I want to begin with a personal experience. I was in Lonavala the other day with a group of people, and we were looking for details about a particular restaurant. Since it was a place we were not extremely familiar with, the internet was the only option available for a reliable solution. I went to Google, as that is what our instinct has now become. But then I hesitated for a moment and immediately closed the tab. I thought that Google might not provide me with all the answers I was looking for, and Zomato would be a better alternative. And since both of them are free to use, why not chose the one that dedicates its entire business strategy to serving just the food industry? I then opened Zomato’s application, found exactly what I needed, and my work was completed in seconds! It’s not that Google isn’t helpful anymore. It is. It has consistently been the most used search engine, and we cannot undermine its resourcefulness. The reason I thought Zomato would be more appropriate is that it specializes in this arena.
Let's get to the point
How is Zomato related to Reliance and JustDial, you would wonder. See, the thing is, JustDial has an umbrella-like business model. It will give you numbers of SMEs belonging to practically every sector and industry – restaurants, education, malls, clubs, etc., basically like Google but for number directories. I didn’t go to Google, which means that I wouldn’t have gone to JustDial either because there is already an app specializing in providing details of restaurants near me. If there hadn’t been an app, I would have been left with no other option but to go to Google or JustDial. There are still many industries for which there is no technology aggregator. JustDial is doing a great job there. But, how long do you think that would last? Aggregators are the future. Specialization is the future.
The world and the Indian Startup ecosystem, in particular, is becoming increasingly competitive. To have and maintain a moat, specialization has become very important. Let me explain this to you further.
When you need to find a restaurant near you, what do you do? You go to Zomato. Do you need to order medicines and want to consult a doctor? You go to Pharmeasy. Do you want to book a truck? You go to Porter. That is human psychology pumping millions for these e-commerce businesses!
JustDial has realized this and is taking steps to offer better value to its customers. JustDial has been facing a lot of competition lately from these aggregators, and it knows something has to be done.
Why is Reliance buying JustDial?
Reliance has a widespread presence in India. Reliance Retail is the fastest-growing retailer in the world. Reliance Fresh, Reliance Digital, MyJio, Trends, Project Eve, Armani, GAS, Burberry, Marks and Spencer, and SuperDry are some iconic brands that Reliance already owns! So why the sudden interest in a number listing company?
During the lockdown, business for JustDial had become difficult. Companies were reluctant to spend on advertising as cash crunches were huge. Existing customers were canceling their subscriptions, and JD was forced to offer heavy discounts to keep them in the game. JD realized that something had to be done, and it had to be done soon. It then ventured into B2B marketplace services, going by the name of JdMart. This was in direct competition to the 25-year-old IndiaMart.
IndiaMart’s founder Dinesh Agarwal claimed in an interview that he is not worried about JdMart. It believes that they will take some time to gather insights and develop their product offering. Voice search and Machine Learning algorithms are added advantages that these competitors will have to provide to maintain their market share. That’s where Reliance comes in. Reliance has brought with its management heavy capital investment that might change the course for JustDial in the future. Amazon and Walmart have already established themselves on the B2B front, and Reliance believes they can take over this fight.
The transaction
Reliance has purchased a controlling stake in the company for Rs.5710 crores. That’s not a lot. This means that Reliance probably got the deal for a bargain, considering JD’s difficulty staying afloat. But JustDial has managed to remain profitable, despite these difficult times, and it deserves all due credit.
The promoter of JustDial, VSS Mani, will continue as its Managing Director and CEO; however, it will lose 15.6% equity.VSS Mani has been reappointed as the managing head by the shareholders for another five years. It is good that the management of the company is in good hands. However, interestingly, he will have to vote as per Reliance’s instructions. So, the entire control is with the largest company in India. As the Reliance official statement says, this acquisition will benefit its partner merchants and aid in developing a digital ecosystem.
As most of you must have read, shares of Just Dial Ltd. fell by 4% after the acquisition went public. This was probably an immediate reaction to a change in the management. Reliance Retail will get access to the vast database that JustDial has curated over the years, integrate it with its other business offerings, and make B2B transactions more convenient.
Now we have to wait and find out whether this amalgamation between the two was the right decision. Who wins this rat race? Time will tell.
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