Jamshedpur-born VSS Mani has surely come a long way from his early days as an employee of Delhi-based United Database, which offered yellow pages and telephone-directory related services. With Justdial, the 48-year-old today lords over the online listing space, clocking revenue of ₹589 crore from less than a crore when he began the venture in Mumbai in 1996. Along the way, investors such as Raj Koneru and PE funds Tiger and Sequoia made a killing when the company went public two years ago. Just like Mani got the curve right with the launch of phone-based directory services coinciding with increasing telephone density in the country, he chose to go online with Justdial.com in 2007 when the internet slowly started casting its web wide. Over the years, the contribution of voice-based search to revenues has declined with online search contributing the lion’s share. With over 15.3 million listings and 346,000 paid listings as of Q1FY16, Justdial seems to be sitting pretty.
But a look at the stock performance shows that investor interest is really waning. The stock has halved to ₹979 from its all-time high of about ₹1,900. In fact, the stock traded as low as ₹750 during the August carnage. One key reason behind the flagging sentiment is the delay in Justdial’s entry into the ever-growing and competitive app space as users increasingly move away from desktops to mobile. What is also not helping matters is that the management has stopped disclosing operational metrics which detail PC and mobile internet searches, voice / SMS searches and PC and mobile visits. For some time now, Justdial has been fine-tuning its app Search Plus, and so when it finally announced the launch of its app on the Android platform on September 14, the stock surged 13% in a single session. But will the euphoria last?
No competition killer
Though there are over 25 services being offered through the app, analysts feel that the app given its mix of mere listings and a sprinkling of transaction-based services offers an inconsistent user experience. A Motilal Oswal report states: “In case of restaurants, movie bookings, electronics shopping, travel, etc., consumers can transact online; however, other categories like on-demand services, courier services, auto care and apparel only have listings and contact details of the respective vendors. As a consumer, we found an inconsistency in what to expect from categories — transactions or listings.”
But more critically, with specialised apps taking precedence in each vertical, Justdial’s Search Plus is unlikely to be the preferred app for users. For example, as against Bookmyshow, Search Plus redirects users to the websites of multiplexes. Though it has launched its own online food-ordering service and through the new app offers listings of restaurants, it cannot match the clout of Zomato, Foodpanda, Just Eat, TastyKhana or TinyOwl, which periodically offer discounts. While the app has tried to integrate product quotes from leading e-commerce websites such as Flipkart, Snapdeal and Amazon for consumers to easily compare online and offline prices, the online retailers’ own apps offer prices that are dynamic and different. In the travel section, apps such as MakeMyTrip score over Search Plus as it doesn’t provide any option for train bookings. In case of cab bookings, the app has only a single vendor listed — EasyCabs. With customers preferring the Ubers and Olas of the world, Search Plus comes across as a latecomer.
In effect, Justdial’s transition from search to transactions is not going to be easy because there are enough specialists doing just that. The management is planning to spend ₹100 crore for promoting the app, whose contribution to revenues is expected to reflect from the next fiscal. Justdial will earn commission whenever a customer makes a purchase on a third-party site or engages with an offline vendor suggested by the app. R Krishnamachari, Justdial CFO, was quoted in the media as saying “…users will discover that it doesn't matter, if you want to book a ticket, you do not care from which interface you get a ticket as long as you get a ticket in the easiest and most convenient manner….” That’s precisely the point: the Justdial app does not offer the ease of interface, which other popular apps do.
In fact, had the management been more proactive about fathoming the disruption that apps would create it could have made some early inroads through buyouts. But that option, too, is not on the table. With just about every start-up already loaded with PE and VC funds, valuations have gone out of whack, prompting the management to abandon its idea of raising fresh funds of over ₹1,000 crore to fund buyouts. “We realised that valuation levels were so stretched that there is no point doing any acquisition at this point of time," Krishnamachari had earlier said.
So, what does the management do next? It looks to prop up the sagging stock price. The debt-free company with over ₹800 crore in cash now wants to buy back 1.2 million shares worth ₹170 crore at a maximum of ₹1,550 a share.” We felt, as a board, the optimal view between a high dividend and the buyback is buyback at this point in time,” said Krishnamachari. Whether that is misplaced priority, is for existing and potential investors to judge but with well-entrenched specialised online aggregators, Justdial has its task cut out in the app space.