Just Dial Ltd

NSE:JUSTDIAL

Earnings Call Transcript 2019-Q3

[Operator]

Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Q3 post result conference call of Just Dial. [Operator Instructions] I would like to now hand over the conference call to Mr. Ashwin Mehta. Thank you. And over to you, sir.

[Ashwin Mehta, Regional Head of Software & Services Research]

Thanks, Begat. On behalf of Nomura, we would like to welcome you all to the Just Dial 3Q post result con call. We have with us the founder, MD and CEO of Just Dial, Mr. VSS Mani. We also have the CFO of the company, Mr. Abhishek Bansal. So without further delay, let me hand it over to the management.

[Abhishek Bansal, Chief Financial Officer]

Thanks, Ashwin. Hi, everyone. Welcome to Just Dial's earnings call for third quarter fiscal '19. We'll quickly go through key financial and operational highlights for the quarter. Operating revenues stood at INR 226.8 crores, which grew at a healthy 15.2% year-on-year, the growth rate being the highest in last about 14 quarters. Adjusted operating EBITDA, excluding noncash ESOP expenses, stood at INR 60.5 crores, witnessing 19% year-on-year growth. Adjusted EBITDA margin stood at 26.7% for the quarter. Now coming to EBIT margins. EBIT margins stood at a healthy 20.5% versus 19% during same quarter last year. Net profit for the quarter stood at INR 57.3 crores, which almost doubled year-on-year. Other income was INR 34 crores for the quarter, getting benefited from decline in bond yields during the quarter on sequential basis. Cash and investments stood at INR 1,440 crores as on 31st December, which is an increase of about INR 240 crores during the fiscal year. The buyback of INR 220 crores was completed on the 10th of this particular month. Broadly, as we can see, business has been able to replenish the buyback amount during the first 3 quarters of this fiscal itself.Coming to operational highlights. Mobile traffic grew at a healthy 43% year-on-year to 105 million unique users. Overall, including all platform, we were able to grow at 25% year-on-year to 134-million-plus unique users for the quarter. We added another 1 million listings to our database. And we now have 25 million active listings as we speak, which is about 20% year-on-year increase. Paid campaigns, that stood at approximately 485,000 at the end of the quarter, which was an addition of about 14,800 campaigns during the quarter. Overall, it was a steady, solid quarter. All 3 key metrics: user growth, revenue growth, profitability, that we primarily track, were on track. First 9 months of this fiscal have delivered 60% year-on-year growth in operating profit at EBIT level. Our focus on adding feet on street continued. We now have 3,600-plus personnel in our cold-calling feet on street team. Ramp-up in this particular team is helping us with higher customer acquisition, which is showing an uptick in paid campaign. As a business, focus continues on getting more users to our products, getting users to engage more through super rich curated content, building onto current growth rate and maintaining healthy profitability.We shall now open the floor to questions. Thank you.

[Operator]

[Operator Instructions] We have the first question is from Mr. Ravi Menon from Elara Security.

[Ravi Menon, VP of IT Services & Internet and Analyst]

Just want to check on your other expenses. How much of that is advertising this year? And how does that track Y-o-Y?

[Abhishek Bansal, Chief Financial Officer]

In this particular quarter, we're at approximately INR 19 crore. So broadly, for first 3 quarters of this particular fiscal year, we have spent about INR 40 crores on advertising.

[Ravi Menon, VP of IT Services & Internet and Analyst]

INR 40 crores? Okay. All right. And you said that your feet on street expansion will continue. So do you think that there is some improvement on pricing as well that we can expect on the paid campaigns front?

[Abhishek Bansal, Chief Financial Officer]

See this particular quarter, as you can see, out of the 15% top line growth, 10% came due to volumes of say paid campaigns; the rest, about 5% impact were due to pricing. On pricing or blended realization, there is inherent downward pressure due to increasing mix of Tier 2, Tier 3 cities. However, despite that, we have been able to arrest that particular decline through either bundled offerings or timely price increases which are embedded in our software, which are traffic linked. So going forward as well, I think revenue growth should be a function of both campaigns growth as well as realization growth.

[Ravi Menon, VP of IT Services & Internet and Analyst]

And any impact that you've seen so far from Google neighborhood in any particular cities? Or do you even see that as a threat to you?

[Abhishek Bansal, Chief Financial Officer]

See honestly, not really. So some of these particular products have been launched in last 6 to 12 months. But we don't see any specific impact per se. Even if I consider my user behavior or in my particular peer set, adoption of this particular or any newer products seems to be very, very low at this point of time.

[Ravi Menon, VP of IT Services & Internet and Analyst]

All right. Great. And one last question about your other income. It seemed to be pretty high on a Y-o-Y basis. Any one-off realizations like mutual fund redemptions or anything of that sort in here?

[Abhishek Bansal, Chief Financial Officer]

No, nothing. So entire other income, bulk of it is due to MTM gains on our portfolio. Last year December quarter, there was a increase of about 65 basis points in 10-year G-Sec from September '17 to December '17. This year, almost opposite happened. September '18 ended at about 8.05%, whereas December ended at about 7.34% or so. So due to that, there was a gain of -- whatever. The total other income stood at INR 34 crores for this particular quarter. There is no one-off in that particular other income.

[Operator]

We have the next question from Mr. Miten Lathia from HDFC Mutual Funds.

[Miten Lathia]

Just one piece of information which perhaps you could add to your disclosure engagement. So while you've been sharing unique users for a long time now, what is the sort of engagement improvement after you've added the other tabs on your JD App, which is your social, videos, JD Pay, news, et cetera? So if you have handy data and if you could share, it will be great if you could start sharing it later.

