Ladies and gentlemen, good day, and welcome to the Just Dial Limited Q2 FY'24 earnings call. We have with us today Mr. V.S.S. Mani, Managing Director and CEO, and Mr. Abhishek Bansal, CFO, Just Dial Limited. At this moment, all participants are in the listen-only mode. Later, we will conduct a question-and-answer session. At that time, you may click on the Raise Hand icon to ask a live question. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Bansal, CFO, Just Dial Limited. Thank you, and over to you, sir.
Thank you. Hi, everyone. Welcome to Just Dial's earnings call for second quarter of fiscal 2024. Our operating revenue for the quarter stood at INR 260.6 crore, witnessing 27% year-on-year growth and 5.5% on sequential basis. This growth is primarily driven by healthier collections, which we have witnessed during the past quarters. Our last 12-month collections have grown about 38% year-on-year. EBITDA for the quarter stood at INR 48.8 crore, representing a margin of 18.7%, which is an improvement of 10.4 percentage points on year-on-year basis and 387 basis points on sequential basis. In absolute terms, EBITDA had a very healthy 33% sequential growth. As we have been highlighting earlier, that our cost control measures should show up as margin expansion on quarter-on-quarter basis. The same is playing out.
Our employee headcount stayed flattish on a year-on-year basis, down about just 1% and declined 3% sequentially. Overall, on employee count, focus is on maximizing productivity and bringing in efficiencies across departments. Our other expenses witnessed a muted 2.8% YOY growth and were down 4.7% sequentially. Advertising spend stood at approximately INR 5 crore for the quarter. Other income stood at INR 57.9 crore. We expect approximately INR 75 crore of quarter of other income, this is 7.2% yield to maturity that is embedded in our treasury portfolio, but it can have variations based on movement of bond yields during the respective quarter. Since yields went up about 15-20 basis points for our treasury's tenure during last quarter, our other income was a bit lower at INR 57.9 crore.
Profit before taxes stood at INR 92.1 crore, growing 43% year-on-year. Effective tax rate stood at about 22%, which is presently on higher side, since bulk of our treasury mark-to-market gains are currently short-term in nature, and hence provisioning for those taxes happens at full tax rate currently. Once they will cross the three-year holding period, higher tax provisions will get reversed. Tax stood at INR 71.8 crore, growing 37.5% on a year-on-year basis. Sequentially, due to drop in other income, there is a 13.9% drop. Second quarter collections stood at a very healthy INR 278 crore, growing about 21% year-on-year. Consequently, deferred revenue, which is advances received from customers, has grown to INR 468 crore now, and it grew about 23.6% on a year-on-year basis.
Active paid campaigns at the end of the quarter stood at about 561,000 , which was up 11.3% year-on-year. Average realizations have grown about 14% year-on-year, so growth is coming as a mix of both campaign additions and improvement in realizations. Overall, cash and investments stood at INR 4,282 crores as on quarter end. Coming to operational highlights, total traffic stood at about 172 million unique users for the quarter, growing about 10% year-on-year. Mobile traffic, which forms now majority, 85%+, of overall traffic, at 148 million users, grew about 12% year-on-year. Organic traffic, what we call as free traffic, has been growing steadily, which has helped in reasonable traffic growth despite very low advertising. Total listings have now crossed 40 million.
Overall, it has been a quarter panning out in line with expectations on most fronts, be it traffic, revenue and even improving margins. Recent cost controls and, healthy collections should help us see improving top-line trends going forward and even margins continuing to expand as we, we have been, discussing earlier. With this brief update, we shall now open the floor for questions and further discussion. Thank you.
Thank you very much. We will now begin the question-and-answer session. To ask a question, please click on the Raise Hand icon available on the toolbar, or you may click on Q&A icon to raise hand. The operator will announce your name when it is your turn to ask a question. Please accept the prompt on your screen and unmute your microphone while proceeding with your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from Darshil Zaveri, from Crown Capital. Please go ahead.
Hello. Good evening, sir. Hope I'm audible?
Yes, you are.
Yes, please go ahead.
... Yeah, congratulations on a great set of results, sir. So I just wanted to ask any guidance for, you know, FY24, will we be able to reach our 25% EBITDA? And how would you see sequential growth going forward? Can we continue on a run rate of, you know, maybe 20-25% growth for the next two, three years?
So Darshan, this is what the objective is. On top line, grow this business sustainability at a 20%+ kind of run rate, and margins of 25%+. In this particular quarter, we, on a reported basis, already margins are very close to 19%. And most of our expenses for the quarter anyway hit our P&L during that particular quarter itself, apart from incentives, which tend to be revenue linked. So against my total INR 211 crore of operating expenses for the quarter, while accrued revenue in P&L was INR 260 crore, I actually collected INR 278 crore. So on a sort of cash margin basis, the business already is generating closer to 25% kind of margins. And as we move into future quarters, that obviously will start reflecting in P&L as well.
As can be seen in last few quarters, there has been a continuous quarter-on-quarter margin expansion.
