Local search-service provider Just Dial has got an approval from its board to raise funds up to Rs 1,000 crore. This was despite the company having cash reserves of about Rs 750 crore on its books.
Discussing the same with CNBC-TV18's Latha Venkatesh and Sonia Shenoy, the firm's CFO Ramkumar Krishnamachari said the management had sought the board nod only for an enabling resolution, and funds would be raised only if an appropriate opportunity arose. "Otherwise we are going to let this resolution pass. Lots of companies do that," he said.
He also added that the company would utilize its existing cash reserves first should an opportunity arise before going to market for further funds. "Historically, we have been extremely prudent in the way we use our cash."
Below is the edited transcript of the interview on CNBC-TV18.
Sonia: I wanted to talk about the board approval to raise funds to the tune of Rs 1,000 crore. You already are sitting on cash of Rs 750 crore on your books. What was the need for this additional fund raising and what would the money be used for?
A: This is only an enabling resolution. We do not need cash right now. We are not looking to raise money right now. This is just: should an appropriate opportunity of a strategic nature arise, we will come to the market and utilise this cash, otherwise we are going to let this resolution pass. Lots of companies do that. They take an enabling resolution so that they are ready if it is needed.
Right now, my business continues to generate cash. I am sitting on a healthy cash balance. I do not need the cash to run my business right now. It is purely an enabling resolution and that's about it. Do we have any identified utilisation opportunity right now? Definitely nothing.
It is purely something that the board has given us so that we are not constrained tomorrow should something come up so that we can go ahead and raise. We are not looking to raise and keep the cash. Let me underline that: we are not going to hold cash we are not going to raise it and keep it and wait for an opportunity.
Latha: Out of the blue, a board does not give permission to a management to raise such a large sum of money especially when you have a large sum of money [on your balance sheet]. Hence, the market is doubting as to what you are planning? Do have something in mind in terms of a big acquisition or is it that at this point in time private equity (PE) investors and well-lined investors in general, are very kind towards digital companies, so you simply want to strike when the iron is hot?
A: As I mentioned, we don't have anything specific at this point of time. Lot of companies take these kinds of resolutions so that they are armed should an opportunity arise. Definitely this space is hot and lots of action is happening. We believe that should something interesting come up, we are not constrained. As of now we do not have any so it is just an enabling provision, that's about it.
Latha: Have you passed this enabling resolution because there is a lot of money flowing in? Have a lot of investors approached you or are you seeing a lot of investors ready to get in to in to the digital space?
A: Definitely we are a key player in this space and we are a leading player in our segment as well. We are foraying in to e-commerce and other areas. Lots is happening in the transaction space. We do get enquiries from time to time but as I mentioned these are things, which are happening in a business-as-usual manner. We will raise only if an opportunity arises and anything else will be purely speculative. By nature, historically, we have been extremely prudent in the way we use our cash.
During the IPO we did not raise cash and the money that we raise is safely invested so we are going to be extremely prudent with our existing cash itself. If something comes up, we will first utilize the existing money before I go to the market and raise more money.
Sonia: In terms of growth opportunities from hereon. You have some new launches that are expected: Just Dial Cash, online cab booking which is become a huge thing now. Just tell us about when these are expected to come on board and what will it really do to your revenue trajectory say in the next couple of years?
A: These are definitely exciting things some of these are disruptive to existing business models. Looking at the lakhs of vendor base and millions of relationships we have, we are providing an enabling platform. Some of these verticals are quite exciting especially the cab space, the travel space, the doctor space, the restaurant space and most important the e-commerce space.
What we are doing is that today, the product is getting ready to be launched for mass communication. Which is why we are building a great product that will be communicated to users in Q4. Starting with Q4 we sort of have to build up the traffic, communicate the value proposition of the product to the user. They will be immense benefit to them in terms of saving money and time and the whole convenience of doing all these things on a single platform.
Our belief is that the value proposition to the user for many of these platforms is immense. It is only a question of communicating to them, which we will start doing and also vendors will realize that since consumers are going online is this an online platform with which they can have a level-playing field and they can get a slice of the online pie? With the aggregated transaction we make the money. Monetisation should start sometime in 2016 in my view.
As I mentioned that there will be five sources of revenue that we will have come 2016 one is the core search revenue which is already continuing, second will be the transaction fee for many of this search plus transaction, third will be the subscription fee for some of the vendor application which we are building, fourth will be the shop front fee which we will have for many of the millions of small-medium business; and fifth will be the banner and the banner advertising that has already been started right now. So we are confident that search plus will scale up and start contributing to the bottom-line and top-line.
Latha: If and when you look for acquisitions and I am sure you already being looking for them because you are sitting on a pile of cash what kind of acquisitions will interest you?
A: As I mentioned we are constantly looking out if there are interesting technologies that are available for us to sort of accelerate or go to market or technologies that we can acquire. That can complement our existing business. These are things that we keep looking and we are extremely prudent when it comes to spending money and spending on something we have never acquired in the history of our company.
You have to realise that if and only if we find something very interesting and of value we will look at it otherwise technology has been our core competence, and we build lots of things on our own. Only if something can accelerate our go-to-market or complement our existing products [will we look at it] but nothing interesting so far at this point of time.
Latha: What are the odds that before the fiscal year is out you will have identified an acquisition target?
A: By the end of this year? Very low.
