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Edited Transcript of JUSTDIAL.NSE earnings conference call or presentation 23-Jul-19 12:30pm GMT

Q1 2020 Just Dial Ltd Earnings Call

Mumbai Jul 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Just Dial Ltd earnings conference call or presentation Tuesday, July 23, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Abhishek Bansal

Just Dial Limited - CFO

* Venkatachalam Sthanu Subramani Mani

Just Dial Limited - Founder, MD, CEO & Executive Director

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Conference Call Participants

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* Arya Sen

Jefferies LLC, Research Division - Equity Analyst

* Niket H. Shah

Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research

* Pranav Kshatriya

Edelweiss Securities Ltd., Research Division - Research Analyst

* Prince Poddar

JM Financial Institutional Securities Limited, Research Division - Analyst

* Rishit Parikh

Nomura Securities Co. Ltd., Research Division - Associate

* Shaleen Kumar

UBS Investment Bank, Research Division - Associate Director and Analyst

* Vijit Jain

Citigroup Inc, Research Division - Research Analyst

* Yash Agarwal

JM Financial Institutional Securities Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Very good evening, ladies and gentlemen. I'm Swardip, the moderator of the session. Thank you for standing by and welcome to the Just Dial Limited First Quarter Financial 2020 Earnings Conference Call. (Operator Instructions) I would like to now invite Mr. Rishit Parikh to take the session ahead. Thank you, and over to you.

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Rishit Parikh, Nomura Securities Co. Ltd., Research Division - Associate [2]

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Thank you, Swardip. On behalf of Nomura, we would like to welcome you all to Just Dial's 1Q FY '20 Earnings Call. We have with us Founder, MD and CEO of Just Dial, Mr. VSS Mani; and also the CFO of the company, Mr. Abhishek Bansal. Without further delay, I would now like to hand over the call to the management. Over to you guys.

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Abhishek Bansal, Just Dial Limited - CFO [3]

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Hi, everyone. Welcome to Just Dial's earnings call for first quarter fiscal '20. We'll quickly go through key financial and operational highlights for the quarter.

Operating revenue stood at INR 240 crores, which grew 13.5% year-on-year. Operating EBITDA stood at about INR 64.2 crores for the quarter, witnessing about 12% year-on-year growth. Adjusting for noncash ESOP expenses, operating EBITDA margin stood at 28.7% for the quarter. Now Ind AS 116 accounting norms for leases have become effective 1st April 2019. As (inaudible) in the way we account for our leased properties, under the new accounting standard, these leases should be carried on the balance sheet as right-to-use assets, and corresponding liabilities for rental payments need to be recorded. As a result, earlier we were booking rental expenses in our P&L under other expenses, but now there's a depreciation in interest cost that is booked in P&L for those particular leased assets and liabilities that are created.

Overall, against INR 6.5 crores of quarterly rental expense, in 1Q, we have booked a depreciation of INR 5.3 crores and another INR 1.7 crores of interest cost. Operating EBITDA margin, which is our more like-for-like parameter for the quarter stood at about 20.3%.

Net profit for the quarter stood at INR 57.3 crores, which was up about 49% year-on-year. This was aided by INR 31 crores of other income, which was due to MTM gains that we had on our investment portfolio due to decline in volumes during the quarter.

Cash and investments stood at a healthy INR 1,397 crores as of 30th June.

Coming to operating highlights. Mobile traffic is growing at a healthy 36% year-on-year rate. Mobile unique users have now crossed 125 million on a quarterly basis. Overall including all platforms despite a high base, we were still able to grow at 25% year-on-year to about 156 million plus quarterly unique users.

In terms of database, we added another 750,000 net listings to our database, and we now have about 26.5 million active listings in our database, which was about 17% year-on-year increase. Our database now comprises of about 67 million images.

Coming to paid campaigns. Paid campaigns at the end of the quarter stood at about 515,000 as we added broadly 14,500 new paid campaigns during the quarter. In line with our strategy of getting SMEs onboard across the country, both our free listings as well paid listings, we have also been ramping our feet-on-street team. Our cold calling feet-on-street team is now about 4,400 member plus.

Overall, we have continued to focus on core aspects of our business that is growing our traffic, improving our product, expanding our database, curating content, getting more SMEs into the paid ecosystem. This should help us in scaling newer heights in both top line and profitability going forward despite the challenging macro environment that we see, especially for SMEs. We shall now open the floor for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have our first question from Mr. Pranav Kshatriya from Edelweiss. (Operator Instructions)

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [2]

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My first question is this quarter we saw unearned revenue growth slowing down significantly. Any particular reasons of which you would identify? Is it more to do with the macro? Is it more to do with the -- any other reasons that would be helpful?

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Abhishek Bansal, Just Dial Limited - CFO [3]

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Pranav, so definitely the macro for especially SMEs is challenging. So we do get feedback from our particular sales personnel, where they would say that SMEs are not that comfortable paying the entire upfront amount, which a good proportion of them were paying for earlier. As a result, we have also shifted our focus on monthly payment plan so that our product is more affordable for SMEs. The idea is in the current tough macro scenario, we want that -- the number of paid customers or the sign-ups to continue happening, which is reflected in continued addition in paid campaigns as well. So mainly a mix change of having more monthly payment contracts is what was the result for unearned revenue to have softness.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [4]

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How do you read the current macro? You expect there are certain things to improve to get back to normalcy. Are there weaknesses in a particular segment in a particular geography? Or it is all across...

