Who Wants In? JustDial is Selling Shares to Raise Rs 822- Rs 950 cr

As JustDial goes public on May 20 to give its investors a partial exit, the question is: will the public part with its cash?

JustdialSay a bunch of venture capitalists put in a lot of money into a company which is doing good business. Its been a few years and now the investors are getting fidgety. Of course at some point, they want out. What do you do? Unless a suitor comes along and acquires the company, investors don’t have a lot of choice but to try and take the company public.

The question is: will the public part with its cash?

This is perhaps a niggling thought for VSS Mani, whose company JustDial is going public on May 20. The company he founded in 1996 (at the age of 29), is looking to raise Rs 822 cr- Rs 950 cr from the exchanges. Justdial, which had once shelved its IPO plans (read: Justdial files for IPO : But Why?), is now looking to sell 17.5 million shares to raise money. No fresh equity will be sold.

Meaning, existing investors and promoters will sell part of their stake in the company to the public in what will be a “multibagger” exit for them. Saif Partners, Sequoia Capital, Tiger Global, EGCS and SAP Ventures have collectively invested nearly Rs 580 cr in the company.

In this issue, existing investors will sell 14.7 million shares while the promoters will sell 2.8 million shares. The 25% sale values the company between Rs 3288 cr- 3800 cr.

To be sure, Justdial is the leader in the local search market and makes decent margins on growing sales. But it remains to be seen how the markets react to the IPO, especially when there haven’t been any precedents of such kind at the Indian stock exchanges. Analysts say that the demographics to which JustDial sells, is extremely positive and will attract a lot of investor interest.

JustDial’s earnings per share of Rs 9.4 is in 2012 is close to that of Internet company Info Edge at Rs 9.5 in 2012. On a consolidated basis, the company’s revenues grew 48% year over year to Rs 277 cr. Its net profits at Rs 52 crore for the year 2012, was up by 84.5% year on year.

The growth is impressive. But is it enough to justify the 47x- 53x price on the face value? Its hard to benchmark the valuation against others quantitatively as business models in the Internet space tend to be different, said another analyst who was positive about the IPO as well. The company is an early mover in the space. Other competitors in the space include Getit, Asklaila, Sulekha and new entrants like ZatSe.

A successful IPO will set a new record and encourage fledgeling Internet companies in India. But if it doesn’t, it may be a long time before another Internet company can sell the story to the Indian buyer.

But that’s what the markets are all about: risks and rewards.JustDialRecommended Read: Facts & Myths in Indian Local Search Space [Insights from an Insider]

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