Reliance-Just Dial Deal: Brokerages Expect Stake Buy To Aid Reliance Retail’s New Commerce Push

Brokerages expect Reliance Retail Ventures Ltd.’s acquisition of a majority stake in Just Dial Ltd. to strengthen its presence in new commerce, provided the retail unit of Reliance Industries Ltd. leverages the search and listings platform’s network.

Reliance Retail agreed to buy a 66.95% stake in Just Dial through preferential share allotment, open offer and secondary purchase from promoter for Rs 5,719 crore, according to an exchange filing.

Just Dial has more than 3 crore listings and nearly 13 crore quarterly unique users across web, mobile, app and voice platforms as of March.

“With 20% of retail listings, Reliance Retail could digitise merchants’ inventory, which could then be used for direct app-based ordering. Just Dial’s sales team (feet on street) of 3,849 personnel could also serve as an asset for Reliance Retail — it would offer quick reach to a large number of merchants across India,” Motilal Oswal said in a report.

Shares of Reliance Industries fluctuated between gains and losses while Just Dial stock fell as much as 5.25% on Monday.

Here’s what brokerages have to say about Reliance Retail-Just Dial deal...

Motilal Oswal

• The execution of a large digital ecosystem and synergy with Just Dial may prove a herculean task, with the past references of Den and Hathway yet to drive synergies with JioFiber.

• Reliance Retail, through a partnership model, could use data analytics to broaden its offerings.

• Reliance could use Just Dial’s strong network of independent service providers to create a transaction-based model rather than the current listing model.

• The management indicated the capital infused by Reliance Retail would help drive the growth and expansion of Just Dial into a comprehensive local listing and commerce platform.

Jefferies

• While the stake in Just Dial is touted as a step in Reliance Retail’s new commerce initiative, the research firm awaits more details on how the exchange and/or integration of data will happen between the two platforms given both have B2B offerings.

• Also awaits progress on the WhatsApp partnership which in some ways was also expected to help Reliance Retail’s in its new commerce initiative.

• At this stage, it is not clear if Just Dial’s online service platform could be of interest to Reliance Retail.

• Just Dial on an economic interest basis adds 0.2-2% to Reliance Retail's revenues and profit after tax (assuming 41% consolidation before the open offer).

JPMorgan

• Would wait to see how the acquisition would expand JioMart’s footprint and if JD Mart is eventually integrated with the JioMart app, thereby putting in place the building blocks of a ‘Super App’.

• The acquisition of multiple digital properties strengthens Reliance Retail’s online commerce/payment presence.

• The key attraction for Reliance Retail would be access to Just Dial’s database of merchant listings/retailers and the potential to scale up the JD app and JD Mart Platforms and add on to the Jio Mart app and expand the scope of services and offerings across B2B and B2C.

Kotak Institutional Equities On Just Dial

• Upgrades rating on Just Dial to ‘add’ from ‘sell’ with a new fair value of Rs 1,130 apiece (Rs 595 a share earlier).

• Reliance Retail will utilise Just Dial’s 30 million (3 crore) business listings to drive digitisation of these businesses.

• Reliance Retail could ultimately become a large-scale aggregator platform providing myriad products and services to end consumers.

• Reliance Retail will seek to significantly improve the Omni, JD Mart and JDXperts offerings.

• Reliance Retail will gain access to consumer data, which it may utilise to cross-sell other products and services from within the Reliance platform.

• Change in ownership may revive investments in customer acquisition and engagement (improved user interface, advertising) as well as tech-stack (superior product and back-end integration).