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Abhishek Bansal, Just Dial Limited - CFO [5]

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See largely, weakness obviously is across the board, though Tier 2, Tier 3 cities continue to give decent growth to us. As far as specific pockets or categories are concerned since we are extremely broad-based, no single category contributes more than 3% to 4% of our revenues. So there isn't anything sort of concentration, per se. So the weakness is -- at the SME level is mostly across the board. So we obviously cannot predict how long will it take for that recovery to happen. From our particular perspective, the idea is to have as many customers sign up with us, have SME see value in continuing to invest with our particular platform, and as and when macro improves, that should help us exponentially gain at that point of time.

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Operator [6]

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We move into the next question. We have with us Mr. Arya Sen from Jefferies.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [7]

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Firstly, can you confirm that the collection growth this quarter on a y-o-y basis was minus 6%?

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Abhishek Bansal, Just Dial Limited - CFO [8]

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Yes, if you were to actually back-calculate basis unearned and accrued, so yes, what you mentioned broadly, that would be the 6% impact y-o-y for the quarter.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [9]

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Sure. And Abhishek, last quarter you had mentioned that there was about INR 15 crores to INR 20 crores of collection which got pushed into this quarter. So if I sort of adjust for that, then that number would be even lower, right? Or is it that again something got pushed into next quarter as well? How should I sort of look at it?

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Abhishek Bansal, Just Dial Limited - CFO [10]

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See, we sell our particular listing in 2 types of payment plans, 1 is the monthly payment plan where we collect only 1 or 2 months as down payment, and the rest amount comes on a monthly basis via auto debit of ECS of the customer's bank account. Other option is customers can pay upfront. So if you were collecting say INR 12,000 annual contract in upfront, in first quarter, you will have that particular INR 9,000 or INR 10,000 as unearned revenue. But if you were to collect in a monthly payment plan mode, then that complete INR 9,000 or INR 10,000 will actually come in future. So that particular mix also impacts that particular collection for the quarter. So ideally, this particular trend in collections or unearned revenue is best seen on a slightly more long-term basis.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [11]

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Okay, and if I were to look at -- sir, I mean you've talked about how the sort of mix has changed towards more monthly payment. So I mean is there any sort of number you can share in terms of what has usually been the share of monthly payment contracts and how much it is swung in this quarter?

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Abhishek Bansal, Just Dial Limited - CFO [12]

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So typically, 32%, 35% is our historical average that we have for monthly payment customers. In last couple of quarters, it had gone down in the range of about 26%, 28% or so. And in June quarter, we have tried to bring it back to about 36%, 37% levels.

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Arya Sen, Jefferies LLC, Research Division - Equity Analyst [13]

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And all this is as a percentage of revenue?

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Abhishek Bansal, Just Dial Limited - CFO [14]

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All this is, yes, largely as a percentage of revenue.

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Operator [15]

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(Operator Instructions) We have the next question from Mr. Niket Shah from Motilal Oswal.

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [16]

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I had couple of questions. First is you said you had an annual contract as well as monthly and weekly contracts. Do you have more than 1 year contract like a 2-year 3-year, 4-year kind of contract as well that you've launched?

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Abhishek Bansal, Just Dial Limited - CFO [17]

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So we, for our very select set of categories, we do have option of where the customers can actually pay for a longer than 1-year duration.

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [18]

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Okay, and how much would that be today as a percentage?

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Abhishek Bansal, Just Dial Limited - CFO [19]

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So total that component out of the total about INR 400 crores of unearned revenue that we have, that component is not more than INR 32 crores, INR 33 crores.

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [20]

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Okay, got it. And the one again very basic question is if you have a paid subscriber who has, say, 10 centers across India, would that be taken as 1 paid subscriber or 10?

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Abhishek Bansal, Just Dial Limited - CFO [21]

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In case you have 10 separate outlets, you will be considered as 10 separate campaigns.

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [22]

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Okay. I'll take that off-line.

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Abhishek Bansal, Just Dial Limited - CFO [23]

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Just to clarify, suppose you have -- your Mainland China Restaurant, and for that particular restaurant, you take up a particular paid listing in 4 different areas, it will continue to be 1 campaign, but if Mainland China subscribes for a paid listing for 4 of its separate outlets, those will be 4 separate campaigns.

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [24]

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Although the payment is done by the Mainland China itself, it would still be taken as 4 separate outlets. Is that understand correct?

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Abhishek Bansal, Just Dial Limited - CFO [25]

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Sorry?

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [26]

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I'm saying that if Mainland China has given you, say x amount of money for 4 outlets, will it be taken as 4 outlets and not 1 outlet?

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Abhishek Bansal, Just Dial Limited - CFO [27]

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Yes...

