Synopsis: Cash makes up nearly 94 percent of this Reliance-backed company’s market value. Despite steady profits and rising income, the stock lags. Is this a deep value or a classic trap?
When investors hunt for undervalued stocks, they usually look for businesses trading below their intrinsic worth. But now and then, the market throws up a situation so unusual that it forces a double take. Just Dial Limited is one such case. On the surface, this looks like a once-in-a-cycle mispricing. But markets rarely make mistakes without reason. To understand whether this is a bargain or a value trap, we need to look deeper.
With a market capitalisation of Rs 5,914 crore, the shares of Just Dial Ltd closed at Rs 695.45 per share, down 0.3 percent from its previous day’s closing price of Rs 697.85 per share. Over the past five years, the stock has delivered a poor return of 3 percent, underperforming NIFTY 50’s positive return of 71 percent.
In recent years, Reliance Retail Ventures Limited has maintained a firm hold on Just Dial Limited. As of December 2025, Reliance Retail holds 63.84 percent of the company’s shares, which makes up the majority of the promoter shareholding, standing around 74.15 percent.
Although not much has shifted since FY24 in shareholding, there has been just a minor adjustment from the previous 64 percent. This consistent strategy indicates that Reliance is committed to a long-term partnership with Just Dial. However, this also means that there is very little stock left available for the public.
A Business That Quietly Prints Cash
The hidden driver behind this story is Just Dial’s strong cash position. As of the most recent quarter, the company has investments valued at about Rs 5,418 crore and roughly Rs 152 crore in cash. This brings the total to nearly Rs 5,570 crore, which is almost 94 percent of its total market value. Simply put, the market values the entire operating business at just a small premium over its cash and liquid investments.
Management has explained that much of this large treasury is invested in debt mutual funds, fixed deposits, and tax-free bonds. These options are generally low-risk and liquid, aimed at protecting capital while generating steady returns. Consequently, the company has been earning significant income from its surplus funds.
This trend is evident in the rise of other income. Other income has shot up from Rs 40 crore in FY14 to Rs 387 crore in FY25, nearly a tenfold increase over eleven years. This results in a compound annual growth rate (CAGR) of around 23 percent, which far exceeds the company’s core revenue growth of about 8.6 percent CAGR during the same time. In recent years, treasury income has become a key factor in overall profits, boosted by the expanding investment base.
Financials
The revenue from operations for Just Dial stands at Rs 306 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 287 crores, up by 7 per cent YoY. Additionally, on a QoQ basis, it reported a slight growth of 1 percent from Rs 303 crore.
Also, EBITDA stood at Rs 95 crore in Q3 FY26, a growth of 9 percent as compared to Rs 87 crore in Q3 FY25 and from Rs 87 crore in Q2 FY26. Also, coming to the margins front, EBITDA margins increased by 100 bps YoY and by 200 bps QoQ, reaching 31 percent in Q3 FY26.
Coming down to its profitability, the company’s net profit stood at Rs 118 crore in Q3 FY26, a decline of 10 percent as compared to Rs 131 crore in Q3 FY25. Additionally, on a QoQ basis, it reported a decline of 0.85 percent from Rs 119 crore.
Looking ahead, Just Dial is positioned at the heart of India’s rapid digital transformation. The internet user base in the country reached 969.1 million as of March 2025, with online penetration approaching 69 percent. Smartphone use continues to grow, with millions of devices shipped each quarter and 5G smartphones accounting for the majority of new sales.
Additionally, India’s e-commerce market has surpassed US$160 billion and is expanding quickly, driven by increases in digital payments, better logistics, and greater involvement from Tier 2 and Tier 3 cities.
Government initiatives support this backdrop. Programs under Digital India focus on improving digital infrastructure, promoting digital literacy, and making online services more accessible. The rise in digital payments has been impressive, with UPI transactions hitting record levels and enhancing the transition to a cashless, app-driven economy. Micro, Small, and Medium Enterprises, which play a major role in India’s GDP and exports, are also becoming more digital. As more MSMEs go online to attract customers and manage operations, platforms that help businesses gain online visibility are likely to benefit.
This broader environment offers a structural advantage for Just Dial, whose platform connects millions of users with local businesses. As India’s digital adoption expands and small businesses seek more visibility, the company is well-positioned to benefit from this long-term trend.
Valuation Comfort, Market Skepticism and other factors
Despite these positive trends, the stock still trades at a valuation that reflects deep scepticism. The stock is currently trading at a P/E of 10.2x, which is a staggering discount as compared to its 5-Year median P/E of 59x.
One reason is that the growth of the core business is moderate rather than high. Just Dial operates in the local search and SME advertising sectors, which are steady but very competitive. Investors may doubt whether the company can significantly boost growth in the coming years.
Another concern is the increasing reliance on treasury income. While interest and investment income elevate reported profits, markets usually give higher valuations to earnings from operational growth instead of financial income. This leads to the perception that part of the current profitability might not stem from the strength of the core business alone. One of the other reasons behind the company’s share price is the slower growth in both its topline and bottom line.
Over the past few quarters, the sales of the company are losing its growth traction. With nearly 40 percent sales growth reported in December 2022, it started declining to just 6 percent in Q3 FY26. This trend is also seen in the bottom line (net profit) of the company, which is terrific.
The other reason is the lack in capital allocation policy. Justdial has nearly always remained a cash-rich firm in the past years. However, it is to be noted that after FY21, its investment side on the balance sheet rose significantly to Rs 3,798 crore in FY22 from just Rs 1,512 crore, which is a staggering 151 percent jump.
However, this jump was mainly attributed to Reliance Retail acquiring 40.95% in Just Dial by subscribing to preferential shares and buying shares from its promoter family worth Rs 5,710 crore, with Rs 3,497 crore from the family and the remaining by infusing another Rs 2,222 crore in the company, which made a sudden spike in the investment section of the company.
The other reason is that the company has no clue about how to use these proceeds sitting idle on the balance sheet. For example, in July 2023, the company cited that the money could be utilized for either organic or inorganic opportunities in the future.
Also, the company in July 2024 said that it was discussing a dividend payout to its shareholders, which could have been 100 percent or more of the company’s annual profit. Fast-forward to April 2025, when the same question was asked to the management, and they cited that the company has not decided to distribute its cash via dividend. This lack of decision made a lot of uncertainty, left the shareholders on a hook, and despite having such high reserves, the company has not paid out any dividend to its shareholders for over 10 years.
Uncertainty regarding capital allocation also affects market sentiment. The company has built up a large cash reserve but has not yet created a long-term, clear policy on dividends, buybacks, or major investments. Until investors see how this capital will be used, the cash on the balance sheet may continue to be valued at a discount.
Competition adds another layer of caution. Global and domestic digital platforms like Google, especially those focused on search and discovery, are constantly expanding their local business listings and advertising tools. This puts pressure on pricing power and long-term market share.
Business Overview
Founded in 1996, Just Dial started as a phone-based local search service and later became a digital platform accessible through the web and mobile. Today, it provides tools for small businesses to manage operations, accept digital payments, and connect with customers online. With crores of business listings and millions of users each quarter, it remains a prominent name in India’s local discovery scene.
Thus, this situation presents a classic market debate. On one hand, investors see a profitable, asset-light business with a large cash and investment base in a rapidly digitising country. On the other hand, they note moderate growth, competitive pressure, and uncertainty about how surplus funds will be utilised. Whether this represents a unique mispricing opportunity or a stock that is undervalued for structural reasons will depend on how effectively the company translates its financial strength and favourable digital trends into stronger, more visible operational growth.
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