So that's great to hear, sir. So just want to know, sir, if we have that seasonality part, maybe the festive seasons of Q3 would be higher, or how would we term, you know, seasonality in our business? Like, could we see more, you know, revenue coming up because it's a festive season? How would it work?
So Darshil, in our case, our subscriptions tend to be mostly annual subscriptions. So the seasonality is not there because of festive months as such. On the contrary, slightly, the seasonality goes on the downside because in these particular months, the certain businesses are busy in their specific festive season, et cetera. Overall, on the traffic side, we do have a bit of seasonality in terms of summer months doing well because certain categories on, say, AC repairs and services or say, tutorial related categories, et cetera, tend to do well in those summer months. And on the monetization side, the last quarter, fourth quarter, typically tends to be highest revenue generating quarter for us, but that is more that historically since typically February, March or fourth quarter tends to have higher subscriptions.
Those renewals end up getting done every year in fourth quarter. Otherwise, there isn't much of a seasonality factor.
Okay, thank you so much. So just one last question. So, sir, we've probably going to reach INR 1,000 crore revenue by this year, and so maybe next year onwards for a reported business, we'll be able to see 25% because our leverage will kick in for sure by next year. Is that fair to assume?
So broadly, INR 278 crore is what we collected, this particular quarter, and whatever amount we collect typically gets recognized over, next 12 months. So basis that if, current growth rates continue, then, yes, there could be 20% plus kind of top line growth as we have been, targeting.
Okay. Okay. Thank you so much, sir. All the best for you. So thank you.
Thank you.
Thank you. We have our next question from Saumil Shah, from Paras Investments. Please go ahead.
Hi, can you hear me?
Yes.
Yeah. So, sir, my question is on a broader perspective, because what are, what are we doing so special that Google is not doing? Because if, say, someone wants to search for a restaurant or, say, any hardware shop, they will just go on Google and search for it. So in that scenario, you know, what are we doing so special that Google is not doing? And or maybe how do we take some market share from Google?
Saumil, on Google being the go-to platform for users, one thing we need to understand is that India typically is a 90%-95% Android smartphone market, and in Android, the default browser, say, is the Chrome browser. So as a user, my behavior is typically to go into that Chrome search bar, type my search query, and that triggers that default search engine as Google. So not just in India, globally, also, there are platforms that draw a significant amount of traffic via Google itself. Now, the second part to this particular question would be that for local businesses to get searched, today, you can find in certain categories, those particular businesses listed on Google as well.
But our experience has been that the strength of our business comes, one, due to breadth of listings that we are able to offer in each particular category. Second, in terms of depth as well, so the kind of the quantum of information, the rich content that we are able to serve and the localized results. So if you are searching for something in Malad West, we will definitely be able to cater to exact results from Malad West. That kind of search experience probably is not replicable, plus the global search engine also has a bit of restrictions in terms of their structure, that their adverts results come on top, followed by local listings, followed by organic SEO results, and in certain cases, SEO results come even ahead of the local listings pack.
So that way, a commercial intent-oriented search engine, such as Just Dial, serves the key purpose of finding SMEs. And in a country like India, which is 70-80 million such businesses, our particular platform is able to deliver better depth and breadth of local search results.
Okay. Okay, and, I mean, what would be our market share in India?
So there aren't any specific studies or such data points that I am aware that get released regarding market share, and I believe it is very difficult to assess as well.
Okay. Okay. So my second question is on the other income side, because on a yearly basis, I mean, how much other income we can expect? Because on a full year basis, I mean, quarterly, it is difficult to judge, since there is a lot of fluctuation, due to bond yields. So say, on a yearly basis, how much other income can we expect?
So current invested treasury portfolio is about INR 4,250 crore odd. On that INR 4,250 crore, the yield to maturity of our portfolio currently is about 7.2%, and the average duration or the modified duration of the portfolio is about three years. So if bond yields or rates were to remain constant, then this is 7.2% on that INR 4,200 crore, which comes to, say, around INR 290 crore-INR 300 crore, is what should be the treasury income. But again, for example, last year, throughout the year, bond yields kept going up. So last year, treasury MTM gains were muted. And when the cycle will possibly reverse any time in future years, that particular year could have much higher gains as well, versus the 7.2%.
So on a longer two to three-year time frame, I would say that 7.2% per year is what we should be earning, because that is the YTM of our portfolio.
Okay. So as per the current bond yield, even the current quarter would be lesser than 7.2%?
This particular month, yes, again, bond yields have hardened, a bit. We'll have to see how these pan out. MTM gains typically depend on where the quarter ends, so we'll have to see how it goes. But again, these are sort of, temporary fluctuations. They should be seen on a longer-term time frame.
Okay. Okay, that's it from my side. All the best.
Thank you.
Thank you. We have our next question from Anupama Bhootra from Arihant Capital. Please go ahead. Ms. Anupama Bhootra, can you please unmute your microphone?
Yeah, just a minute.
Sure.
Yeah, yeah. So, am I audible?
Yes, you are.
So I wanted to understand what kind of penetration do we have when it comes to Tier -3 and Tier -4 cities, very small towns, in terms of mapping and usage? This is my question one. And what is the status when we talk about these new initiatives, which includes JD Real Estate, Experts, and Shopping? So, yeah, these are my questions.