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Niket H. Shah, Motilal Oswal Securities Limited, Research Division - Former Head of Midcaps Research [28]

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Or not as 1 paid subscriber, it will be taken as 4 paid subscribers.

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Abhishek Bansal, Just Dial Limited - CFO [29]

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Yes, it will be taken as 4 paid subscribers.

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Venkatachalam Sthanu Subramani Mani, Just Dial Limited - Founder, MD, CEO & Executive Director [30]

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Average, 4 questions on campaign, 1.2, 1.3. 1.2. Average campaign per customer is about 1.2.

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Abhishek Bansal, Just Dial Limited - CFO [31]

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So again it's about 515,000 campaigns that we have, unique customers broadly would be about 430,000 or so.

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Operator [32]

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We have the next question from Mr. Vijit Jain from Citigroup.

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Vijit Jain, Citigroup Inc, Research Division - Research Analyst [33]

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Just a quick question on the Ind-AS-related changes. So when I add back your INR 65 million-odd on to your operating and rent expenses, I see that -- just for the like-to-like comparison with the previous quarter, I see that there is a decent jump in that line item even though I think you said your advertising costs for the quarter were like INR 17 crores, INR 18 crores on the TV, I think. So just some sense on how that would look go-forward rent.

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Abhishek Bansal, Just Dial Limited - CFO [34]

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So advertising spend for last quarter was about INR 19 crores, and for the previous quarter -- March quarter was about INR 17 crores, INR 17.5 crores.

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Vijit Jain, Citigroup Inc, Research Division - Research Analyst [35]

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Okay. Okay. And so coming again to the Ind AS question. So then to assume that the impact that you had on your above EBITDA line and on your depreciation, amortization and finance expenses, is the trend rate that we'll see going forward at least...

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Abhishek Bansal, Just Dial Limited - CFO [36]

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Okay, so the way it was that -- for leases that are greater than 1 year spending, those particular leases come on to our particular balance sheet. On an average, we have around 2.75 to 3 years left in our particular pending leases. For these particular leases, a asset is created which is depreciated on a straight-line basis, which means the depreciation on leased assets that you see on a quarterly basis, that should largely remain same, but the reason for that changing could be in case we add to our particular rental properties in future or in case there is any rental escalation that happens in future. On that interest component during the initial years, the interest expense booking in P&L is slightly higher, and it will reduce as the tenure goes forward.

So again, IND 6.5 crores of rental expense, depreciation plus interest cost was about IND 7 crores also. So IND 50 lakhs is the impact at (inaudible) level, which should result in the second half of the remaining lease tenure. But by in large for your particular understanding, the IND 6.5 crores, IND 7 crores is the run rate that you can assume for now.

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Vijit Jain, Citigroup Inc, Research Division - Research Analyst [37]

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Okay. And I have one final question. So I see you added about 900-odd employees in this quarter. Could you give a sense of where these feet-on-street were hired? Is this the share of maybe new cities or geographies in the Tier 2, Tier 3 cities and in the metro cities, et cetera? So any kind of color on where you're hiring these people wherein?

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Abhishek Bansal, Just Dial Limited - CFO [38]

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So bulk of the hiring is happening in Tier 2, Tier 3, Tier 4 cities. So there are many cities where, compared to the population as well as the count of SME data that is there in those particular cities, our penetration is much lower. So in all those cities, we are trying to expand our presence, and this is (inaudible) not specifically restricted to certain cities or states.

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Operator [39]

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Moving to the next question, we have Mr. [Chirag Patel] from [Bhavesh Investments].

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Unidentified Analyst, [40]

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So basically, I'm listening to the commentary by the management. I would like to know the quantitative data like what was the average contribution for top-11 cities and Tier 2, Tier 3 cities.

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Abhishek Bansal, Just Dial Limited - CFO [41]

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Tier 2, Tier 3 cities for last quarter contributed about 29% to revenue, and they now contribute almost 50% to our overall campaigns.

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Unidentified Analyst, [42]

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What was the revenue contribution for this particular quarter?

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Abhishek Bansal, Just Dial Limited - CFO [43]

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29%.

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Unidentified Analyst, [44]

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29%, okay. And campaign was 50%?

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Abhishek Bansal, Just Dial Limited - CFO [45]

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Yes.

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Unidentified Analyst, [46]

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Okay, and sir if you can provide the data regarding what was the ESOP expenses for the particular quarter?

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Abhishek Bansal, Just Dial Limited - CFO [47]

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That was about INR 4.6 crores.

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Unidentified Analyst, [48]

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And we are going to see the same trend for the whole year?

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Abhishek Bansal, Just Dial Limited - CFO [49]

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ESOP expenses broadly should be in the range of around INR 5 crores, INR 5.5 crores a quarter.

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Unidentified Analyst, [50]

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Okay. And so are there -- were there any increase in the market size like, in Q4, you have mentioned that 65 million are the SMEs and 15 million or 20 million are the freelancers. So was there any increase in the market size? Or what kind of changed?

