On Monday, the stock hit a low of Rs 1,016, before recovering to Rs 1,023 — still down 4.67 per cent for the day.
The open offer price for additional 26 per cent, or 2,17,36,894 fully paid-up equity shares, that Reliance Retail announced was fixed at Rs 1,022 apiece, 4.76 per cent below Friday’s closing price of Rs 1,073.
This is the same price at which 2.12 crore preferential shares, equivalent to 25.33 per cent post preferential stake, will be allotted to Reliance Retail. In addition, Reliance Retail would acquire 1.31 crore shares from VSS Mani, equivalent to 15.62 per cent post-preferential share capital, at an even lesser price Rs 1,020.
In total, Reliance Retail would acquire about 67 per cent stake at an EV/Ebitda of 25 times and P/E of 31 times on a stable-state FY20 basis.
VSS Mani holds nearly 11 per cent stake and would continue to lead Just Dial as Managing Director and CEO.
“We upgrade the Just Dial stock to ‘buy’ from ‘sell’ earlier with a revised target price to Rs 1,330 against Rs 920. We now assign a 25 per cent premium to the native business and execution risk discount for JD Mart to 25 per cent. We raise FY23-24 EPS estimates by 16.5 per cent/11.6 per cent, post incorporating Rs 2,160 crore cash on books, leading to increased other income,” said BoB Capital Markets.
Like RJio, Just Dial can now afford to delay its monetisation plans, disrupt the competition in pricing and play a significant catchup in the B2B segment.
“A Zomato-like transition (B2B and even B2C) into a more ‘comprehensive’ and end-to-end ‘transactions’ cannot be ruled out – further increasing the competitive / capital intensity of the business. It is surprising that the acquiring entity is RRVL, and not Jio Platforms. We reckon JD’s B2C business has limited exposure to Retail / Kiranas’ directory, which may be the key area of interest for JioMart (part of RRVL),” ICICI Securities said.
Many technology acquisitions in the past led to cannibalisation of ‘competing’ revenue by the acquirer.
“The fact that Just Dial ‘complements’ (v/s 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
over plays out in the long run,” ICICI Securities said.
Motilal Oswal said the acquisition could have far-reaching effects and enable Reliance Retail to make strong inroads into new commerce – if it is able to leverage the
platform and network.