So on Tier -3, Tier-4 versus others, typically, the way we look at is top eleven metros versus outside top eleven cities. So in terms of count of customers, we have about 40% customers coming from top 11 metros, and rest about 59%-60% from Tier -2 and beyond. On the monetization side, about 59% comes from Tier -1 cities. If we were to look at in terms of search patterns or the split of 40 million businesses that we have, that would possibly be again, say, around 50%-55% coming from outside the Tier-1 , say, top 11 cities, and rest about 45% from Tier -1 cities.
Regarding your second question around the new initiatives, so as we have discussed over last couple of quarters, the new initiatives primarily aim at adding a transaction layer over the local search results that we already deliver, be it in services via JD Experts or possibly on the product side via JD Shopping, et cetera. So these platforms are already ready. In services, we even delivered about 100,000, we catered to 100,000 transactions over the period of last 12-15 months. Now, the key question in front of us is that, at what point of time do we think that, okay, we should be spending money in order to incentivize both users and possibly merchants as well, in order to boost transactions?
At this point of time, the way we see it, that it is for sure going to be negative unit economics, business. Another key consideration for us is that in several of these categories, we already have subscription revenue coming in, which will also get cannibalized. So if we were a new entrant, new vertical player, then possibly the impact would have been only to consider the negative unit economics aspect. But for us, it is also about whether the INR 50 crore that I'm earning from some of these categories annually can I own similar kind of actual revenue generating positive EBITDA over these? So I think we'll wait for few more quarters before we decide to splurge money on these initiatives. From the product aspect, they are fully functional at this point of time itself.
Okay. And, one more small question, just a data point. What was the B2B contribution, in this quarter, and monthly sign-ups?
So about 25%-25.5% revenue came from B2B segment customers. And in terms of monthly subscriptions, about 65% of businesses were signed up on monthly plans.
Okay. Thank you so much. I'm done. Thanks.
Thank you.
Thank you. We have our next question from Niraj Kamtekar from Prospero Tree. Please go ahead.
Am I audible?
Yes.
Hello. Yeah, thank you. Good evening, sir. Sir, my question is related to the utilization of the cash balance lying with the company. Sir, before Reliance was to become the co-promoter of the company, Just Dial has conducted 3x the buyback of the shares and rewarded the shareholder. As on FY 2021, the cash balance was around INR 1,600 crore, and Reliance has introduced another INR 2,200 crore, that the sum of INR 3,800 crore, and today the cash balance is around INR 4,300 crore, against the market cap of INR 6,300 crore. Even the company is thinking of any acquisition or expansion, sir, I don't think that we require such a huge cash balance with us.
Is it not proper to reward the shareholder either in the form of buyback or dividend? At least what we are earning on our treasury business, can the company should distribute the something with the shareholder.
See, regarding the three buybacks that you mentioned, one point to note is that some of those particular buybacks were done at a time when the taxation rules pertaining to buyback were different. At this point of time, even if we want to distribute cash to shareholders, the various mechanisms, be it dividends or buybacks, they attract a certain tax, be it at company level or in the hands of the recipients. So at this point of time, the board has not taken a decision whether we want to distribute, that particular, cash, et cetera. So this particular cash, at this point of time, is deployed in the safest and most efficient instruments available, and in future basis, how business plans pan out, we will take a call along with the board on usage of this particular cash.
But, sir, when the dividend or buyback is done, the tax is applicable to all the shareholder, whether it is a promoter or non-promoter. So what stop you from distributing the cash? Because even the 7.2% yield you are earning at the company level, is it enough earning on the cash balance?
See, the tax ultimately is a particular, while it is same for all the shareholders, but that particular tax will actually be paid out, right? So that 7.2% post-tax is what will shareholders earn, though at company level, the effective tax rate will be 10%-12% on our treasury gains. Having said that, the point is relevant, that there is a significant, significant amount of cash in the company, and at some point of time, there will need to be a decision on either utilization of this cash or distributing it back to shareholders, in the most efficient manner at that point of time.
But, sir, I would like to share my view that, the shareholder or investor are not putting or investing the money in the company, which are, heavy on the cash and less on the business, because we want the operating profit, not the treasury income. And we have enough cash, and our business itself is generating a good amount of cash and profit. So you must declare something, or you must distribute the some amount of the money which you earn every year to the shareholders, sir. It's my suggestion, because otherwise, the many investors are not happy with the company, sir.
Point taken. We will take this up with the board. Relevant point, we will take it up.
Okay, sir, and then last, second last question is: how we are different from IndiaMART?
See, we earn only about 25%-26% revenue from B2B categories, so the majority chunk, 3/4 of our revenue comes from B2C-oriented categories. So our strength from day one has been to get you a real estate agent, a packer and mover, whatever, spa, salon, doctor, dentist, all these B2C kind of categories. In B2B categories as well, we have over two, three years worked extensively to create catalogs for businesses. At this point of time, we have about almost a million reasonably rich catalogs for businesses, which are getting augmented on a day-by-day basis, which is what is helping us with incremental revenue growth as well.