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Abhishek Bansal, Just Dial Limited - CFO [51]

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So that particular market size, we also typically get to know from various government reports, annual reports, et cetera. So by and large that we get to know on an annualized basis, the last number that we are aware is around 60 million, 65 million SMEs another INR 15, INR 20 million freelancers, which is our particular assessment. So no significant changes to that as per our knowledge.

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Unidentified Analyst, [52]

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Okay. Sir, within this, the buyback is now being [back], so what do we expect in the coming years? Are we going to be able to provide a dividend or be able to continue with the buyback.

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Abhishek Bansal, Just Dial Limited - CFO [53]

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So the last buyback got concluded in Jan this year. The earliest proposal can be taken up in Jan 2020. So at that point of time, the Board will take a decision on how the capital allocation needs to be done.

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Unidentified Analyst, [54]

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Okay. Sir, what was the retention in the quarter?

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Abhishek Bansal, Just Dial Limited - CFO [55]

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We typically look at a long-term rate. So the long term-rate is fairly steady at about 56%, 57% when we look at our 1-year retention rate.

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Unidentified Analyst, [56]

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Okay, so other than this, what was the employed churn rate for the particular FY '19 and of this particular quarter?

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Abhishek Bansal, Just Dial Limited - CFO [57]

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That I will have to check and come back to you.

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Unidentified Analyst, [58]

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Have we add on any particular cost in to the bundle product, which we are selling to the customers? Or is there a hike in price?

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Abhishek Bansal, Just Dial Limited - CFO [59]

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So our particular pricing is dynamic in nature depending on the category for which the SME wants to advertise in, depending on the geography they want to cater to. The pricing is automatically determined by the system. System algorithm also takes into consideration what the recent traffic trends have been. So it's a dynamic algorithm that we have for our premium listings. For nonpremium listings, we have a base price which again is customized at a category level. Above that particular base price, SMEs can choose to pay whatever amount they want, and this is whatever each of the SMEs are contributing for that particular category, they get to rank in order of highest to lowest.

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Operator [60]

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We have the next question from Mr. Prince Poddar from JM Financial.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [61]

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Abhishek, VSS, just 2 questions both on unearned revenue. Basically, the first question is if I heard it...

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Abhishek Bansal, Just Dial Limited - CFO [62]

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Sorry, your voice is very low.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [63]

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Can you hear me now?

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Abhishek Bansal, Just Dial Limited - CFO [64]

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Yes, better.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [65]

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Yes, so okay, my both questions on unearned revenue. Basically, first question is if I heard correctly, the share of monthly payments has gone up from 28-odd percent to 36-odd percent in this quarter. Is that correct?

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Abhishek Bansal, Just Dial Limited - CFO [66]

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Yes.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [67]

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Okay. So basically if I understand correctly, 8% change in monthly transactions from probably in yearly transactions has resulted in a change of 17-odd percent, 16%, 15% 17-odd percent in the unearned revenue growth? Is that the kind of correlation we have between monthly payments and upfront revenue?

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Abhishek Bansal, Just Dial Limited - CFO [68]

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It is not exactly right to actually correlate that because it also matters what is the total quantum of selling that we are able to do. So it will be a factor of both what is the total monthly plus upfront payment contracts that we are able to sell and within that, the mix impact as well.

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Venkatachalam Sthanu Subramani Mani, Just Dial Limited - Founder, MD, CEO & Executive Director [69]

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More over to payments.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [70]

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Okay. So basically, just an add-on to that question, if let's say, I -- rather than going for a yearly contract, I went to you and ask for 3 contracts for 3 months, for say April, May, June. So it will be counted as 3 campaigns, right, 3 paid campaigns?

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Abhishek Bansal, Just Dial Limited - CFO [71]

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No, so if you sign up for, let's say, you cannot ask for 3 separate contracts. It will be a single contract that you will sign irrespective of whatever is the period. So if you want to offer a monthly payment plan, we will say that, okay, you can pay 1 month or 2 months of down payment and then we take our ECS mandate. That particular mandate is submitted to the bank. Once it is verified, then on a monthly basis, your particular amount gets auto debited. And it is all one single campaign.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [72]

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Okay, so essentially the number of paid campaigns won't be impacted by a monthly contract or a yearly contract?

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Abhishek Bansal, Just Dial Limited - CFO [73]

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No, no. However, what typically happens is that if you sell on a monthly payment plan, since it is more affordable, there is a likelihood that more number of customers sell by your core product.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [74]

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Yes, that's correct. That's correct. And my only concern is on the unearned revenue because it's -- the number has gone down significantly. And one reason of course, we can understand is a 9 months or 3/4 of some of the contracts have been gone because they are not paying us for 1 year. But that's a huge jump, I mean, from 22-odd percent...

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Abhishek Bansal, Just Dial Limited - CFO [75]

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That particular money is likely to come in future on a monthly basis rather than coming and sitting on our books today.

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Prince Poddar, JM Financial Institutional Securities Limited, Research Division - Analyst [76]

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Okay, so would we see this unearned revenue growth to probably catch up to a 15%, 16% rate going ahead because then backward essentially mean what is growth is going to be in the next quarters for them.

