Justdial IPO, quite an awaited IPO of the year has opened today. Just dial IPO, was issued in order to raise an amount of INR 822-950 cr and has been assigned a grading of 5/5 by CRISIL. If successful, this 950 cr IPO would become one of the largest IPO by an Indian internet company.
The issue price will be between INR 470- 543 per share with a face value of Rs 10. An investor needs to order a minimum quantity of 25 shares. The issue will get listed at BSE, NSE and MCX-SX.
Benefits to retail investors
Just Dial has offered a discount of 10% at the floor price to the retail individual investors and it also offers safety net mechanism for investment upto INR 50,000. Under this scheme, retail investors are assured that, in case the stock fall over 20% from the issue price during the first six months after listing, the company promoters will buy back the shares from retail investors.
The safety net has been proposed by SEBI in 2012, as during 2008-2011, many retail investors have lost their money since the share price of 62% of the 117 companies listed, fall sharply during the first 6 months.
Benefits to the selling shareholders
As per the reports, if the IPO get opened with a share price of Rs 543, the selling investors including Sequoia, Tiger Global and SAIF can make a profit of around 820% each on their initial investment in the IPO.
Incorporated in 1996 by V.S.S. Mani, Just Dial offers a 24×7 free local search to provide information about local businesses, products and services to the users. Selling advertisements and qualified leads is the main source of earning for Justdial. Currently, they have more than 145,000 paid advertisers and more than 300 million customers using their services.
Although, Company is having a decent business model but after analyzing the company’s Red Herring Prospectus, the company seems to be more prone to risks and uncertainties. There are outstanding criminal cases against the managing director and other directors. Also, there lies intense competition among the upcoming local search providers and new global entrants. The company’s revenue model is dependent on digital advertising, a market that at present cover a very small domain in Indian market and largely captured by Google, Facebook, Linkedin and many more. So, in our opinion, investors can avoid the Just Dial IPO.
At present Just Dial faces major competition from local search and business listing providers such as Getit, Asklaila, Sulekha and Indiamart. If the IPO goes positive, than it would not only provide a good exit for its selling shareholders but will also increase the trust of the upcoming startups and VC’s and angel investors in the internet ecosystem.
The other IPO’s in the internet space include InfoEdge (Naukri.com) in 2006 and Makemytrip in 2010. Naukri.com issue was opened at a price band of INR 290 – 320 per share and was oversubscribed nearly 55 times, Makemytrip was the first Indian company to get listed on NASDAQ since 2006 and get opened at a price of $14 raising $80.5 million from the US IPO market. As of today, current stock price of Infoedge is INR 379 and of Makemytrip is $12.89.