20 May 2013
Technicals- IFCI, GVK, Navin Fluorine, Jindal Saw, ICICI Bank, Kappac, Tide Water Oil:: Business Line:: Business Line
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Just Dial IPO: AVOID :: Business Line
Investors can avoid the initial public offering of shares by Just Dial, a search service provider with a large database of listings across a wide range of categories. Although the business model of the company is quite strong, the steep valuation that the offer demands, intense competition among local search engines, and the growing local presence of global players are key concerns.
Just Dial is dependent on digital advertising (on computers and smartphones) in a relatively smaller market as India is. So, even if scalability is managed on the database front, the company may find it challenging to translate it into advertising revenues.
Also, this issue is entirely an offer-for-sale with private equity players and the promoters partly reducing their holdings in the company. So, no part of the funds raised would be used towards business development.
At the upper end of the price band (Rs 470-543), the offer demands a price-to-earnings multiple of 60 times its annualised earnings for the nine-month period ending December 2012. Even at the lower end, the valuation multiple is 52 times.
This is way too expensive compared with broader markets and internet-based businesses such as Info Edge (40 times FY13 earnings) and even mammoth global firms such as Google and Facebook.
For the nine months of FY13, Just Dial recorded revenues of Rs 271.6 crore and net profits of Rs 47 crore.
Between FY-08 and FY-12, the company’s revenues and profits grew at a compounded annual rate of 40 per cent and 121.5 per cent respectively. A small base makes profit growth seem extremely fast paced. But in the last couple of years, the growth has moderated . Annualising the latest nine month period numbers, profit growth in FY13 would be 22.6 per cent.
The US based Yelp! has a similar business model, though it is making losses at the net level. But Yelp! is much larger compared with Just Dial, recording revenues of $137.6 million (Rs 750 crore) in CY12 and has guided for $210 million (Rs 1144 crore) in CY13. Just Dial has no listed peers. Prominent unlisted peers include Sulekha, Asklaila and Askme.
Investors can consider investing in Just Dial later in the secondary markets, if the stock corrects by at least 25-30 per cent on dips related to the broader market.
GETTING THE CLICKS
Just Dial provides users information through classified listings on a host of categories such as restaurants, malls, hospitals, ATMs, and movie halls.
Customers reach the company either by calling or through its portal. It was the first mover in this space in India and has been able to build a stable model. If a business or an SME wishes to be given priority in listing or prominence ahead of others, Just Dial charges a fee which is the source of revenues for the company.
As of December 2012, Just Dial has a database of 91 lakh listings, which has rising rapidly over the past three-four years. Of this, 1.95 lakh were paid campaigns. The conversion has been to the extent of only a little over 2 per cent.
Nearly 61 per cent of the search requests coming to Just Dial is from the Internet (including mobile internet), the rest from voice. The proportion of traffic is likely to tend towards the internet in light of the increasing penetration of smartphones and also rising broadband coverage. The Internet, being a wide-ranging platform for a host of businesses to launch services, poses formidable competition to Just Dial from the likes of Sulekha, Asklaila and Askme. Its peers operate with similar models and are backed by strong venture capitalists and private equity players.
INTENSE COMPETITION
Data from Crisil suggest that these players still have only a third to a fourth of the listings that Just Dial has. But they would still be competing for advertisements.
Also, Google is increasing its India presence at a rapid pace with its superior technology access enabling it to map businesses especially in the metros.
It is likely to take away a large share of advertising on the internet from many other players.
A recent report by FICCI-KPMG indicates that digital advertising would grow at 32.1 per cent annually from Rs 2,830 crore in 2013 to Rs 8,720 crore in 2017. The market itself is not too large as compared with developed economies, there are many other unrelated websites and portals vying for the pie.
Clearly, the rate of growth is not scorching enough and even if Just Dial, being the market leader grows at a faster pace, valuations would be compelling only if the stock corrects significantly.
