Buyback Review, ,

Just Dial in its board meeting on July 20, 2018, has approved buyback for an aggregate amount not exceeding Rs. 220 Crores through ‘Tender  route’ on proportionate basis at a price not exceeding Rs. 800 per Equity Share. Just Dial buyback  represents 4.08% of the paid-up equity capital. The Just Dial buyback price is at a premium of about  38% to its closing price of Rs. 580 on July 20, 2018.  The price has moved down further since then. The record date for Just Dial buyback is 12/10/18.

Established in 1996, Just Dial Limited is India’s leading local search engine offering a wide array of informational and transactional services through multiple platforms.

Just Dial Buyback: Latest Updates
Just Dial Limited Past Buybacks

2015-16: Buyback  of  Rs. 164.63 crore @ Rs. 1550 per share  (details given in Table later in the post)
2017 :  Buyback of Rs 84 crore from open market @ Rs. 700 per share
Bonus:   NIL
Split : Nil
Rights: Nil
Dividend:   20% – 2014, 20% in 2015

Just Dial Buyback : Present tender Buyback vs earlier Tender Buyback
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Just Dial Buyback: A Framework to Estimate Acceptance Ratio:

This framework is based on shareholding of Just Dial investors who hold up to certain number of shares as on 31/03/2018. To this we have added estimates for
1) Additional purchase  of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Shares by  new category of arbitrage investors.
3) Inputs from last tender Buyback (2015-16)
Based on approximations indicated above, and taking a considerably high tendering ratio, Just Dial Buyback could have a acceptance ratio in 10-25% band. Since the price of Just Dial has been under pressure for quite some time and has not recovered near to record date as well,  many investors who exit at this stage may not be able to do so, resulting in a lower buyback ratio.

Cross Tabulation of Estimated Returns for Just Dial Buyback

The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback.  Investors may kept in mind that stock markets are quite volatile at this  juncture and there are many political and other uncertainties related to international markets. We have depicted  estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.

Shares Purchased
375
Nos.
Buyback Price800
Absolute Returns
when Posted
MP when Posted464.5
Investment (Rs.)174188
Acceptance Ratio / Price Aft Buyback 420430480
10%-1.40%0.54%10.23%
15%2.69%4.52%13.67%
20%6.78%8.50%17.12%
25%10.87%12.49%20.56%

This post is purely for informative and educational purpose and is in no way suggestive of taking any position in the counter. Profit or Loss in  any buy sell operation in stocks is associated with significant risk of capital loss. For more on Buyback Benefits and other issues please refer the earlier Posts

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Just Dial Price Chart and Quarterly Performance:

just dial Share Price

Rs. In Crore
Jun-18 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17
Sales 211.43 200.47 196.79 194.47 190.04 181.72
Other Income 8.23 16.62 2.58 20.05 26.61 12.62
Total Income 219.66 217.09 199.37 214.52 216.65 194.34
Tot Expenditure 154.01 154.69 150.24 154.87 157.55 149.55
PBIDT 65.65 62.4 49.13 59.65 59.1 44.79
Interest 0 0 0 0 0 0
PBDT 65.65 62.4 49.13 59.65 59.1 44.79
Depreciation 8.39 8.43 9.02 9.33 9.64 10.28
Tax 11.82 7.16 11.65 10.25 10.72 19.91
Deferred Tax 6.91 7.85 -0.14 2.61 0.58 -10.75
Profit Aft Tax 38.53 38.96 28.6 37.46 38.16 25.35
Equity 67.4 67.39 67.36 67.33 69.56 69.54
Face Value 10 10 10 10 10 10
EPS 5.72 5.78 4.25 5.45 5.49 3.65
PBDTM(%) 31.05 31.13 24.97 30.67 31.1 24.65
PATM(%) 18.22 19.43 14.53 19.26 20.08 13.95
About Just Dial:
        • Just Dial Limited is a local search engine company.
        • It was founded by VSS Mani and is headquarters is in Mumbai.
        • Just Dial has strong pan-India network, spread across 11 branches.
        • The services provided on company’s platform of ‘Search Plus’ may be broadly classified under:
           Ordering services;
           Scheduling services;
           Travel/ leisure services; and
           Buying products/ price discovery through reverse auction.
        • Just Dial offers its services across various platforms, such as voice, Web, mobile Internet and mobile applications.
        • The Company apart from providing search and related services, is also engaged in other information service activities.
Just Dial Buyback: Observations
        • Just Dial listed its shares on the stock exchanges in June 2013.  After commanding good valuations, the stock has remained in bouts of pressure in last few years.
        • During Fy 17-18, Just Dial revenues stood at  Rs. 781.8 crore, a growth of 8.8% over the preceding year. Its net profit  grew at 18% to ₹143.2 crore during the year.
        • For Q1FY19. Just Dial posted Operating revenue of 211.4 crores, which grew 11.3% year-on-year, operating EBITDA stood at 57.4 crores witnessing 77% year-on-year growth
          and ~ 25% sequential growth. Net profit stood at Rs 38.93 crore compared to Rs 36.05 crore in the corresponding quarter a year ago.
        • Just Dial reported a 24.6% yoy growth in unique visitors to 125.2 million. Mobile traffic constituted 73.7% of the overall traffic.
        • Cash & Investments stood at ₹ 1,288.8 Crores as on June 30, 2018
        • Just Dial added more than 800  employees  the quarter, out of which  660 additions were in the sales area. This could be a pointer to better demand for company’s products 
        • There have been fears that Just Dial will loose its relevance and customers as search engines like Google target more and more small businesses. Just Dial also faces competition from Zomato & Practo. Some analysts have been of the view that Just Dial valuation is stretched and the company business model is outdated.  
        • With about significant correction from the levels at which Just Dial ruled at the time of buyback announcement and with significantly high buyback price of Rs.800, Iam inclined to take a risk in terms of small stake in Just Dial before the Record date for Just Dial Buyback. On the flip side, many mid cap stocks in IT are recently witnessing a sharp correction and overall market sentiment remains very poor. The outlook for the market continues to be hazy which can cast a shadow on expected returns in this Just Dial Buyback arbitrage opportunity.
        • Question marks on sustainability of Just Dial search business may continue to haunt Just Dial share price.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

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