Mumbai-based local search firm Just Dial Pvt Ltd, backed by Asia-focused private equity major SAIF Partners, is coming up with its initial public offering (IPO). The 16-year-old company has initiated talks with merchant bankers and is expected to hit the capital markets before the end of this fiscal year, said a source familiar with the development. The proceeds will be used for Just Dial's international expansion.
Just Dial, which was founded by VSS Mani in 1994, is expected to file its draft red herring prospectus (DRHP) in the next three to four months. The company may be looking at mopping up around Rs 200 crore to Rs 250 crore from its maiden issue, which may also be a first for local search companies in India. Just Dial's investors, which also include hedge fund Tiger Global and venture capital firm Sequoia Capital besides early investor SAIF, are expected to stay invested after the issue.
Though the company is currently exploring a stake dilution of around 10%, this may increase to 25% as stipulated under the new listing norms by the government, said the source who asked not to be named.
Just Dial could be looking for valuation of over Rs 2,000 crore for its public float.
Investment bankers like Goldman Sachs, Morgan Stanley, Citigroup Global Markets and Kotak Mahindra Capital Company are learnt to be pitching for underwriting of the Just Dial issue.
An email sent to VSS Mani, founder and managing director of Just Dial, remained unanswered at the the time of filing this article. When contacted, SAIF Partners India head and Just Dial board member Ravi Adusumalli confirmed the development.
Just Dial raised its first round of institutional funding of Rs 50 crore from SAIF Partners in 2006, which was 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 last year in a secondary deal.
Just Dial has already launched its services in the US and plans expansion in other English-speaking countries like Canada, UK, Australia, New Zealand and Singapore. 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 had revenues of Rs 90 crore in FY09, according to VCCEdge, a private company and deals platform. It has a presence in 240 cities with 3.5 million listings and 25 million users. Just Dial's website receives over 225,000 hits a day on an average and 200,000 business listings a month, said this report.
While there are no direct listed comparables to Just Dial in India, local search firms like China's largest search engine Baidu have market capitalisation of over $26 billion.
For SAIF Partners, this would be its third portfolio company planning an IPO in recent times in India. Mobile VAS firm One97 Communications, where SAIF holds around 40% stake, has already filed for its IPO. SAIF-backed Speciality Restaurants, which owns restaurant chains Mainland China and Oh!Calcutta, is also reportedly looking for an IPO. The PE firm also exited IT services firm Intelligroup last week, which was acquired by NTT Data for $200 million, making 5x returns on its investment.
The local listing space has attracted interest from both corporates and investor community. In December '08, 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), Sulekha (Norwest, Indigo Monsoon) and GETIT Infoservices (Helion Ventures). 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.