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Reliance in on dial up

Reliance in on dial up

 the retail arm of the giant acquired the listings company at a steep price. but why?
finance
July 20, 2021
3 min read
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Reliance in on dial up

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Reliance in on dial up

the most interesting part of boxing matches is when two athletes land blows on each other. but most of the time, the two just dance, swerve or clinch. for those who’re not well versed with boxing parlance, clinch is when two boxers seemingly hug each other in the middle of the ring. 

currently, Reliance and Tata are in the dance part of the match. they’re sizing each other up. so when Tata acquired Cult.Fit, Reliance made a play for Just Dial. 

apart from the Reliance vs Tata angle, the deal is quite interesting in itself. let’s look at some absolute numbers. Reliance Retail will acquire Just Dial for a deal valued at INR 5,710 crore. under the contours of the deal, Reliance is gaining 40.95% of the company. it could up its stake by another ~20% through an open offer for its shareholders -  it’s a big deal. 

why does Just Dial want to sell?

Just Dial has grown over the years but growth in their case didn’t correspond to success. it started off as a phonebook from which people could get phone numbers for various businesses. but this was the pre-internet era. later, it launched an app to keep with the times, which listed numbers and contacts of businesses. it then tried to foray into being a channel where one could order food, call cabs or book tickets. and it even tried to be an e-commerce company. ultimately, it couldn’t compete with other stronger companies in these sectors. 

why does Reliance want to buy?

it is interesting to note that it wasn’t RIL, i.e. Jio, that acquired Just Dial but Reliance Retail. Just Dial boasts of 30 million sellers on the platform, a majority of which are in non-metro cities and are small mom-and-pop stores. this is a network Reliance Retail has been trying to build for two years now. Reliance Retail has been trying to use point-of-sale devices as an acquisition channel to modernise retailers. Just Dial through listing has been trying to solve the same problem but using a different angle. In fact, Just Dial launched JD Mart, a B2B platform in February 2021. this allowed wholesalers to connect to retailers across the country. a direct complement to what Reliance has been doing.

what about the investors?

for retail investors who bought into Just Dial earlier this year, it has been a good deal. In February, when Just Dial announced it launched JDMart, the stock was trading at INR 650. currently, it is close to twice that price. by leveraging JDMart to Jio Mart, the revenue of both companies is likely to increase in the future.

back to the dance

this deal adds an extra punch to the battle between Tata and Reliance. but this is not even round one in the fight, with most integrations still in progress. customers and investors will be in for a treat once the two stop dancing and actually start landing punches as discounts, special offers and access to a different universe of products, services and companies.