What is the Reliance Retail – Just Dial deal all about?
The news was doing the rounds for some time, but Reliance Retail announced detailed plans in a press release, on how it proposes to integrate Just Dial into its retail portfolio. Here is a quick tabulated summary of how the deal will actually pan out.
|Current Shareholding Pattern of Just Dial Ltd|
|Number of Shares||% Holding|
|Holdings of VSS Mani (Promoter) family pre-deal||2.185cr||35.31%|
|Public shareholding in Just Dial pre-deal||4.003cr||64.69%|
|Total Number of shares outstanding pre-deal||6.188cr||100.00%|
|Reliance Retail invests in Just Dial equity|
|Current shareholding of RRVL in Just Dial||-Nil-|
|Shares to be acquired through preferential offer||2.020cr|
|Shares acquired from VSS Mani (Promoter) family||1.310cr|
|Purchase via open offer to minority shareholders||2.170cr|
|Total Number of shares to be held by RRVL||5.600cr||67.40%|
|VSS Mani (family) reduces its stake in Just Dial|
|Current holding of VSS Mani (promoter) family||2.185cr|
|Shares sold by VSS Mani family to RRVL||1.310cr|
|Shares held by VSS Mani family post RRVL deal||0.875cr||10.53%|
|Post Deal Share Capital of Just Dial|
|Reliance Retail Ventures Ltd (RRVL)||5.600cr||67.40%|
|VSS Mani (former Promoter) family||0.875cr||10.53%|
|Total Shares outstanding||8.308cr||100.00%|
By the time the deal is consummated, Reliance Retail will be holding 67.4% in Just Dial with the promoter family of VSS Mani reducing their stake from 35.3% to about 10.5%. Here is a quick dekko at the nuances of the deal.
Why Reliance Retail dialled into Just Dial?
As it stands today, Reliance Retail Ventures has already paid Rs3,497cr to acquire a 40.95% stake in Just Dial. That would value Just Dial at approximately Rs8,560cr in post diluted terms, significantly higher than the current market cap. The deal happens in 3 distinct steps, which have also been explained in the ownership shift table above.
1) Preferential allotment of 2.12cr equity shares to RRVL at Rs1022.25 per share, amounting to Rs2,167cr. This will constitute 25.33% stake in diluted capital post the preferential issue.
2) Acquired 1.31cr shares of Just Dial from VSS Mani and family at Rs1,020 per share amounting to Rs1,336cr. This will constitute 15.62% of the diluted capital post the preferential issue.
3) Finally, RRVL will make an open offer to minority shareholders to acquire 2.17cr shares representing 26% of the diluted equity capital. This is mandatory as per SEBI Takeover Regulations.
On successful completion of the open offer, RRVL will hold over 67% of the capital of Just Dial. RRVL has already paid Rs3,497cr for the 40.95% stake and assuming an open offer around the same price of Rs1,020, the total infusion by RRVL for over 67% controlling stake would be over Rs5,700cr.
What are the merger synergies for Reliance Retail?
For Reliance Retail, which is already India’s largest retailer, this is a logical integration of a company that brings a strong customer and vendor franchise. Currently, Just Dial has average quarterly traffic to the tune of 12.91 crore users and it lists over 3.04 crore vendors and service providers. This is an invaluable database for Reliance Retail to leverage.
For RRVL, this acquisition further boosts its digital ecosystem of MSMEs and partner merchants. One of the big plans for RRVL is to combine Google Cloud to integrate customers, retailers and wholesalers into one single seamless chain. Being a predominantly digital audience, Just Dial customers and listings would automatically fit into the RRVL scheme of things.
What happens to Just Dial after the deal?
The original promoter, VSS Mani and family, will see their stake in Just Dial come down to just about 10.35%, although Mani will remain MD and CEO of Just Dial to maintain continuity. But, the promoters have a strong justification for the deal. It has created the database and now comes the big challenge of centrifugal monetization of data. That required mountains of capital as well as an established business model like Reliance Retail that can automatically and seamlessly leverage this data franchise.
Just Dial may have a 25 year legacy, but the real digital valuation edge lies in creating and leveraging the ecosystem and not in building the database. For Just Dial, this deal puts them in the right place at the right time to leverage on the emerging digital paradigm. Obviously, Mani understands this reality much better than anybody else!