So, sir, is there any plan, just like earlier, the JD Mart was introduced, once again, we will come with the another app or refocus on the B2B segment?
So for us, what we have observed is that our traffic gains for the core platform itself are much better versus creating a separate particular platform. So at this point of time, we have both the standalone apps for the B2B segment, as well as the core JD app, which has all the content pertaining to the digital catalogs. And at this point of time, about 14%-15% of the overall traffic comes for B2B-oriented categories, which was just about 7%-8%, say, five, six quarters back.
Mm-hmm. Okay, sir. That's, that's all from my side, sir.
Thank you.
Thank you. We have our next question from Rishabh Shah, from Dalal & Broacha. Please go ahead.
Hello, am I audible?
Rishabh? Yes, you are.
Hello. Yeah. So, my question is, can you please specify how many categories we are present in right now? In total.
So, Rishabh, for us, for search purposes, every particular keyword is one search category. For example, five-star hotel-
Okay.
- is one, chemist is one. So that way, we would have more than possibly 400,000 keywords. But broadly, I mean, any category, any commercial intent, search-oriented category that you could think of, I'm sure you will find it on the platform.
Okay.
No single category-
Uh, yeah.
Sorry, no single category contributes more than, say, around 3%-4% of the revenue, so that way, revenue base is highly diversified.
Okay. So, my question is that, that, if I, if we look at the, vertically integrated, platforms that are there, like, for food delivery business there's Zomato, then for, medical, businesses, Practo. So, like, now, now people are focusing more towards those, people are getting attracted towards those, kind of areas. So now, where do we stand to compete these kind of companies? Like, could you please elaborate on this?
So, Rishabh, this, we are a horizontal platform, right? So there has been this particular discussions to debate about, horizontal versus vertical, whether users are gravitating towards vertical platforms, et cetera, et cetera. My assessment is that as a user, you need both kind of platforms. There are times when I possibly go to a vertical platform to get my job done, and there are other times where there are so many categories where there isn't a critical mass of users in India to create a vertical platform, that there is definitely a merit in coming to a horizontal platform. And since I'm coming for all such categories, many of the times, even the vertical-oriented categories, users end up reaching out to, the horizontal platform itself.
The fact that we have 170 million-plus quarterly users coming in, in a country like India, you do need to search for SMEs, day in and, day out. So, I mean, verticals, since a majority of them are, sort of bleeding even today, or are just sort of about to, touch profitability, which we'll have to see how sustainable it will be in the light of whether past growth can be achieved or not. So from our perspective, we are very clear that core business should grow at a healthy 20%+ top line levels, with a reasonably healthy 25%+ profitability.
Okay. Okay. Thank you for this. And I have another question, which is, for the previous quarter, we announced a INR 30 crore new initiative. Now, this particular amount is very unclear for where it is being used. Can you please specify on the usage of this amount?
So the two platforms that we created, one for services, other for product-related transactions. Those two platforms, over last four to five quarters, we built on a total capital outlay of about INR 30 crore. Majority of it was spent last year, fiscal 2023. In the middle of last quarter-
Okay.
Since those particular platforms were ready, that particular amount moved from intangible assets under development, or call it CWIP, to fixed assets. So they have got capitalized now, and they will get depreciated over the useful life of the asset. There is no incremental capital expenditure that is happening specifically for those platforms. Those platforms are getting maintained, et cetera, but those particular expenses are being expensed in that particular quarter itself. They are not getting capitalized anymore.
Okay. Okay, and, sir, can you please tell me about JD Omni, where there is this data analytics part which is entering into the segment, and how it can lead to a more stable earnings and a higher profitability? Can you please specify on this about JD Omni, how are we and strategies are we planning for?
JD Omni is essentially an end-to-end cloud-hosted business management solution. If you are an SME, and you want to completely digitalize your business, including operations, you can use the entire JD Omni suite and actually run that particular business via JD Omni. At this point of time, basis customer feedback, the key component of JD Omni that we actually actively work on and that we actually sort of bundle with our core business subscriptions, is the website component. Businesses want their own website, which we sell to high-value customers as part of our JD listing subscriptions. Our pitch to a particular SME is that in case you buy a higher value package, we also create a website for your business. Till the time you keep paying money to Just Dial, your particular website, et cetera, will continue.
If you stop paying, then these get discontinued. So that is what we are leveraging from JD Omni at this point of time.
Okay. Okay, sir. And, sir, can you be specific about employee cost as a percentage of your sales, which is approximately, if I take for FY 2023, I may be wrong, please correct me, it may be 77.1% of it. So are we keeping that number on a steady-state basis, or are we, we may increase that number, or is there any addition to that or any such changes?
Within operating expenses, the two key line items are employee expenses and other expenses. Other expenses, at about INR 26 crore-INR 27 crore a quarter, are at sort of steady state. The key delta, which we possibly expect in other expenses, comes out of advertising. In case we step up advertising, that can possibly go up. On the employee expenses part, last year, 77% was on a higher side because we had done significant bit of hiring, and whatever revenue generation happened from that hiring, that benefit is coming in now in this particular fiscal year. So we do not expect material increases in employee expenses. As you can see, in last three-four quarters, headcount has largely sort of stayed flat. Employee expenses as percentage of revenue should keep declining as we move into future quarters.
