Just Dial at 10000 Crores Market Cap. Overvalued , Under-Owned, Market Frenzy ?

Over the last couple of weeks we have seen Just Dial move up by 40% in last 5-6 sessions.

 

After an IPO around 540 the stock is now at 1400 almost. That would be one of the best IPOs in last couple of years.

 

But in reality its not the price but the market cap which tells us the actual value one is paying. As of today the market cap of the company is around 9700 crores or i would take it to 10k crores.

 

Mind you i have no idea of the business and if you really need an idea this is a good link written by a blogger Amit Kumar. But i do use just dial sometimes for some quick data and get bombarded with a lot of smses.

 

The first thing in any analysis of a company i look at it is the market cap.

 

Now for Just Dial its 10k crores.

 

Is this Over-Valued,

Is this because it is under-Owned ?

Is it just Market Frenzy and some operators

Is it the next big thing ?

 

Now if you were to go buy a mobile phone the calculation starts with what can i get for 10k. So lets find out which companies can you get for 10k crores or round abouts. All the below data is approximate and picked up from www.screener.in which is a really good website made by Pratyush Mittal .

 

Focusing only on low or zero debt companies like Just Dial.

 

 

1) Eicher Motors at 11400 cr.

2) Britannia at 10700 cr.

3) Emami Limited at 10600 cr .

4) Piramal Enterprises at 9532 cr and Enterprise Value much much higher.

5) Godrej Inds at 9514 cr. Some debt but lot of holdings.

6) Procter and Gamble at 9100 cr.

7) Tata Global Beverages at 9000 cr.

8) Jubilant Foods at 8300 cr. ( And i used to think Jubilant is expensive )

9)Torrent Pharma at 8000 cr.

10) Berger Paints at 7900 cr

11) Crisil at 7500 cr

12) Biocon at 7400 cr

13) Blue Dart at 6500 cr

14) Bajaj Holdings at 9800 cr

15) Bata India at 6500 cr.

 

Note above are not buy recommendations but are low risk stocks which have hardly any debt and a buisiness set up over a few decades ( apart from crisil and jubilant ) . Do have a positive view on a few of them.

When i just run a screener of how many companies are above 9000 cr market cap it seems to show only 100. Need to recheck this but it does imply Just Dial is in the top 100 companies by market cap.

 

So how do you value a company which has done a PAT of say 100 cr over sales of 410 cr. Whatever i try to justify its difficult to a 10k crore market cap ?

 

The second question is who owns the major part of the shareholding. I believe the IPO was for 1.35 cr shares and 91 lakh out of it was subscribed by institutional investors. So only 25-30 lakh shares were subscribed by HNIs and retail. So all said and done i believe majority of the holding is cornered. So forget about it being under-owned its almost not owned.

 

The stock traded 35 lakh shares today with 20% delivery volumes. Thus it has become a day traders favorite.

 

Is it market fancy ? Well in the business of e-commerce and telephone service provider or whatever you would tag Justdial and niche companies with new businesses have been pricey always.

A company called snapchat rejected a 3 billion dollar offer from facebook supposedly. ( that is like 18k crores )

 

So is Just Dial the next big thing. Well i really dont think so unless a Google or a Facebook or a Yahoo believes this is the big thing and buys it out.

 

Or investors buying at the current market price believes there will be a similar buyout for a few billion dollars ! or maybe soon we will get such a rumour floating in the market that a google or a facebook is buying this company or promoters will sell stake. 

 

Bottomline :

 

Just Dial is prized crazily at current levels but you cannot sell it as it does not have futures and is totally controlled. If you own it book profits or pray that some big guy latches up to this supposedly big idea at a few billion dollars.

 

Remember Reliance Communication was 4.2% of the Nifty in 2008 and is now not part of the Nifty. ITC was 2.5% of Nifty in 2008 and is 10% of the index today.

 

Disclosure: I have no positions in the stock and no fundamental view on the company. Can i be entirely wrong ? Yes i can be ( but would you like to bet on it ? )

 

Do not take any trading or investment decisions based on the above article and read the disclaimer.