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Bajaj Auto’s Q4 FY13 : LKP Research
Subdued Q4 results, margins weaken further
Bajaj Auto’s Q4 FY13 numbers came in slightly above our expectations at the PAT levels owing to an unexpected rise in other income and a lower than expected tax rate. However, the topline (net sales including other operating income) came in at Rs47.5 bn, which was in line with our expectations. This was just 2% up yoy, while it was a decline of 12.3% qoq. Realizations were up 7.1% yoy and just 0.6% qoq to Rs 50,167 as the company took a price hike upto Rs 500 per vehicle in April and withdrawal of subventions. Domestic volumes were down by 8% yoy and 18% qoq on the back of competition and weak business environment, which resulted into lower sales in Q4, while exports grew by 5% yoy and fell by 3% qoq mainly on weak market conditions in Sri Lanka, while markets like Egypt, Iran and Argentina have shown some signs of recovery. At the EBITDA levels, RM costs to net sales dipped to 73.3% from 73.9% qoq and 73.4% you, while staff costs scaled up to 3.6% of sales qoq and 2.6% yoy. Other expenses to sales zoomed up to 7.7% from 6.3% qoq and 7.1% yoy. This signifies 2W companies (both Hero and TVS spent heavily on this expense head this quarter) investing heavily into marketing now, so as to gain back their lost market shares to competition. As a result of this, EBITDA margins as a result moved down to 17.6% from 18.7% qoq , and 19.8% yoy. Other income grew by 20% qoq and 74% yoy to Rs 2.4 bn. Also, lower than expected tax rate at 25.9% (due to Rs69 cr of tax exemption) compared to 30.2% qoq led to higher than expected PAT at Rs7.65 bn.
Outlook and valuation
Bajaj’s domestic sales may improve with the new launches, but may not help it significantly to gain market share as the executive segment is too crowded and this may lead to a price war, thus hurting domestic 2W margins. With continuation of a weak operational domestic environment, we expect a subdued performance from motorcycles going forward. With strong demand for diesel carrier segment in domestic 3Ws, upgrading of 3W models in Q2 FY14 and expected opening up of permits in some states, 3W business is expected to perform strongly. Exports markets other than Africa and Latin America will remain soft. Higher spend on other expenses to push the inventory as well as fresh sales will restrict margins below the company guidance of 20%. RM costs softening and currency benefits may help Bajaj to improve margins marginally. Also strengthening 3W business with expected (but delayed) launch of the much awaited RE60 in Q4 FY14 will provide some traction to margins. With subdued expectations of volumes from domestic motorcycle segment, we are lowering our FY14/15E volume growth expectations from 6%/9% to 5%/8% in FY14/15E respectively. We have lowered our margin estimates from 20%/20.7% to 18.9%/19.6% for FY 14/15E respectively. We have rolled over our estimates from FY14E to FY 15E. Due to this, our target price moves up from Rs 1,846 to Rs 1,932. Hence, we upgrade the stock from Underperformer to Neutral.
LKP Research
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Just Dial Limited IPO- all details
Just Dial Limited | |
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*Non-Retail investors i.e. QIB and Non-Institutional Investors Bidding for more than 2 lac shall mandatorily use ASBA facility | |
Symbol - Series | JDIAL |
Issue Period | 20-May-2013 to 22-May-2013 |
Post issue Modification Period | 23-May-2013 |
Issue Size | Public Issue of 17,493,458 Equity Shares of Rs. 10 each (including Anchor Portion of 3,936,925 equity shares) |
Issue Type | 100% Book Building |
Price Range | Rs 470 to Rs 543 |
Discount to Retail investors | Rs 47 (10 % to the floor price) |
Face Value | 10 |
Tick Size | 1 |
Market Lot | 25 Equity Shares |
Minimum Order Quantity | 25 Equity Shares |
IPO Grading | IPO Grade 5 / 5 |
Rating Agency | Crisil |
Maximum Subscription Amount for Retail Investor | 200000 |
IPO Market Timings | 10.00 a.m. to 5.00 p.m. |
Book Running Lead Manager | Citigroup Global Markets India Private Limited and Morgan Stanley India Company Private Limited |
Syndicate Member | Citigroup Global Markets India Private Limited and Morgan Stanley India Company Private Limited |
Categories* | FI, IC, MF, FII, OTH, CO, IND and NOH |
Name of the registrar | Karvy Computershare Private Limited |
Address of the registrar | Plot No. 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500 081 |
Contact person name number and Email id | Mr. M. Murli Krishna , (91 40) 4465 5000, justdial.ipo@karvy.com |
Prospectus | Click Here |
Ratios / Basis of Issue Price | Click Here |
Application Forms | Click Here |
ASBA e-form link | e-Forms |
Grading Report | Click Here |
Branches of Self Certified Syndicate Banks (SCSBs) where syndicate / sub syndicate member to submit ASBA form | Click Here |
Anchor Allocation Report | Click Here |
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Investment Focus: Coromandel International offers opportunity :: Business Line
The country’s leading complex fertiliser producer Coromandel International’s stock has corrected over 32 per cent in the last six months, even as Nifty gained 11 per cent during the same period. Slack fertiliser demand due to steep rise in farm gate prices, high inventory with the distributors and a weak monsoon impacted the company’s performance in FY13.
