Jusdial has been around for a few years and is generally considered a successful Indian company. It has Amitabh Bachchan as a brand ambassador and as a frothing at the mouth ToI / ET reporter reports, he reportedly will make 53x on his investment of 6.3 lakh which is about 3.4 CR – just about enough to buy a new Jaguar for Aaradhya baby.
When the IPO came out, several points struck me as concerning / bordering on red flags Some of them defied what we read in B schools as the resons for going for an IPO – but we all know how much reality B-schools teach. Let me capture those points and ask you to apply logic – rather than any B-school gyaan and take your own call.
Assumption 1: An IPO is to raise money from the capital markets to use for the growth of the company primarily.
Assumption 2: A lucrative IPO is about a company that has made money and is showing a good trajectory of growth
Assumption 3: A lucrative IPO has an appealing P/E ratio
Assumption 4: The company is leading with technology and is ahead of / equal to its peers in technology / experience or has a history of buying out competitors and adopting their technology.
And the “red herring” – The promoters have promised to buy back assuming the volume weighted average price for the last 60 days is less than the IPO price. I have two issues with this – a) how difficult is it to maintain this above or just around the IPO price in the last 60 days? b) Why the defensive move?
Frankly speaking there arent too many IPOs coming and too many options to invest either in the secondary markets, but this has too many pointers against it. I would read the tea leaves thus –
a) A lot of top executives would be looking to get their kitty and leave within the 6-8 month timeframe
b) If possible I would get a nice put after 180 days when the safety net goes. When – I am not sure.
c) With the cash they have, they will acquire some companies (but that’s not an IPO related development).