But any steady state number can you give?
Steady state number, I mean, if business is operating at a steady state of, say, 25% EBITDA margin, and say, 10% or 11% is going in other expenses, then effectively that implies, say, anywhere around 62%-63%, materializing from employee costs.
Okay. Okay. And, sir, can you tell me how much percentage of our buyers are repeating, as in how many repeat buyers are there of our services? And is it growing or is it steady?
I presume by buyers you mean the merchants-
Right.
Taking the JD subscriptions?
The paid campaign. Yeah, yeah, yeah. Yeah, the-
Yes.
How many are repeating? Yeah. Repeat rate, yeah.
So paid campaigns, our typical one-year repeat rate is approximately around 55% odd. So if 100 customers sign up today, one year down the line, 55 go into year 2. But in our particular case, it's not the case that even if a customer has not gone into year two, one year down the line, they have churned out forever. They could come back into the paid ecosystem one quarter or even six months, 1 year later as well. Plus, there is some bit of natural attrition that happens because SMEs itself change their business in that particular time duration. Most importantly, these trends have been similar for even last decade, so they have held very much steady.
Okay, okay. Sir, in one of the con call, you had mentioned that out of 80 million SMEs, we are planning to go to the active paid campaign of, let's say, 1%, that is [guess]. So, any guidance over there? I mean, are we closing over there soon? Pretty soon enough?
See, so the way we look at it is that overall, revenue should grow at, say, 20%. Part of it, or say almost half of it, should materialize via campaign additions, and rest via increase in pricing or realizations. We are not that obsessed with that, okay, the volume component should grow at, be it even at the expense of declining realizations. So, a steady 10%-12% volume growth from current levels is what we would sort of build in over the next two, three years. But again, the key is that this is keeping in mind that the overall revenue growth should be 20%+ .
There could be geographies where volume growth could be much higher, and there could be geographies where we might have entered with much lesser pricing, say INR 999 a month, where there could be a 25% price hike itself that could be taken.
Okay, thank you, sir. I have one more question, that is, since we are increasing our realization, so, we know that we are becoming aggressive on that part, but, are we going to be as much aggressive in the coming years, in the coming two, three years or somewhere down the line? Can you share that?
Sorry, what do you exactly imply by being aggressive?
I mean, since we are increasing our realizations, so, I mean, are we going to be this much aggressive? Are we going to be keeping? Are we going to keep increasing our realization at the current level every year or every two year, three year, maybe so?
Okay. So on an average blended basis, my current monthly realization comes to, say, around INR 1,550 a month. Okay? So which translates into INR 18,500, say INR 19,000 per annum, which for a SME is highly reasonable at this point of time. Secondly, we sell two types of subscriptions. One is the premium subscriptions, the other is the non-premium listings. In premium listings, the price hikes are very much linked to the traffic growth. So if I'm able to deliver, say, 20% traffic growth in a particular category, I don't mind taking 10%-12% price hike, and the customer also does not mind paying me that kind of price hike. So the endeavor will be how we can keep growing our traffic, and wherever we can take price increases, we will definitely try to take those.
Okay. Okay, sir. Okay, sir. Thank you very much, and all the best, and congratulations on your good results. Thank you.
Thank you.
Thank you. We have our next question from the line of Vivekanand Subbaraman from Ambit. Please go ahead.
Hi, am I audible?
Yes, you are.
Yeah. Thank you for the opportunity. So my first question is with respect to the collections trajectory that you reported recently. You made a statement that you are gunning for 20% sustainable growth. Abhishek, my questions here are, one is: What gives you the confidence that you can sustain the 20%+ collections growth for the business? The related question is: How did you manage to achieve the traffic growth to say 170 million without spending money on advertising? If you could also provide the advertising number this quarter, that would be helpful. That's my first set of questions.
Okay. So, Vivek, on the first question, around 20% growth, so it's a mix of multiple levers that we are trying to work out. One, in premium listings, where we think that the cost per output or the cost per inquiry is relatively cheaper, we could easily take price hikes. So in those particular listings, we are working out those price hikes. Then in Tier -2, Tier -3 cities, as I mentioned, there are several geographies where we have entered with just INR 750 or INR 1,000 per month kind of subscriptions. My Tier -2 realization is just 45% of my Tier -1 realizations. And over time, we believe that Tier -2 should keep converging towards Tier -1, and Tier -1 in itself should see hikes, bases, whatever traffic growth trends are.
This brings me to your second question, that, on the traffic growth side, there is a significant amount of, rich content that has been added to all the categories, on our, platform. So today, when you search for any particular category or even, direct business, you see, highly rich content in terms of, be it ratings and reviews, photos, videos. We are working on even, stitched videos, which could be created from the content available in a listing, which we would want the business to directly use it for even sharing to their, direct customers. So as a result of these particular initiatives, the organic traffic has been growing, reasonably well, which is what has helped us, come to this 170 million number.