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Abhishek Bansal, Just Dial Limited - CFO [77]

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See from our particular perspective, we are not that specifically focused at where the unearned revenue growth goes. For example, if I was to sell everything on a monthly payment plan, technically, deferred revenue can potentially be 0 because if you're getting from the customer in that particular month that is being consumed by the revenue, and the company can still be growing at a healthy rate. But obviously, we would ensure that we want to have a healthy mix of customers paying us for full year versus affordability for new incoming customers. So overall, we'll have to see how unearned revenue stands out going forward.

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Operator [78]

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(Operator Instructions) We have Mr. Pranav Kshatriya from Edelweiss again for a follow-up question.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [79]

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Sir, the slowdown versus the -- how do you see tackling the margins because despite the low-teen kind of a growth, we're not really seeing a margin expansion coming through so just wanted to know how should we see this -- we saw that revenue growth remain stable at 15%.

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Abhishek Bansal, Just Dial Limited - CFO [80]

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See, Pranav on the margin side, the adjusted EBITDA margin excluding ESOP was about 28.7% for the quarter. Even if I were to take the rental expense into consideration, still it was about 26%, 26.5% or so, which I think is fairly healthy at this point of time, especially considering that we are investing into expanding our particular feet-on-street team substantially. So the payroll cost, which is the biggest cost item, that grew about 13.5%, 14% year-on-year despite about 11% increase in total strength of employee. So considering the regular wage hikes as well as addition of people, we are able to control that. Once we see slight more pickup in revenue, at that point of time, operating leverage should come into play.

In our historical year say 4, 5 years back, when we did our IPO at that point of time, we were at about 30% EBITDA margin but top line growth was also 25%, 27% or so. So considering we are near about that range with a much higher advertising spend and at just about low teens kind of revenue growth rate, I think margins are fairly decent at this point of time.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [81]

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Okay, and my second question is on the capital structure. So I understand that you can't give clarity on whether you'll do a buyback or anything like that but just wanted to understand whether you continue to believe that you have enough cash on the books and all the incremental cash generated will be returned to the shareholders considering not so much pressing need for the cash.

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Abhishek Bansal, Just Dial Limited - CFO [82]

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Yes, so considering we have about INR 1,400 crores cash on books and the business is generating healthy free cash flows, we do continue to believe that a good proportion of the incremental free cash flows should be shared back with shareholders. Whatever these are mode irrespective of whatever is the tax regime, I think those considerations are secondary. So at appropriate time, Board should take a decision on this particular capital allocation.

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Operator [83]

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We have the next question from Mr. Yash Agarwal from JM Financial.

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [84]

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Yes, do you give some sense of guidance on how the paid listings will grow the rest of the financial year given that there is some slowdown in the SME and the overall economy? So what is your sense of the overall paid listing? How do you see that growing?

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Abhishek Bansal, Just Dial Limited - CFO [85]

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Yash, certainly from our particular perspective, the objective is mainly to maximize overall revenue growth, which obviously has 2 levers, 1 is campaigns as well as the realization. We are taking steps to ensure that the key inputs, which is the traffic growth, should be strong. More users should be using the product. We should be adding to our feet-on-street team, which is getting us good results. So all those are being focused upon. The output in terms of campaign growth, et cetera, should follow. Like last 3 quarters, we have been able to add 14,000, 15,000 on a quarterly basis. Four quarters back, we were at broadly 450,000 campaigns. We're now at about 515,000-plus. So paid campaigns are coming through nicely at this point of time, and with our steps of adding more feet-on-streets, I think that sort of trend should continue.

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [86]

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Sure, actually, the volumes have been growing pretty decently past few quarters. What are the steps that we can take to grow the realization? It seems a lot of work is coming from the Tier 2, Tier 3 cities where I believe that realization would be low. So no more than the urban areas. So how do you see that catching of the realization also growing? Are you satisfied with the overall volume growth that has been reported?

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Abhishek Bansal, Just Dial Limited - CFO [87]

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There's a fine balance that we have to ensure. So realizations as we also mentioned that ideally we should be on a year-on-year as well as sequential decline considering Tier 2, Tier 3 cities are gaining their particular share. But on the other hand, since that traffic is panning out very healthy, that results in some particular price increase coming through in our premium listings, which is what is able to offset that embedded price decline. So at this point of time, revenue growth is more driven by volumes rather than realization. In our premium listing, we obviously try to ensure that we get as much realization benefit as possible, but at the same time be conscious that the product itself should be a highly return product for the customer.

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [88]

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All right. And is there any other way to monetize these active users apart from these paid campaigns? In other words, is there any medium that you guys have thought about? Or is there anything in the plans?

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Abhishek Bansal, Just Dial Limited - CFO [89]

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So at this point of time, our particular complete monetization happens from SMEs. So our belief is that continue to give wonderful products firstly for the users and monetization primarily, especially from SMEs, is the best way. In case there are any other avenues for monetizing the user base itself, we shall look at appropriate time.

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [90]

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Right. And lastly, just on this capital allocation, so you mentioned on the previous participant's question that incrementally free cash flow you look to return back to the shareholders, but your starting base of about INR 1,400 crores, that itself is pretty substantial. So is there any acquisition on the -- any major investment of -- what is the idea? What I'm trying to understand is how will the minority shareholders benefit from this huge chunk of cash that you hold because that is sort of the question, the valuation also of the stock. So yeah.

