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Business News/ Market / Mark-to-market/  Justdial: the Internet wannabe
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Justdial: the Internet wannabe

Justdial is one of the rare listed companies in India that hopes to benefit from the growth in the use of Internet

If you’ve been looking forward to buying an Internet stock at a stratospheric valuation, and relish the adventurism of not knowing when your investee company will turn in a profit, then Just Dial just doesn’t fit the bill. Premium
If you’ve been looking forward to buying an Internet stock at a stratospheric valuation, and relish the adventurism of not knowing when your investee company will turn in a profit, then Just Dial just doesn’t fit the bill.

Every few months since mid-2013, Flipkart has raised hundreds of millions of dollars for its e-commerce operations. With each fund-raise, its valuation has risen considerably; a little over a year ago, it had a valuation of $1.5 billion, which has now reportedly risen to $10 billion.

While it hasn’t exactly been a case of investors laughing their way to the bank, since the same set of investors seem to keep pouring in money into the cash-guzzling company, the sharp rise in valuations has undoubtedly generated tremendous interest in Internet companies among Indian investors.

Just Dial Ltd is one of the rare listed companies in India that hopes to benefit from the growth in the use of Internet. It started as a phone- and Internet-based classifieds company, but is in the midst of transforming itself into an e-commerce company.

But Justdial is just a wannabe; it’s nowhere near as cool as Flipkart. Its revenues grew at a glacial pace of 27.2% last year, and this improved to only 30% in the first six months of this year. But here’s the heart-wrenching detail about its finances, where all your hopes of mimicking Flipkart’s privileged investors get dashed: Justdial makes decent money on its classifieds business.

Last year, its operating profit stood at 142 crore, or as much as 30.8% of its revenues. And in case you’re hoping that the profit was a result of accounting jugglery, it turns out that the company generated cash worth 133 crore from operations last year.

And unlike normal Internet investors, Justdial’s shareholders, it appears, just can’t stomach risk. Last month, when the company said that its board had approved raising 1,000 crore worth equity funds (it didn’t need), all hell broke loose. Its shares fell by nearly 20% in a few trading sessions, with investors reportedly worried that the company may make a reckless acquisition of an Internet company at a crazy valuation. The company was forced to issue a statement to calm nerves: it stated that the board approval was only an enabling resolution. Flipkart’s investors, on the other hand, have regularly persuaded the company to raise funds even when the company didn’t need them.

If you’ve been looking forward to buying an Internet stock at a stratospheric valuation, and relish the adventurism of not knowing when your investee company will turn in a profit, then Justdial just doesn’t fit the bill. The only good opportunities for wannabe Internet investors in India may be offline; such as, starting their own website.

P.S.: Justdial shares have nearly trebled compared with the price at which it issued shares in an IPO last June. Demand for profit-making Internet companies may not be that bad, after all. Of course, it’s nothing to match the 6.7 times jump in Flipkart’s valuation.

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Published: 25 Nov 2014, 07:02 PM IST
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