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REGISTER NOW OR LOGINJustdial Ltd. (NSE:JUSTDIAL) is a leading local search engine in India. It offers a wide array of informational and transactional services through multiple platforms. The company operates through various platforms such as website, mobile website, Apps, telephone and text and provides local search related services to users across India. It operates in a wide range of categories across sectors, which adds to the diversification of revenues and reduces dependence on any particular sector or category. Justdial has over 134 million unique users across the web, mobile, App and voice platforms, and 24.8 million listings at the end of September 2018. Justdial is headquartered in Mumbai but has a pan-India presence with offices in many leading Indian cities such as Bengaluru, Chandigarh, Chennai, Delhi, Hyderabad, Kolkata etc.
Justdial Advantages
i) Adapting a customer-friendly approach - The company undertakes several initiatives for the ease and convenience of its users. It started ‘Search Plus’ services for its users for making several day-to-day tasks convenient. It also launched JD Omni, an end-to-end business management solution for SMEs, JD Pay, a unique solution for quick digital payments for its users, and JD Social. Justdial's search services are available across multiple platforms such as website, mobile website, Apps, voice and text (SMS). Information is accessible 24 hours a day, 7 days a week with multi-lingual support.
ii) First-mover Advantage - In just two decades, Justdial has become a reliable source of providing fast, free and comprehensive information to users and connecting buyers to sellers. The company has a first-mover advantage and has captured significant market share across India. Early mover advantage has enabled Justdial to build a database which is not easy to replicate. It has developed an advanced and scalable technology platform which includes a vast range of features for enhancing user experience.
iii) Will Benefit from India’s growth story - Justdial should benefit from booming commerce in India as it is the leading local search engine in the country. The company has become instrumental in bridging the gap between users and businesses by helping them find relevant providers of products and services effortlessly and offers an attractive value proposition for local SMEs. As the country witnesses a major online boom, platforms such as Justdial will benefit. The country has more than 800 million Mobile users who spend nearly 90% of their online time on their mobile phones. Increased mobile usage in India has led to most of the Indians looking for information from online sources.
iv) A scalable and profitable business model - Advertisers pay fixed monthly or annual fees to run search-led advertising campaigns on Justdial’s platform. Pricing is determined by various factors such as business categories of advertisers, geographies targeted, type of package. Justdial also runs multi-city and national campaigns for the advertisers. The company has been witnessing a growth in the number of such paid campaigns, over the years. Its app and website are very comprehensive and compatible with all the operating systems. It allows company, category and product wise search. It also has a map view and location based search service. Justdial is embracing automation to improve efficiencies and also strengthening its mobile platform to make it faster and more appealing for users. Investments in JD Omni and Search Plus should also drive long-term growth.
v) Growth, Growth, Growth - Most of Justdial’s traffic is from the mobile site and app (~80%), desktop accounts for 15% followed by voice ~5%+. The company has been expanding geographically as well as through various other initiatives in order to make online search more convenient for its users. Operating revenues and traffic have been growing over the years. Other parameters like user engagement, active listings, total app downloads are also increasing each year.
JD Traffic Growth
Source - Corporate Presentation
A widespread footprint, in-depth knowledge, healthy relations with existing MSMEs and long industry experience are Justdial’s key strengths.
Challenges
Justdial works in an evolving landscape and therefore needs to keep updating its information. Any inconsistency in the search, data quality or locations data could hamper the overall experience. The absence of a specialized vertical increases competition from specialized sources such as Zomato, Urban Clap etc. Competition from start-ups is also building up. Justdial also faces competition from global search engines who have deep pockets and are looking at entering into the booming Indian market. In addition, vertical-focussed players who can spend aggressively on customer acquisition through cashback and discounts are also a constant threat to the company. Given all the competitive pressures, Justdial is still able to stand strong and has reasonable revenues and profits when compared to its peers.
Valuation
Justdial shares are currently trading near the Rs. 600 mark. The stock is picking momentum since the last month and is trading just 15% shy of its 52-week high price. The company has a market capitalization value of Rs. 3,500 crores and has completed a share buyback recently in January. The board approved buying back of up to 27,50,000 for Rs. 220 crores. Shares are trading at nearly 20 times its FY’18 earnings might seem a bit expensive, but have priced in the company’s strong fundamentals and India’s growth story.
Conclusion
Justdial has earned a strong reputation of a local search engine in India and could become a potential buyout candidate for Google. The company has an extensive database of nearly 25 million listings, a strong brand equity and good contacts with advertisers in India which form a deep moat around its business. Growing smartphone penetration, low data costs, a younger population have supported the rapid expansion of Justdial platform in India.
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