Just Dial shares rose as much as 9.3 per cent to Rs. 1,099 on Tuesday, but over the last two months the stock has plunged 42 per cent as compared to a 4 per cent rise in the broader Sensex during the same period.
The sharp selloff in Just Dial has come amid fears of redemption by pre-IPO investors, whose lock-in period expires on June 5, 2014. This could put a large number of shares in the open market.
Just Dial counts Citigroup, Morgan Stanley, Tiger Global and Sequoia Capital among its institutional investors. Bollywood superstar Amitabh Bachchan owns 62,794 shares, or nearly 0.09 per cent stake in Just Dial, according to the company’s March 31 shareholding disclosure.
According to Nirmal Bang, private equity investors own a 41 per cent stake in Just Dial and they will be allowed to sell their holdings once the lock-in period is over. The value of these holdings at the current market price of Rs. 1,005 per share is Rs. 2,890 crore, the brokerage added.
Mr. Bachchan was allotted shares at a price of Rs. 10 each in 2011 and his original investment of Rs. 6.27 lakh has now swelled to nearly Rs. 6.8 crore, but is down from nearly Rs. 10 crore a month ago.
Despite the recent selloff, Just Dial is one of the few Initial Public Offer (IPO) success stories in recent times, where investors have netted handsome returns. The stock, which started trading on June 5 last year, was issued at Rs. 530 to retail investors.
Nirmal Bang analyst Jignesh Kamani is confident that Just Dial’s new initiatives such as “Get Quote” and “Search Plus Services” will lift earnings and bring down the astronomically high price earnings (p/e) Just Dial currently trades at.
Nirmal Bang has a target of Rs. 1,705 on Just Dial, indicating a 70 per cent upside from current levels.