Justdial lists at a premium to offer price; stock surges 15.3%

MUMBAI: Justdial, India’s first voicebased search company, debuted on the stock exchanges at a sharp premium to its offer price because of high demand from investors who did not participate in the initial public offering.

The company’s share listed at Rs 590, drawing a premium of 11.32% to the offer price of Rs 530 for institutional investors and a 22% premium for retail investors (offer price was Rs 477), indicating the strong demand for the only listed voice-based search provider.

The stock surged as much as 19% to a high of Rs 631.90 before having pared some of its gains to close 15.3% higher at Rs 611.45. Around 1.69 crore shares worth Rs 1,034 crore changed hands on both BSE and NSE.

Justdial has raised Rs 950 crore through the IPO, making it the biggest one so far this year and raising hopes in some quarters of a revival in the primary market. At Wednesday’s closing price, it was valued at Rs 4,272 crore, 15% more than Info Edge, the only other listed online services company.

However, a few market experts believe that Justdial’s strong debut is unlikely to revive the primary market.

“Justdial is a unique case and the strong listing was due to the oversubscription of the issue earlier,” said Vikas Khemani, president-investment banking, Edelweiss Capital. “However, primary market revival depends on stability in the secondary market.” The Justdial IPO drew strong response from foreign institutional investors (FIIs) and high net worth individuals. The issue was subscribed 12 times. Nine existing shareholders sold 1.75 crore shares though offer-for-sale, of which 75% of the issue size is reserved for qualified institutional investors and 10% for retails with 10% discount. The company provides search service through multiple platforms such as internet, mobile internet and telephone (voice) and is likely to use cash to enhance its brand name and provide liquidity to existing shareholders.

Analyst believe stock deserves premium valuations as the company is in a high growth phase, has an asset-light business model, monopoly in the voice search segment, negative working capital cycle and high free cash flows.

Motilal Oswal initiated coverage on Justdial with a buy rating. The brokerage expects the company to post a revenue CAGR of 33% over FY12-15E, complimented by a 560-bps margin expansion on account of a shift in search mode from voice-based to Internet.

“Given that JDL is in a high growth phase, complimented by asset light business model, etc, we believe the premium valuation is justified,” the report added. The brokerage firm values JDL at 30x FY15E EPS of Rs 22 and has arrived at a target price of Rs 660.