And apart from that, for the top line, we are also working on a couple of initiatives, such as, the reseller model, wherein instead of having, fixed costs, it would be obviously on a, variable model, basis. And, we are working on online self-signups as well. So with SMEs also maturing, there could be a possibility that, say, a part of, renewals could start coming in, online. So the idea is, these particular revenue initiatives would not only aid my top-line targets, but these would be, high margin, revenue sources.
Okay. Yeah, that's, that's very helpful, the detailed answer. The few follow-up questions that I have related to your answers are, one, one is the advertising number during the current quarter. I think I missed that. Could you-
It was about 5%.
Help us with that?
Okay.
Was this online marketing spending, or was it purely brand related?
Majority was online marketing spending.
Okay. Historically, there used to be a thought process of wanting to spend a certain percentage of revenue, let's say 5%-6% revenue on advertising, if not more. Has that number now materially come down to 2%-3% on a sustainable basis? Is that what we should infer based on the traffic trends and recent ad spends?
So Vivek, the way we look at advertising is that our particular business requires a sustained, calibrated level of advertising versus a, sort of a one shot or kind of, blitz advertising. The user should recall our particular brand name, so that whenever they are doing searches online and they see our particular listings or they directly come to the platform, they should be doing those particular searches. So 5%-6% is what we would ideally want to spend on advertising on a sustainable basis, but in current year it has been on a, lesser side.
Third quarter, fourth quarter could be bit higher, but since organic traffic itself has been aiding our particular growth, we thought it is prudent to optimize these spends at this point of time by spending mostly on digital and possibly branding-related initiatives could also be taken up in future quarters.
Hmm. Okay. Okay, my last set of questions are on, on the top 11 versus non-top 11. I know you commented quite a bit on, on, how you are looking at monetizing the premium searches, in the top 11 markets by taking price hikes. So just to understand better, now, in terms of your median pricing in top 11 markets versus, you know, pre-COVID versus now, where does it stand? Have you withdrawn all the discounts in the top 11 markets? And, and how would that trend be in the non-top 11 markets, compared to pre-COVID, say, 2019 pricing?
Firstly, we have withdrawn all kinds of discounts. That happened, in fact, somewhere towards the end of fiscal 2022 itself. For the last, say, about six, seven quarters, we have been not giving out any of these particular discounts. In terms of where pricing stands versus pre-COVID sort of levels, on an overall revenue basis, we are, I think, about 6%-7% higher versus where we used to be at in around March 2020 levels. There, say, the non-top 11, there the delta is much higher. They are up about, say, 20% or so, but the top 11 as well are up about 5%-5.5% or so.
Okay. Your sense is that the key lever that enabled you take these price hikes and withdraw discounts is the traffic on the platform that has improved materially versus pre-COVID levels. Is that the only factor or is there any other factor here?
Traffic is one of the most critical factors, and especially considering the organic traffic has been quite steadily growing. We are much, much higher versus where we used to be at pre-COVID levels. Apart from that, as I mentioned, in Tier -2 and beyond geographies, wherever the pricing was much lower, there the delta tends to be higher. So even if I take INR 1,000 a month to INR 1,200 or INR 1,250 a month, that translates into, say, a straight 20%-25% hike. So that is what aids Tier -2 geographies.
Even now, as I said, like, against fifteen to fifty rupees a month, Tier -1 average is only about INR 20-INR 50 a month, which again, think of any particular SME in a city like Mumbai, Delhi, Bangalore, INR 2,000-INR 2,300 a month is very highly affordable.
Okay, very helpful. Last question from my side is, did the spending or inorganic traffic acquisition by say some of the focused vertical players have any bearing or the swing in that inorganic traffic acquisition by any of the vertical players have any bearing on the traffic coming back to Just Dial, where some of these-
... some of these D2C companies, the vertical, vertical focused startups, they, they, they're now spending less and that, that benefiting you guys?
See, as I mentioned, our revenue is highly diversified. So for example, in this particular festive season, you see advertising right, left, and center in all product-centric categories. But, that doesn't really impact us directly. Or other way would be that it is very difficult to assess that, okay, whether high or low spending by vertical players in a certain category is affecting our traffic right away or not. So our particular results today, the 90%+ traffic that I am generating today is coming absolutely free of cost. And that free of cost traffic has no bearing from what others are doing. That is purely the strength of the platform that is making the global search engine rank us where we are.
Right. Okay. Thank you so much for the detailed answers. All the best.
Thank you.
Thank you. We have our next question from Resham Jain, from DSP Asset Managers. Please go ahead.
Yeah. Hi, good evening. So I have just one question. In terms of unique visitors, if I look at over the last, let's say, four years, pre-COVID to now, there has been a growth of close to 2% CAGR. And I presume that in the last four years, the usage of internet has or might have increased significantly. So in that context, if you can explain what are those missing links where the overall growth is not at par with how the internet users are increasing? If you can explain that part, and what are we doing for the same?