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Abhishek Bansal, Just Dial Limited - CFO [91]

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See, so far for last about 3, 4 years, we have been returning money to shareholders primarily via buyback. Buyback used to -- buyback rules require maximum only 25% of paid-up capital plus free reserve. For last year when we did the buyback, that limit was coming to INR 227 crores against which we returned INR 220 crores. So primarily at that point of time, we were constrained more by that particular buyback limit. We definitely want to have a good chunk of treasury on our particular balance sheet to ensure that we stay -- we do have a decent war chest in these particular disruptive times. Despite that, business obviously is generating a good amount of free cash flow, so we'll take a call with the Board at appropriate time on how much quantum should be returned back and via what mechanism.

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Operator [92]

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We have the next question from Mr. Shaleen Kumar from UBS.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [93]

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Abhishek, and apologies for background noise. Again coming back to the same point of achieving plans from our subscription plan. Can you give me -- firstly, will it bring down the stickiness of the customer as they move from a quarterly or a biannually to a monthly plan? And second, is there some kind of a minimum guarantee here we are asking from them when we are shifting them to monthly plan. That's my first question.

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Abhishek Bansal, Just Dial Limited - CFO [94]

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See, 2 things happened. 1 obviously, when you talk about stickiness, we cannot obviously force a customer to continue sticking with us. We would want the strength of our product to result in customer continuing to pay us. Secondly, the key advantage of monthly payment plans is that there are customers who might not even be trying our particular service with the sole purpose that they will have to pay for 12 months upfront. So with that particular focused approach on monthly payment plans, you get a lot of suspect customers as well into the paid ecosystem, which can eventually turn out to be long-term customers for you. So it's a mix of both that sort of tend to take place.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [95]

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So no minimum guarantee, basically. It's like a trial but for a month, kind of thing?

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Abhishek Bansal, Just Dial Limited - CFO [96]

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No, so the way it works is we do educate our particular customers, like for the best return on our particular services, they should actually continue for at least a 6- to 12-month kind of period. They have to pay a particular down payment, which can anywhere vary between 1 to 3 months, and it is also mandatory to sign a ECS mandate, which we present it to their particular bank.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [97]

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Okay sure. Isn't it short-term plans should be premium included? Should the premiums and the long-term plan, but that's not reflected in the kind of a realization or...?

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Abhishek Bansal, Just Dial Limited - CFO [98]

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So actually, the way it works is that, in case you want to pay upfront for a period of entire 1-year, then you do get 10%, 12% discount because you're paying 1 short. That particular impact anyway is not very material. I mean to be able to gauge realization in fact due to that particular component, that will not be that material.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [99]

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All right. And after you want to share like year-on-year on the same product realization, are they like stable? Are you taking some kind of price increase? Or is there a turndown? Would you like to share something on that?

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Abhishek Bansal, Just Dial Limited - CFO [100]

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So as I mentioned earlier, that 2 types of listings we have, premium, nonpremium. In premium listings, definitely for our particular soft categories, which have seen good amount of traffic traction. There are in-built growth rates, which are linked to the kind of growth that we see in traffic. For nonpremium listings, we try to ensure that the pricing -- the entry-level pricing should be linked to affordability. So maybe our passers and movers, they would require to pay, say, around INR 3,000 a month, whereas a duplicate car key maker, they could come in at INR 750, INR 900 rupees a month plan as well.

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Operator [101]

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We have the next question from Mr. [Chirag Patel] from [Bhavesh Investments].

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Unidentified Analyst, [102]

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Sir, it seems like your top-11 cities campaign has not been doing from last 3 years of our -- and even in the revenue contribution piece, all the increase is coming from Tier 2, Tier 3 cities. So what kind of problems are we facing over there?

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Abhishek Bansal, Just Dial Limited - CFO [103]

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See, Tier 2, Tier 3 cities, definitely they are contributing to much higher growth. In Tier 1 cities, like 2 sales channels we have, 1 is the telemarketing assisted channel wherein a particular telemarketing person sitting out of our particular office makes outbound call to the SMEs. Now there obviously, with the coming of various apps which are able to identify sales- or marketing-related calls, it slightly becomes more challenging to reach out to SME, plus the product in itself is becoming more of a show-and-tell product. Say 4, 5 years back, it was very easy to simply call up a SME and say that, okay, you pay INR 10,000 annually, and from tomorrow, you'll start getting SMS with the user inquiries. But today, I need to actually do a demonstration to that particular SME educating that paying to Just Dial is probably half the job done. They have to ensure that they get good ratings from their particular customer, they keep their listing as enriched as possible because, on a Internet platform, those particular factors are key to decision making of a user. So that is where our particular feet-on-street cold calling team is turning out to do well.

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Unidentified Analyst, [104]

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Yes, we can see that you have been recruiting JDAs a lot from last couple of -- next couple of years. So how you're bringing that, how are you going to improve this thing? Like again contributing middle single-digit growth in Tier 1 cities. So how is it going to be possible now?

