Just Dial Ltd.: Should you invest?

About the company: Just Dial Ltd

Just Dial Limited (Justdial) is India’s leading local search engine with a vast database of over 30 million MSMEs. Millions of Indians get connected with these MSMEs via their platforms on a daily basis. The company provides local search-related services to users across India in a platform-agnostic manner. The multi-platform offering includes apps (Android, iOS), mobile websites, desktops, voice, and text.

The diversified offerings for the company’s customers include the transaction-enabled and mobile-friendly website for SMEs, a rating tool for SMEs to solicit online ratings from their customers, and payment gateway solutions.

Area of Operation: Just Dial Ltd

1. Justdial has launched JD Omni, an end-to-end business management solution for SMEs, through which it intends to help thousands of SMEs efficiently run their business online and have an adequate online presence via their own website and mobile site.
2. Apart from this, it has also launched JD Pay, a unique solution for quick digital payments for its users and vendors, and JD Social, its official social sharing platform to provide curated content on the latest happenings to users. The organization also aims to make communication between users and businesses seamless through its Real-Time Chat Messenger.
3. With the launch of JD Mart in FY21, they operationalized a dedicated platform for the B2B marketplace. JD Mart will connect bulk buyers with wholesale sellers (manufacturers, distributors, wholesalers, and other bulk suppliers) across product categories.
4. Their upcoming developments are JD Xperts, JD Partner, DIY Concept, and Hyperlocal Services.

Board of Committees: Just Dial Ltd

Subsidiaries:

• Just Dial Inc., USA
• JD International Pte. Ltd., Singapore
• MYJD Private Limited
• Except for Just Dial Inc., USA, both the other companies have not yet started their operations.

Competitors:

No direct domestic competition but they face competition from more established multi-national players, who are richer in terms of capital and other resources. They enjoy a first-mover advantage which translated into the largest user database in the country.

Shareholding pattern: Just Dial Ltd

Top Shareholdings:

• Reliance Retail Ventures Ltd – 66.96%
• Quant Mutual Fund – 1.88%
• DSP Mutual Fund – 1.84%

Industry Overview:

The Indian e-commerce market is expected to grow to US$ 99 Billion by 2024 at a CAGR (2019-24) of 27%, with grocery and fashion/apparel likely to be the key drivers of incremental growth. With the rise in ‘Digital India’, disruptions due to COVID-19, and the growth of smartphone adoption, online sales are expected to grow to a great extent. The e-Tail (Retail sales facilitated through the internet) market is expected to register a CAGR of over 35% to reach ₹ 1.8 Trillion in 2020.

There is a huge growth potential for e-commerce in the Tier-II, III, IV, and V areas, due to greater access to the internet, higher smartphone penetration, as well as raising awareness and people’s aspirations. There lies a largely untapped market, as the internet continues to not be readily available in these areas. However, with greater reach and better infrastructure, more people can benefit from internet-based services. These factors will encourage established service providers on the internet and related technological offerings.

Profit and Loss Statement: Just Dial Ltd

Consolidated P&L (in Rs. Crores):

Key Pointers:

1. Their prime source of revenue comes from the SME packages. 
2. Almost 80% of the company’s expense includes Employee costs.
3. In the last two FYs, the company’s financials have deteriorated to an extreme level.
4. While there is continuously negative growth in revenue, their expenses have been increasing.
5. Net profit is deteriorated by more than 70% in the last 2 years.
6. Their EPS growth has been drastically hit.

Balance Sheet: Just Dial Ltd

Consolidated Balance Sheet (in Rs. Crores):

Cash Flow: Just Dial Ltd

Consolidated Cash Flow (in Rs. Crores):

Financial Ratios: Just Dial Ltd

Stock Price:

Ratios:

Strength:

1. Just Dial is India’s largest local search engine and enjoys a first-mover advantage which translated into the largest user database in the country.
2. Promoters have increased their holdings from 33% to 77% in a duration of 2 years.
3. Company with Low-Debt and High-Investment.

Weakness:

1. High remuneration of key Ex. Directors in the light of the fact that their employee cost is 80% of the total company’s cost.
2. FIIs have reduced their shareholding from 51% in 2019 to 3% in March 2022.
3. The company has shown distressing financials, with Net profit and EPS Growth decreasing by more than 70% in the last 2 years and have recorded a negative operating profit in the last FY.
4. Focusing more on non-core business rather than using the investment money in core business operations.
5. The company is having a negative cash flow. Negative 3-Yrs CAGR Sales & Net Profit at -15.97% & -41.48% respectively.

Opportunity:

1. The company is trying its hand in different domains with JD Omni, JD Pay, JD Mart, etc as they have the advantage of huge customer data.
2. The rise in SMEs and Internet connectivity can help boost their business.

Threat:

1. Continuos negative revenue and profit growth alongside increasing expenses can prove to be a huge financial threat.
2. Stock with High PE.

For more information, reach us at [email protected]

Team, MyGoalMySip.

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