SAP Ventures To Invest $7.5M In Just Dial In A Pre-IPO Deal

SAP Ventures, the corporate venture capital arm of SAP AG (an enterprise software application leader), is investing $7.5 million for a 1.5 per cent stake in Just Dial, which values the Mumbai-based and India-specific search firm at $500 million or around Rs 2,250 crore, VCCircle has learnt. This is a pre-IPO transaction and the local search firm is slated for its maiden public float soon. The company is filing it's DHRP later this month and will likely list in the range of Rs 3000 to Rs 4000 crore.

This deal translates into a phenomenal value growth for an Indian company within a short span of time, as the firm has seen its valuation jump fivefold in the last two years alone.

Ram Kumar, CFO of Just Dial Pvt Ltd, declined to comment on the recent development. "It is all speculative at this stage," he said. An e-mail message sent to Jai Das, Partner, SAP Ventures, did not elicit any response till the time of writing this article.

Just Dial had raised its first round of institutional funding of Rs 50 crore from SAIF Partners in 2006, followed by another investment worth Rs 77 crore by Tiger Global in 2007. SAIF Partners is the first and largest institutional investor in Just Dial with about 23 per cent stake. Sequoia Capital India had also picked up a little over 10 per cent stake from an early investor for Rs 40 crore in mid-2009 in a secondary deal.

Although Just Dial's latest financials are not available, the company had clocked net sales of Rs 96.6 crore, with EBITDA of Rs 20.2 crore and net profit of Rs 12.12 crore for the year ended March, 2009. The firm had recorded a compounded annual growth rate of 50 per cent in revenues, 42 per cent in EBITDA and 45 per cent in net profit during 2005-09. Keeping that as a benchmark, the firm will be close to Rs 217 crore in revenues, Rs 40.7 crore in EBITDA and Rs 25 crore in net profit for 2010-11, according to VCCircle estimates. This will translate into a valuation multiple of almost 55 times trailing EBITDA and 100 times net profit, setting an aggressive valuation ahead of its proposed IPO.

Founded by VSS Mani in 1994, Just Dial is a local search firm which provides both B2C and B2B listings of small and medium business advertisers across the country. It provides services over the internet, phone, wireless and print. Its business model involves charging a local business a listing fee which can range between Rs 3,000 and a few lakhs. The service is free for consumers. The company has a presence in 240 cities with 3.5 million listings and 25 million users.

SAP Ventures are information technology investors who focus on enterprise products and services. In the 10 years since it has been founded by Hasso Plattner, chairman and co-founder of SAP AG, SAP Ventures has invested in more than 100 companies such as LinkedIn and WebEx.

In India, the company has invested in companies like iYogi Technical Services (remote-computer tech support for consumers and small businesses), Newgen Software Technologies (outsourced engineering) and Connectiva Systems Inc. (software vendor to communications service providers).

The local listing space has attracted interest from corporate houses and investor community. Last year, Malaysia-based Astro All Asia Networks bought 50 per cent stake in New Delhi-based GETIT Infoservices for around Rs 100 crore, valuing GETIT at Rs 200 crore. GETIT had revenues of Rs 33.2 crore with net loss of Rs 27.6 crore for the year ended March, 2010.

In December, 2008, internet giant Yahoo acquired 30 per cent stake in Chennai-based Network Management Co. Pvt Ltd, which owns the telephone-based directory search service Call Ezee. Another corporate active in this space is Television Eighteen India Ltd (TV18), which acquired Infomedia18 from ICICI Venture in 2007.

Other venture-backed players in this space include AskLaila of Four Interactive (Lightspeed, Matrix and SVB) and Sulekha (Norwest, Indigo Monsoon). Nexus Venture Partners also invested $5 million in New York-based classifieds firm OLX, which has a presence in Portugal, Mexico, South America and China, in addition to India.