With the softening of key input prices and expectation of normal monsoon this year, volumes may rebound in 2013-14. At the current price of Rs 187, the stock trades at nine times 2013-14 earnings, making it a good investment opportunity.
The demand for complex fertilisers declined by over 25 per cent to nearly 16 million tonnes in 2012-13 thanks to steep rise in farm gate prices and adverse weather conditions. But the demand was much higher than the domestic production of around 12.5 million tonnes. As a result, a significant portion of the requirement was met through imports.
Despite favourable demand-supply economics, higher imports in anticipation of a strong demand led to excess supply in 2012-13. Also, sales push by fertiliser companies in the fourth quarter of 2011-12 fiscal led to pile up at the retailer end. However, the inventory at the dealer end is expected to moderate by the first half of the current fiscal. A nominal growth in demand may translate into healthy volumes for the company in 2013-14. The total inventory in Coromandel’s books declined from Rs 2,725 crore in September last year to Rs 1,478 crore by March this year.
The company has commissioned an additional complex fertiliser manufacturing unit at Kakinda in March. This will augment its capacity by 15 per cent to 36.35 lakh tonnes. It targets a gradual increase and expects to scale peak utilisation levels on the expanded capacity by 2014-15.
However, in order to de-risk the business and reduce dependency on government subsidies, the company has consciously scaled up its non-subsidy businesses. Coromandel’s acquisition of Sabero Organics and investment in single super phosphate fertiliser maker Liberty Phosphates (56 per cent stake) is a move in this direction. Liberty now commands 14 per cent share in the market. Coromandel also intends to acquire additional 26 per cent stake in Liberty through an open offer.
A visible improvement in the performance of its pesticide subsidiary Sabero Organics will benefit Coromandel’s performance beginning this fiscal. Sabero’s revenues grew at an impressive 32 per cent during the March quarter. Sabero posted Rs 3 crore profit last quarter, compared to a loss of Rs 11 crore during the same period last year.
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Just dial IPO opens today
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Dear Customer, Just Dial Limited is one of the first companies to offer comprehensive local search services in India. The company started offering their local search services in 1996 under the Just Dial brand, and launched Internet and mobile Internet services in 2007. JDL has a strong brand recall in India as evidenced by the 254.3 million searches of their database that were conducted in fiscal 2012. | ||||||||||||||||||||
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Stock Strategy: Consider long strangle in Reliance Industries :: Business Line
Reliance Industries (Rs 834.4): The stock of Reliance Industries has been moving in the Rs 700-1,000 range for quite sometime. In the recent Nifty rally, Reliance was among the laggards. If the liquidity vigour continues, then Reliance will also join the party. On the other hand, if there is any flight of capital from equity, the stock will head towards its support level.
F&O pointers: Reliance Industries witnessed unwinding of close to 3.5 lakh shares in open interest positions on Friday in May series. This indicates that traders are not willing to carry over their positions. Option trading also indicates negative bias, as puts shed open interest positions, suggesting the emergence of put writers.
Strategy: Traders can consider a long strangle on Reliance Industries. This can be initiated by buying Rs 860 June call and Rs 780 June put. The options closed at Rs 21.25 and Rs 7.5 respectively.
Long strangle is best suited when one expects the underlying equity to be volatile.
While the maximum loss is the premium paid (about Rs 7,200) the gains could be unlimited if Reliance Industries either swings above Rs 860 or below Rs 780 in the near-term.
Maximum loss occurs if Reliance settles between the strikes at the time of expiry. Immediate swing in one of the directions will generate profit due to time value. Traders can hold this position with a combined options stop-loss at Rs 18.
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