Investors expect keenly watched Just Dial IPO to boost confidence in Indian Internet story

Investors will keenly watch the response to the Just Dial IPO, the largest IPO by an Indian Internet company which hits the Indian bourses this Monday. The proposed IPO promising multi-bagger exits to its investors will certainly have ramifications for early stage investments in the Internet space in particular.

“Just Dial IPO will definitely serve as a confidence booster for the Indian Internet industry as well as investors,” said Dr Ashish Gupta, senior MD, Helion Venture Partners. “A good exit for investors will go a long way in further establishing the credibility of investing in India and in the Internet.”

Just Dial, which runs the India-specific business listings site Jusdial.com, said it will sell nearly 17.5 million shares at a price band of Rs 470-Rs 543. The issue will solely comprise secondary sale of shares.

According to Gupta, Just Dial IPO sets a good precedence for investors for listing their portfolio companies in India, too. “It signals that the market is open to exits and hence more options will be welcome, especially because Just Dial is a company that is very good at what it does. So it sets a good precedent,” he said.

However, Ravi Adusumalli, general partner, SAIF Partners and one of the early backers of Just Dial sitting on expected returns of 10x-12x on its seven-year-old investment, believes that Just Dial story might not be a true representation of the Indian Internet story. “Though I believe that this IPO will increase confidence in the Indian Internet story, I don’t believe it will have a meaningful impact on investments in the space. Just Dial is undoubtedly a huge success, but the overall Internet ecosystem is still lagging behind expectations of most investors,” he said.

Adusumalli, who was also one of the early investors in MakeMyTrip, another Internet investment that ensured great returns for its investors, believes that listing on Indian bourses for Internet companies is still a challenge.

“I don’t believe that there will be another IPO in the Indian Internet sector at least for the next 12 months. The bar to go to public is quite high,” he said.

Citing MakeMyTrip IPO as an example, Adusumalli said, “India is still nascent. So, most of the demand for Just Dial, similar to MakeMyTrip IPO, will come from overseas investors and not from India. This will change, but will take a few more years.”

While India is still nascent as a market for listing Internet companies, veteran entrepreneurs believe that the market has changed and is beginning to appreciate good quality companies in the space. “Over the last six years since Info Edge listed, Indian investors have understood Internet companies well and this is reflected in the number of banks that do research on Info Edge,” said Sanjeev Bikhchandani, co-founder and vice chairman of Info Edge, the country’s first public-listed Internet firm.

Internet entrepreneur-turned investor Alok Mittal of Canaan Partners said any successful listing (not just the IPO but aftermarket performance as well) amongst venture-backed companies will add proof-points to the success of venture model in India. “However, the impact of the Just Dial IPO will be relatively low. Moreover, one would not wait for a precedence to appear if one were ready to go down that path. Profitable Internet stories are definitely finding favour among investors. Given that global investors now play a significant role in Indian IPOs (both in regular allocation and also as anchors), some of that gap is getting bridged,”

“India is a nascent market for venture capital and every exit—be it through IPO or M&A—helps in the fashioning of a healthy ecosystem,” said Samir Kumar, MD, Inventus Capital Partners.

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