Reliance & Just Dial: Apples and oranges or a symbiotic win-win deal?

Reliance & Just Dial: Apples and oranges or a symbiotic win-win deal?

Investors were left wondering about the synergies, but directory services provider Just Dial may be just what Reliance Retail needs for its digital plans

Late last week, Reliance Industries Ltd (RIL) announced its plan to buy, through its subsidiary Reliance Retail, a controlling stake in Just Dial, a directory services provider, for about ₹3,497 crore.

Both the listed entities left their respective investors wondering what could be the strategy behind the deal, and what synergies it would produce. In fact, as the markets opened on Monday, the Just Dial scrip fell 4% on the National Stock Exchange.

Under the deal, Reliance Retail will first buy a 41% stake and then make an open offer to Just Dial’s public shareholders to buy another 26% stake, in keeping with regulatory norms. Along with the open offer, the final bill for RIL to buy a 67% stake in Just Dial works out to about ₹5,720 crore.

Right call for Just Dial

While that may seem a handsome price, what might have left Just Dial investor unhappy is the open offer price of about ₹1,022 a share — it is 5% lower than the company’s closing price on Friday, July 16.

Also read: Funding at all-time high as startups ride COVID digitisation wave

Yet, analysts said, the deal is a good move for Just Dial and, therefore, its investors. When it first started, the company was mainly competing with other ‘yellow pages’ directory operators such as Getit. Today, though, it is competing with the likes of Google and Facebook, which enjoy far greater muscle power, both financially and technologically.

Reliance’s backing would give Just Dial a strong platform to operate from. The fact that Just Dial founder VSS Mani will continue to serve the company as Managing Director and Chief Executive Officer should also come as some relief to its investors, said a Mint report.

It quoted analysts from Kotak Institutional Equities as saying: “Change in ownership may boost Just Dial’s transformation from a plain vanilla listings platform to a comprehensive discovery and transactions platform.”

Smart shopping by Reliance

Reliance Retail is a B2C (business-to-consumer) company, while Just Dial operates in the B2B (business-to-business) space. At first glance, the two may not appear a good fit. After all, the Reliance group already has Google and Facebook on board as investors in Jio Platforms, and the global players may offer it far superior directory services.

However, a Business Today report pointed out that there is merit in the acquisition. “It is like putting pieces together of a larger puzzle and the picture is now beginning to emerge,” it quoted Ankur Bisen, Senior Vice-President, Technopak Advisors, as saying.

Reliance is looking to expand its Jio Mart business by pushing assisted commerce (where non-tech-savvy customers need help to make an e-commerce purchase), said the report.  For this, it needs to partner local businesses that have great reach among the masses. Just Dial, offering vast data on such businesses — which may not even have websites or digital payment methods — could be the key.

“We believe Reliance Retail will utilise Just Dial’s 30 million business listings to drive digitisation of these businesses such that Reliance Retail’s platforms could ultimately become a large-scale aggregator platform providing myriad products and services to end consumers,” said the Kotak note, as quoted by Mint.

Jio Mart is already partnering kirana stores for last-mile delivery, so the tie-up with Just Dial would work something along those lines. In the push for digital dominance, giants like Reliance and Tata Sons (which recently bought Big Basket) are going increasingly local, and the Just Dial deal is yet another step in that strategy.

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