Okay, Resham, the way we look at this particular metric is, let us take the case of, say, four years ago, say. I have the ready stats for third quarter of fiscal 2020. So in third quarter of fiscal 2020, we had about 157 million unique users, but the split at that particular point of time was 108 million users came organically, which means I didn't pay anything for that traffic, and rest, 48-49 million originated via my paid initiatives. At that point of time, our paid advertising used to be about INR 15-INR 16 crores a quarter. Today, or say last quarter, that 108 has gone to 158-160 million free traffic, organic traffic.
The paid component of traffic is coming at just one third the spend, INR 5 crore versus INR 15-INR 16 crore. And within paid, we have optimized those spends towards high revenue generating categories, where I might be spending higher to generate one particular incremental lead or inquiry, but my revenue also is proportionately much higher. So the way we look at it is that versus pre-COVID, at one third the spend, I am getting even higher versus what my pre-COVID levels were. One can step up advertising whenever there is a need, but as I mentioned in the past, that this business requires a sustained kind of advertising. And in order to see that how our top line and profitability goals get achieved, we would calibrate our spends accordingly.
But let's say if, let's say if you would have spent similar INR 15 crore, now it's, it's anyone's guess, but because the overall internet users must have increased, would then the INR 17 crore unique visitors would have looked much higher? So, so the question is, over the last whatever quarters since you have stopped advertising, what gives you that confidence that without advertising, this growth is okay, or with advertising, maybe a much higher growth could be much better? I hope I am clear in my question.
Right. See, the question is more advertising versus less advertising. It's not that over the last few quarters we have stopped advertising. We never stopped. What we are saying is we have only optimized advertising. Now, the question is that, okay, next quarter, if I were to spend, say, INR 12-INR 13 crore higher, and my INR 17 crore translates into, say, INR 18-INR 18.5 crore, would it immediately reflect into better monetization? That, as I have mentioned, a calibrated approach is much, much better. Our intent is to grow traffic and monetization both. Our particular business, actually, the basics is that you grow traffic, and monetization follows it with a lag. At this point of time, organic traffic has held up pretty well. Going forward, organic will be endeavored to grow at sustainable rates.
Plus, wherever need be, we would obviously add to advertising. As we are seeing margin expansion, it's not that at 25%+, business will not see margins or incremental operating cash flows. Whatever are the incremental operating cash flows, there can be a conscious call to deploy a good chunk of it in advertising to grow traffic and consequently grow revenue, followed by profits.
Okay. One question, just peeping into how the board meeting happens at Just Dial. Can you help us just to understand what kind of discussion happens, or how much time do you spend on core business versus new initiatives? Because we are sitting with a huge pile of cash over the last few years, and this is in a way dilutive in the overall return ratios. So from the discussion perspective, how does things operate, is what I wanted to understand.
I think the relevant way to understand this would not just be that how much time solely the board spends, but more how much time the key strategic—how much time is spent with the strategic holder, stakeholder on these particular initiatives. The board majority today obviously is RRVL representatives, and on an annual basis, we create our annual operating plan, which focuses both on core business as well as new initiatives. Those particular initiatives are monitored not just on a quarterly basis, on a monthly as well as weekly basis.
Okay. And any services being provided to RRVL from our tech platform?
Services as in, sorry?
Anything from our tech platform, from tech input perspective, are anything—
Also so-
You, you did mention about JioMart kind of integration at some point of time, couple of years back when it happened, so I'm asking from that perspective.
So, in RRVL/Jio, MyJio is one of their key platforms or app which has significant traffic. So our particular local search capabilities are getting linked to MyJio app, which should go live anywhere in next couple of weeks. So that will be a significant integration. Apart from that, there could be sort of synergies that could be in progress working in terms of, say, either some cross-bundling, wherein our particular subscriptions could get bundled with some of their offerings or vice versa and so on.
Okay. Any monetization which one should expect or build in their model from this, newer initiatives like MyJio bundling of...?
So at this point of time, it's the core business, 20% top-line target, which will sort of build in these. We are not building in any sort of additional monetization at this point of time for non-core related initiatives.
Okay, Abhishek, thank you very much and all the best.
Thank you.
Thank you. We have our next question from Sarang Sanil, from RW Investment Advisors. Please go ahead.
Hello, am I audible?
It is not loud enough.
Hello? How is it now?
No, not clear.
Am I audible?
Yes, now it is fine. Please go ahead.
Okay, sure. Thank you for the opportunity. Sir, I have a couple of questions. So internally, do you track campaigns per sales employee closely, and is there a target you'd like to achieve? The reason I'm asking is that though we are flattish on employee addition, cost per employee has gone up. Also, campaigns per sales employees are around 48, 49, 49 right now, and pre-COVID, we were well above 50. Right? So do we have a target here?
So, Sarang, we do not explicitly focus on campaigns per sales employee. Rather, we focus on revenue per sales employee, because there could be geographies or there could be sales employees who might work differently in terms of one might focus on signing up more campaigns, be it relatively entry-level or low ticket size. The other could be focusing on signing up high value, lesser number of, campaigns. So from that particular perspective, what we focus on, what is the overall cost of sales and what EBITDA margins does that translate into? And at company level, broadly, the growth is targeted half to materialize from campaigns and rest from, realizations.
