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What Reliance Industries-Just Dial deal means for investors

Reliance Retail would acquire a 25.3% stake in Just Dial through a preferential allotment and another 15.6% stake from Just Dial founder VSS Mani. (Reuters)Premium
Reliance Retail would acquire a 25.3% stake in Just Dial through a preferential allotment and another 15.6% stake from Just Dial founder VSS Mani. (Reuters)

  • Reliance Retail may utilize Just Dial’s 30 million business listings to drive digitization of businesses such that Reliance Retail’s platforms could ultimately become a large-scale aggregator platform providing myriad products and services to end consumers, Kotak Institutional Equities said

Shares of Just Dial Ltd declined by 4% in early deals on Monday on the National Stock Exchange after it said Reliance Retail Ventures Ltd would acquire a controlling stake (of more than 40%) in the company. Reliance Industries owns 85% stake in Reliance Retail.

As part of the deal, Reliance Retail would make an open offer to acquire up to 26% stake in Just Dial for about 1022 per share. This is 5% lower than Just Dial’s closing price on Friday. Depending on the subscription of the open offer, Reliance Retail would end up owning about 41-67% of Just Dial after the transaction is completed.

Commenting on the development, analysts from Kotak Institutional Equities said, “Change in ownership may boost Just Dial’s transformation from a plain vanilla listings platform to a comprehensive discovery and transactions platform." Further, Just Dial would be able to drive growth and expansion with the capital infused by Reliance Retail. The fact that VSS Mani will continue as managing director and chief executive officer of Just Dial should come as some relief to its investors.

“We believe Reliance Retail will utilize Just Dial’s 30 million business listings to drive digitization of these businesses such that Reliance Retail’s platforms could ultimately become a large-scale aggregator platform providing myriad products and services to end consumers," points out Kotak.

Analysts from J.P. Morgan India Pvt. Ltd said in a report on 18 July, “The key attraction for Reliance Retail would be access to Just Dial’s database of merchant listings/retailers and the potential to scale up the JD app and JD Mart Platforms and add on to the Jio Mart app and expand the scope of services and offerings across B2B and B2C." The broker also added, “We would wait to see how the acquisition would expand JioMart’s footprint and if JD Mart is eventually integrated with the JioMart app, thereby putting in place the building blocks of a ‘Super App’."

ICICI Securities Ltd’s analysts reckon, “The fact that Just Dial ‘complements’ (versus competes) broader RIL’s portfolio is comforting. We see loose similarities with RJio’s/ L&T’s acquisition of Saavn/ Mindtree. It remains to be seen how the dynamics of a ‘potential’ amalgamation with RIL over long term plays out."

As far as the contours of the deal go, Reliance Retail would acquire 25.3% stake in Just Dial through a preferential allotment and another 15.6% stake from VSS Mani. This triggers a mandatory open offer to acquire up to 26% stake. The final acquisition cost for 67% stake works out to around 5720 crore.

Meanwhile, even as the open offer price is at a discount to Friday’s closing, it’s worth noting that shares of Just Dial have meaningfully outperformed the broader Nifty 500 index in the past one year. The Just Dial stock is as much as 67% above its pre-covid highs seen in January 2020.

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