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Abhishek Bansal, Just Dial Limited - CFO [105]

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So in Tier 1 cities as well, there are certain new initiatives that we have in pipeline, which should help us deliver better sort of (inaudible) to our particular customers, and if we are able to do that, that should help us be able to monetize that particular inventory much better. So let us see, some of those particular initiatives are underway. They should have a positive impact in coming quarters.

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Unidentified Analyst, [106]

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Okay, so for future, like from next 3 years, should I expect like the revenue contribution for Tier 1 versus Tier 2, Tier 3 cities is going to be around 50-50 percentage each?

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Abhishek Bansal, Just Dial Limited - CFO [107]

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See the revenue contribution Tier 2, Tier 3 at this point of time is about 29-odd percent, and since the geography is too huge, which is currently untapped, these particular territories definitely are expected to continue growing their particular share in overall revenue going forward. At this point of time, they're gaining about 1.5% of quarter. So probably that kind of trend should continue for next 8 to 12 quarters at least.

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Unidentified Analyst, [108]

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Okay, so like now for this particular quarter, we can see the jump in campaign for Tier 2, Tier 3 cities are like about 8% now. But coming forward quarters for this particular year, should we see that it is going to be in the same trend? Or it is going to come down probably in medium term like 6%, 5%?

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Abhishek Bansal, Just Dial Limited - CFO [109]

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We will have to see how it stands out. As I said earlier, we are ensuring that we expand that particular team, so even in Tier 1 cities, there is some particular relation to feet-on-street that has happened. So let us see how (inaudible) Tier 2 span out in terms of campaign growth in those geographies.

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Unidentified Analyst, [110]

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Okay, so coming to the particular application, how -- what percentage of management team from the JD app for this particular year -- or quarter?

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Abhishek Bansal, Just Dial Limited - CFO [111]

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So in terms of overall downloads, if you see we have reached about 25 million cumulative app downloads. On a daily basis, we had about 13,000, 14,000 downloads that we saw on a daily basis. And almost all of them are organic in nature, meaning we do not pay for any of these particular app installs.

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Unidentified Analyst, [112]

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Okay, so are we seeing more traction coming to application? Or is it still the mobile Internet, which is being the major part of it?

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Abhishek Bansal, Just Dial Limited - CFO [113]

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See in some of our particular traffic, it is the mobile Internet or mobile web that continues to dominate. And as we have discussed in the past as well, the key reason being that the interface that we have on mobile Internet and our app, that is almost a replica of each other, and with intermittent Internet connectivity that we see at times, in fact, the mobile web view tends to be much faster. So our particular product is a sort of need-based product where a user might not want to download an app at that point of time, but we want to ensure that they end up taking information from our platform. So we are platform agnostic. Doesn't really matter which specific platform user takes the information from.

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Unidentified Analyst, [114]

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Okay, so in Q2 FY '19, you made a commentary regarding that Android application that you are going to come up with which will help you make more enrichments through application. So is it still on? Or it has come in or how is it processing up over?

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Abhishek Bansal, Just Dial Limited - CFO [115]

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So if you see, on our particular mobile platform, including mobile web as well as app, there are continuous product improvements that keep taking place. The newer version of the Android apps are expected to be out soon, which will have a much better interface, both for surfing, specific listing or a particular category. So those particular improvements are a continuous process. At the same time, there is a lot of effort in terms of getting more and more enriched data, which will obviously enhance the value proposition of those particular listing for the user.

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Unidentified Analyst, [116]

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Okay. In like FY '17, we came up with JD Omni, and in FY '18, we said that it is not making much of a revenue for you. So is it panning out in FY '20 or coming again JD Omni and increasing your revenue from that particular part? Because it was quite promising at that time, and it didn't turn up the way the company wanted it to. So what is your look at it?

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Abhishek Bansal, Just Dial Limited - CFO [117]

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So JD Omni, last 2.5, 3 years, we have spent considerable time and effort in fine tuning that particular product. The product at this point of time has shaped up pretty well. It's the same team that also works on creating automated websites for SMEs, which are transaction enabled, mobile friendly. Those particular websites, we also provide particularly to our particular SMEs by bundling with our core listing product. As far as specifically JD Omni is concerned, we are internally contemplating how we want to take it to the market. Last time we did it through our particular existing salesforce, but JD Omni slightly requiring a more technical expertise. So we will see whether we put a dedicated team for the sale.

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Unidentified Analyst, [118]

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Okay, regarding the app -- application or whatever we use through Internet also, the U.S. you are related to booking account, a cab was not that good compared to any other like Ola and Uber. I even tried it myself. So might be there is a problem like why customer won't try to book a cab from there or won't try to, you know what I'm trying to mean? So what -- how are we going to include this JD Maps in, like which is of our own company?

