Rs 360 cr but put its plan on hold anticipating tepid market response and slipping rupee. Soon after, Sequoia Capital and SAP Ventures invested nearly Rs 327 cr in the company in June.

The nuts and bolts?

The initial public offer is for 13.53 per cent of the fully diluted post-offer paid-up equity share capital of the company with each share selling for Rs 10 each. The company clocked Rs 260 cr in revenue in 2011-12 with a bottom line of Rs 50 cr. In 2009-10, its revenue was Rs 134 cr with 57 million users and 4,000 employees.

In short, Justdial IPO seems to be triggered by investors who are willing to exit the company.

What are your thoughts on using IPO as a vehicle for secondary sales of shares?

Recommended Read: Facts & Myths in Indian Local Search Space [Insights from an Insider]

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