JUSTDIAL - Just Dial Limited Share Price

Management provided an optimistic outlook for Just Dial Limited, emphasizing a strategy aimed at accelerating top line growth while maintaining EBITDA margins. For fiscal year 2026, management set an aspiration for revenue growth in the mid-teens, around 12-15%, while emphasizing that they maintain EBITDA margins comfortably above 25%, aiming to achieve around 30% margins based on sustained operating leverage.

Key forward-looking points discussed by management include:

1. Top Line Growth: The focus for FY '26 is to enhance revenue through targeted advertising and increasing prices in previously underpriced categories, anticipating that these strategies can contribute significantly to revenue increases. Management noted a desire for half of the revenue growth to stem from price increases, aiming for around 7-8% blended price growth.

2. Advertising Spend: The company projected increasing advertising efforts, with a current ad spend at about 2.5% to 3% of revenue, with plans to potentially scale up depending on market conditions and traffic growth, which had shown a 11.8% year-on-year increase in unique visitors.

3. Collections and Deferred Revenue: Collections in Q4 FY '25 saw a notable increase of 11.3% year-on-year, leading to deferred revenue of INR558 crores, reflecting a 10% year-on-year increase. Management is confident this trend will continue into FY '26.

4. Cash Management and Dividends: Management indicated that a formal capital allocation policy would be finalized soon, potentially including a dividend policy to return cash to shareholders. They expect to finalize discussions regarding this in the next quarter.

5. New Initiatives: Details were mentioned regarding an online shopping platform catering to both B2B and B2C markets, aiming to aggregate products from various merchants, which is expected to be launched in the near term to capture online market growth effectively.

Overall, the management strategy centers on optimizing existing resources while enhancing top-line growth through pricing strategies and operational efficiencies.

1. Question: "Could you elaborate a bit more on the collection growth trajectory and your goals for fiscal '26? What is achievable in terms of collections trajectory with the current cost structure?"

Answer: "Collections have improved from 6-7% growth in earlier quarters to 11%+ in Q4. The initiatives included optimizing our telesales team to focus on leads rather than cold calls, resulting in productivity increases of 2.5x to 3x. For fiscal '26, we aim to accelerate top-line growth while maintaining margins. My gross margins are 55%, allowing room for investment in advertising or manpower without sacrificing profitability."

2. Question: "Do you have any specific targets set for headcount addition now that you seem to be back in the hiring market?"

Answer: "We're optimizing our sales team rather than simply increasing headcount. We've rationalized unproductive members and eliminated cold calling. The focus is now on qualified leads, which allows us to maintain output without a proportionate increase in expenses. Headcount will depend on the demand for qualified positions in our high-output segments."

3. Question: "Is there any update on your potential cash return through dividends?"

Answer: "Currently, we haven't finalized a cash return policy, but we expect this discussion to finalize next quarter. A dividend is likely the preferred method due to its tax efficiency compared to a buyback. We'll keep you updated once a decision is made."

4. Question: "You guided for maintaining margins while accelerating top-line growth. Can you achieve mid-teens growth for revenue in fiscal '26?"

Answer: "Yes, mid-teen growth is achievable through various levers such as increasing manpower or higher advertising. However, we prioritize maintaining operating profitability"”our EBITDA growth is critical. Thus, while pursuing growth, we want to ensure that profitability also remains robust."

5. Question: "Any changes in your contribution from B2B businesses?"

Answer: "B2B revenue contribution stood at about 26.5%, showing stability, although its traffic share has improved to near 20%. Optimizing conversion and realizing better pricing on B2B efforts remains our focus, given the higher margins compared to B2C campaigns."

6. Question: "What kind of price rise can we expect from services in underpriced categories?"

Answer: "Our goal is for half of revenue growth to come from volume additions and the rest from price increases. Price increases may range from 7% to 8%, depending on geographic and category variations, aiming for a total mid-teens growth rate this year."

7. Question: "Could you provide an update on your online shopping initiative?"

Answer: "We're working on a beta phase for an online shopping platform that aggregates listings from various merchants. It's designed to enhance visibility for B2C and B2B sellers and will provide users a unified search experience for multiple products across various websites."

8. Question: "What is the expected tax rate for this year?"

Answer: "The tax rate for fiscal '26 is expected to be between 20% and 21%. This reflects a blend of our operational income and treasury income's tax implications, based on our investment strategies and timelines."

9. Question: "Regarding your future A&P spends, what proportions are you looking at for advertising?"

Answer: "Currently, I aim to keep A&P spending around 2.5% to 3% of the top line. We will likely not ramp up to pre-COVID levels as we're focusing primarily on digital marketing, which is more efficient for driving traffic and visibility."

10. Question: "Can you elaborate on the customer behavior of those who discontinue and then return?"

Answer: "Retention rates are around 60%, with past churn being partly due to business mortality. Customers can return even after pausing services for 1-2 quarters. Our focus is on keeping the platform accessible and attractive for recurring business, which drives our customer base."