Mumbai-based local search firm Just Dial Pvt Ltd, backed by private equity majors SAIF Partners, Sequoia Capital and hedge fund Tiger Global, is ready to float its Rs 700-crore initial public offer (IPO) next year. The company will file the draft red herring prospectus (DRHP) by end of this year, according to sources familiar with the development. The company is likely to use the proceeds to fund its world-class campus in India as well as for its global expansion plans.

A source said that Citigroup Global Markets and Morgan Stanley have been finalised as the merchant bankers to the issue.

Just Dial, founded by VSS Mani in 1994, is a local search firm which provides both B2C and B2B listings of small and medium business advertisers. It provides services over internet, phone, wireless and print. Its business model involves charging local business a fee for listing which can be between Rs 3,000 and a few lakhs. The service is free for consumers.

Just Dial raised its first round of institutional funding of Rs 50 crore from SAIF Partners in 2006, followed by a Rs 77-crore investment by Tiger Global in 2007. SAIF and Tiger are the largest investors in Just Dial holding over 20% stake each, said the source. Sequoia Capital India also picked up a little less than 10% stake from an early investor for Rs 40 crore in the middle of last year in a secondary deal.

Confirming the development, VSS Mani, founder and managing director, Just Dial, said, “Our IPO would be one among the largest ones floated by Indian IT firms. This would enable our investors, who had pumped in their money 3-4 years back, to make a decent partial exit.” Though he confirmed that the IPO would be floated by middle of next year, he declined to disclose further details.

According to sources, the company will dilute about 7-8% stake in the proposed IPO keeping its stake at around 40% from their current stake holding of 48%. Investors together hold about 52%.

Mani said, “The proposed fund will be utilized for our Just Dial campus and for the growth capital aiming our expansion in the North America as well as the domestic market. The expansion will include acquisition of either mid-sized technology firms in India or search engines in the US. But it is too early to talk about the acquisition plans.”

“Though there is lesser growth in the US market, it still stands at $75 billion for similar space among the small, medium enterprises (SME) business, which brings a huge opportunity for a new entrant like us,” he added.

Just Dial, which has revenue of Rs 200 crore grows at 50% annually, Mani said. It has a presence in 240 cities with 3.5 million listings and 25 million users.

The local listing space has attracted interest from both corporates and investor community. This month, Malaysian-based Astro All Asia Networks bought 50% stake in New Delhi-based GETIT Infoservices for around Rs 100 crore, valuing GETIT at Rs 200 crore.

In December 2008, internet giant Yahoo acquired a 30% stake in Chennai-based Network Management Co. Pvt. Ltd, which owns the telephone-based directory search service Call Ezee. Another corporate active in this space is Television Eighteen India Ltd (TV18), which acquired Infomedia18 from ICICI Venture in 2007.

Other venture-backed players in this space include AskLaila of Four Interactive (Lightspeed, Matrix and SVB) and Sulekha (Norwest, Indigo Monsoon). Nexus Venture Partners also invested $5 million in New York-based classifieds firm OLX, which has a presence in markets besides India like Portugal, Mexico, South America and China.

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