Sure, sir. So my second question is, so why are we not gaining traction in Tier- 1 cities? We had higher paid campaigns on absolute basis and split on overall basis pre-COVID. Now, on absolute basis, also, we've been growing at single digit for the last three quarters, though on an overall basis, total, paid campaigns, we are well above, you know, double digits. So what is happening in Tier- 1 cities, and is there anything that you're focusing right now so that we can incrementally increase the, realization also from Tier- 1 cities?
If I look at the split of revenue growth for this particular quarter alone, so this particular quarter, revenue had about 27% growth. Okay? So this 27% is split as, say, about 20% growth coming in top 11 or so to say Tier -1 cities, and rest about 38%-39% coming from Tier -2. Now, the next level would be breaking that 20% into volumes versus realization, et cetera, et cetera. But as I mentioned that from my perspective, the endeavor is that, okay, how can both set of geographies grow in terms of overall revenues? Tier -2 geographies have both levers quite open, both signups as well as realizations.
Right. So you're not worried about the paid campaign volume in Tier -1 cities for now?
As I said, that the target is 10%-20% growth to 8%- 20% top line growth should come from, say, volumes, which would be a mix of contribution from Tier -2 as well as Tier -1.
We've lost the connection. Ladies and gentlemen, due to time constraints, we take the last question for today from Hemal HS, an investor. Please go ahead.
Oh, hi. Can you hear me?
Yes.
Thank you for the opportunity. I think a lot of my questions were answered. I just have a different take. I wanted to ask you, since you get so much traffic data, have you ever thought or have you ever focused on the data mining and analytics capability to then cross-sell differentiated services to your merchants? You know, it could be as simple as, you know, underwriting, scoring, to potential some hair salon opening in certain area or neighborhoods. Have you ever explored that, or is that a kind of data or quality of data that you get?
So, Hemal, definitely we are sitting on a sort of, goldmine of data, be it pertaining to users or be it pertaining to, vendors. So we have been, recently exploring that how could we utilize this data. For example, a lot of competitor analytics could be, generated, which could be even interesting for SMEs. So one particular hotel might be keen to know what are the kind of traffic trends for their specific category, what are the kind of traffic, trends for competitors. But at the same time, we have to keep in mind data protection, regulations, as well as, how we want to exactly go by it. So some of these are underway. We will see how we can sort of put some of these thoughts into monetization.
Oh, excellent. And is this something that you expect with next year onwards, as a test in the market, or is it a little bit longer-term idea for you now?
I wouldn't call it a longer term. So far, we have always focused on making money from, SMEs, which is the subscription revenue or so-called, advertising, revenue. This particular possibility of a revenue stream exists, we obviously have been always aware. We will see at what point of time we would want to sort of, exploit this. So in the numbers that I have stated in my entire, call, we have not built in any delta from, this initiative per se.
Okay. And my other question was... See, we are at 170 million traffic, but let's say if you had unlimited ad, I mean, which we don't, but I just want to know, what is the potential for a traffic for you right now? Like, what is the number that you guys track internally that what's the max potential today in India for, for traffic, that you, you would-- this you would say is 100%, I'm getting it all?
So max potential would be anyone holding a smartphone with internet connection and using it for anything pertaining to, sort of, commerce is what will be our target. At this point of time, we would focus to take this 170 million-250 million users. And I think, as by the time we reach that particular, milestone, definitely the, market out there would have been, north of, 350-400 million users, as well.
Okay. Fantastic. And absolutely finally, so does your growth in the past, because you've been doing this for a long time, does it depend on how much does it get impacted due to economic slowdown or economic growth? Is there a parallel to your revenue versus the economy, like versus the GDP growth or anything like that, that you might have tracked?
So definitely there is. See, ultimately, if a SME has money in their particular pocket and they are feeling confident about their business future prospects, they would be willing to ultimately do advertising. During COVID two years, our business got impacted by 30%-32% because B2C, and within B2C, also B2C services-oriented SMEs got severely impacted. Even today, on the ground, SMEs are actually facing macro challenges. Having said that, our product offerings, et cetera, have been able to get us the kind of growth that we have been able to generate. And importantly, we are the only platform that directly advertises SMEs. So today, SMEs view several other alternatives as a platform where their particular name or their business does not get advertised. Those are just transactional platforms for them to sell products.
They might be selling today, but tomorrow the volumes could quickly collapse as well. So from that perspective, yes, the overall health of the economy does impact our business, but difficult to directly correlate and say that with annual GDP, this could be the possible growth rate for the company.
Okay. Thank you. I think, the rest of my questions are answered. Thank you for the, for the opportunity, and good luck.
Thank you.
Thank you. I would now like to hand the conference over to Mr. Abhishek Bansal for closing comments. Over to you.
Thank you, everyone, for joining us. In case you have any further queries, please do reach out. We will do our best to address. That's it from our side, and we'll see you next quarter. Thank you.
Thank you, sir. On behalf of Just Dial Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.