Just Dial rings in gains on stock exchange debut

Bankers, brokers skeptical on whether success of Just Dial, which was largest IPO in 2013, would revive primary market

Search engine Just Dial made a strong debut on the bourses on Wednesday with the stock rising as much as 19 percent over its public issue price.

The stock, which hit a high of Rs631.90 on Wednesday, closed at Rs611.45, a 15 percent premium to the price at which investors received the shares.

But, bankers and brokers are skeptical on whether the success of Just Dial, which was the largest initial public offering (IPO) in 2013, would revive the primary market.

Just Dial’s gains on the listing day were the third best out of the 15 companies which were listed on the stock exchanges in 2013.

Bankers and analysts said, however, Just Dial saw demand among a wider section of investors, including retail, in the IPO compared to most other public offerings this year despite steep valuations because of the company’s unique business model.

The company provides search solutions through phone and internet. 

“Companies with niche businesses will continue to see good investor interest in IPOs even if they are relatively expensive,” said Rajesh Cheruvu, chief investment officr, RBS Private Banking India.

"Investors are very choosy nowadays about where they are investing especially in IPOs given the market conditions,” he said.

Bankers said the success of Just Dial’s 1.35-crore-share IPO, which was subscribed 11.6 times, can be repeated only if investors, mainly retail, see gains on the listing day.

“Retail investors will return to the IPO market if they see they are making money on listing. If they see listing gains in three IPOs, they will be encouraged to come back and invest,” said Sudhir Bassi, executive director, Khaitan & Co.

Retail investors bid for 3.5 times the shares that were set aside for them in the Just Dial IPO. Few public offers have seen interest from this investor category since the mega Bharti Infratel IPO in December 2012.

For companies with ‘usual business ideas’, the key to draw investors to their IPOs would be to price the issue attractively, said Cheruvu.

Hindi movie star Amitabh Bachchan made a killing on Just Dial’s listing day. Bachchan, who had invested Rs 6.27 lakh (62,794 shares at Rs10 a piece) in the company in 2011, saw the value of his holding appreciate to Rs 3.83 crore as per the stock’s closing price on Wednesday.