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Abhishek Bansal, Just Dial Limited - CFO [119]

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See, we first of all have to understand that we are a horizontal, right? So the kind of user experience a horizontal provides, in certain specific categories could be different from what a vertical specialist might have. Secondly, we have a philosophy that we want to make sure that whatever business we run has to be run with unit economics in mind with profitability in mind. So our particular core bread-and-butter business, which is searching for any particular category or business across the board that obviously is our strength. There are several other particular products which are fine-tuned from time to time, which should help in our particular core search capabilities itself. So that is a sort of ongoing process. We don't want to commit a significant amount of resources to a specific niche sort of product within our particular app, where we realize that maybe the monetization potential is not that much at this point of time.

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Venkatachalam Sthanu Subramani Mani, Just Dial Limited - Founder, MD, CEO & Executive Director [120]

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The cab is more of an aggregator rather than we being another cab service provider. So we even search for cab options on Uber and Ola only.

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Operator [121]

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(Operator Instructions) Moving to the next question, we have Mr. Vijit Jain from Citigroup.

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Vijit Jain, Citigroup Inc, Research Division - Research Analyst [122]

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Yes, thanks. My questions were actually answered in the previous question.

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Operator [123]

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So Mr. [Patel] is there in the queue for the follow-up questions.

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Unidentified Analyst, [124]

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So what is the actual number of active participants or vendors which are listed right now because we see that there is a mortality rate, too, and even if there -- as we see a cumulative increase in active participants, but they actually are not active. So do you have any kind of data regarding to that?

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Abhishek Bansal, Just Dial Limited - CFO [125]

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So in our particular case as and when we realize that a particular business is actually shut down, after a certain time period, that particular listing goes out of the database. So the 26.5 million listings that you see, those are active listings, active businesses that are there on our platform.

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Unidentified Analyst, [126]

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Okay, so there is not -- okay, I got it. Abhishek sir, do you have any kind of data regarding the uninstalled rate of applications?

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Abhishek Bansal, Just Dial Limited - CFO [127]

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That I will have to check, but last when we checked about a few quarters back, what we had figured out at that point of time that our uninstalled rates were almost at par or slightly better than what typical comparable industry rates were.

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Unidentified Analyst, [128]

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Okay, sir, how are you facing the karma. What do you think about the competition coming ahead like there are peers coming -- entering in the market, too? And how do you feel the competition is going to go in future?

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Abhishek Bansal, Just Dial Limited - CFO [129]

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See in terms of competitive intensity, obviously, there will be peers that will continue to come into, maybe a small niche vertical, but at the same time, these days, we also hear that some of these particular existing peers are facing pressures in terms of profitability. We hear news of layoff in terms of employees, et cetera. From our particular perspective, we try to make sure that we focus on our particular 3 metrics, which is get our traffic growth to continue at a healthy 25% year-on-year. That should result into a decent revenue growth and good, healthy 25% to 30% margins as well. So if we are able to execute on these 3 continuously, I think competition, et cetera, will automatically get taken care of.

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Unidentified Analyst, [130]

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Okay. Sir, what kind of growth are we expecting for FY '20? Like we have also great numbers in Q1. Is it going to sustain for next 3 quarters leading to a complete revenue from operations about INR 1,000 crores for the particular year?

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Abhishek Bansal, Just Dial Limited - CFO [131]

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See, as I mentioned earlier as well difficult to exactly point how things will pan out. So there are multiple factors that come into picture. A lot of them are, obviously, external as well. The internal parameters we are trying to ensure that we expand our particular feet-on-street, we get our product and pricing right, so those particular efforts are underway. Now what exactly results into whether it results into current rates of revenue growth for the full year, et cetera, those we'll have to probably wait for quarters and see what's the outcome.

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Unidentified Analyst, [132]

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Okay, sir, like we are seeing a big growth in Tier 2, Tier 3 cities.

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Operator [133]

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Sorry to interrupt. Before that Mr. [Patel], I would request you to kindly take the last question as we are reaching end of time.

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Unidentified Analyst, [134]

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Okay, so can you please give what kind of retention rate do we have particularly in Tier 2, Tier 3 cities because as we are seeing a growth is coming over, and they are more onto monthly basis payment not on to upfront fees more. So what kind of bifurcation is there?

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Abhishek Bansal, Just Dial Limited - CFO [135]

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No, it is not the case that Tier 2, Tier 3 customers are more on monthly payment plan contract. So they have a reasonably similar sort of proportion that would be there otherwise. In terms of retention, in Tier 2, Tier 3, retention rates are slightly better because these are the territories where we entered much later, and we entered with our particular Internet of direction. So against average 56%, 57% that we have landed, these particular geographies could have 2%, 3% better annualized retention rates.

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Operator [136]

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Thank you very much. I will like to call the management for any final or closing comments.

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Abhishek Bansal, Just Dial Limited - CFO [137]

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Thank you everyone for joining us. In case you have any further queries, please do reach out. We would do our best to address. That's it from our side, thank you.

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Venkatachalam Sthanu Subramani Mani, Just Dial Limited - Founder, MD, CEO & Executive Director [138]

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Thank you.

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Operator [139]

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Thank you very much. I would like to thank all the investors who joined us today and the management from Just Dial. That does conclude the conference call for today. Wish you all a great evening ahead. You may all disconnect your lines now. Thank you very much.