[Abhishek Bansal, Chief Financial Officer]

Sure, Mitin. So one -- there are multiple metrics that we internally track. One metric obviously is on searches that we track. Searches broadly for the quarter were at about 800 million, 850 million or so. In terms of user engagement post addition of these particular newer features, a couple of metrics that we track is, how have been the repeat user rate, how is the time spent per particular session, et cetera. So we will definitely consider whatever relevant user engagement metrics that we can disclose which could give some idea on how engagement is panning out post these new features.

[Miten Lathia]

Also, if you could help us understand how these other tabs are leading to any monetization, if at all. I mean, is any of it contributing to revenues? And if at all yes, then, which of these to you looks the most promising from a 12-, 18-month horizon?

[Abhishek Bansal, Chief Financial Officer]

See, at this point of time, obviously, most of these particular features are mainly to enhance user experience, increase user engagement. However, there is a certain level of monetization that has already started. The key promising ones that I see, the homepage feed, that is very promising. In fact, we have had interest from a couple of brands to get visibility there, because considering the sheer amount of traffic that we get on a daily basis. The social section also seems quite promising. So on the homepage feeds, we are planning to introduce other features, such as products or services-related items where there could be interest from brands on new launches of their particular products. So we'll see how monetization pans out for that.

[Miten Lathia]

Okay. And JD Pay is utilizing peer-to-peer payment system or is there something else to it?

[Abhishek Bansal, Chief Financial Officer]

So JD Pay has multiple payment options. UPI also is being linked in JD Pay, which should go live in another probably 1 or 2 weeks.

[Miten Lathia]

Okay. So currently, how would one pay?

[Abhishek Bansal, Chief Financial Officer]

Sorry?

[Miten Lathia]

So currently, how does one use JD Pay?

[Abhishek Bansal, Chief Financial Officer]

So currently, vendors can actually request their customers to pay via JD Pay. So if you are a user going to a particular shop, that shop owner can ask for your mobile number, a link will be sent to your mobile number. As soon as you click on that particular link, a payment gateway opens the JD Pay interface. If you have paid anytime in the past using credit card for any of the -- on any of the Just Dial platforms, your particular credit card details will be autopopulated, you enter your CVV and other OTP-related details. That particular money then gets credited to that particular vendor.

[Operator]

[Operator Instructions] In the meanwhile, we have the next question from Nisha Jain from Edelweiss.

[Pranav Kshatriya, Research Analyst]

This is Pranav from Edelweiss. My first question is regarding your traffic on app and mobile. So can you give some color on how the growth has been for traffic for app growth and as well as the mobile traffic growth, I mean the web browser traffic?

[Abhishek Bansal, Chief Financial Officer]

Pranav, out of the total traffic, about 79% originates from mobile platform. And out of the mobile traffic, 90% plus comes on our mobile site. So as we have mentioned in the past, that considering we are a local search engine and our first prime responsibility is to ensure that we give out information to the users at the earliest, we are platform-agnostic. Even in terms of the product design, architecture, speed, if you'll see, our apps and mobile side are almost replica of each other.

[Pranav Kshatriya, Research Analyst]

Right. But any color, I mean, has the app traffic growing much faster than the mobile traffic, or that is not so?

[Abhishek Bansal, Chief Financial Officer]

See, both mobile site as well as app, both are sort of -- the traffic growth is similar in nature. Last year, same quarter, in terms of app downloads, we used to run a campaign with our JD Lite app, which we were campaigning as a 1 MB app. But later, we realized that, that particular instead of 1 MB users want a better experience, which come through as a truly native app. So if you see just the traction on the native app and the mobile site, the growth rates I -- like my assessment is it should be pretty much similar.

[Pranav Kshatriya, Research Analyst]

Yes. And in the newer version of the app, can you tell us that -- where users are spending more time? And has that increased the time spent on the app, if at all?

[Abhishek Bansal, Chief Financial Officer]

See, bulk of the traffic, obviously, users are spending more time on -- so mainly for the core search, we have 2 types of pages: category pages and company pages. So users obviously spend the maximum time browsing or consuming information from those 2 particular types of pages. Once they come to the platform to consume information for those type of pages and they discover other products, they end up spending time on other particular products. For example, recently, we have added features such as online movies. The approach in all these particular verticals is that we continue to remain an enabler. And all the content, et cetera, that you see are automatically powered through various feeds, et cetera.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

May I just say, so in terms of this new approach to the app is to make JD the go-to place for users. They should just come to Just Dial to actually discover and find any kind of product or services. So you heard me talk that there are certain type of daily engagement features that we keep, that could actually have more frequent visits to the app, thereby meaning more searches, or even these visits resulting into some kind of monetizable traffic. Hence, we introduced news aggregation. If you go to the news section in Just Dial, you would see pretty much the best of the best names and the best TV channels, whether it's Republic, NDTV or ET Now or it's The Times of India, Economic Times or any leading newspaper, you get all of them in one place. And it gives the user the ability to change language, even choose a particular publisher and see, filter out information and read out. So we have them in multiple languages, like what we call about 10, 12 languages right now. And then across the board, almost all publications which are worth its name are covered on Just Dial's news section. On the other section, which is infotainment and social section, there, we give lot of information about various products, information about certain companies, information about generally what are worthwhile in nature, all that; which is what we have figured out, that people like to hang out and kind of enjoy more. Then when we introduced sections like movie online. The whole idea was if the person wants to watch a movie online, sometimes, it's difficult to know which app has that particular movie. Supposing it's a new release movie, whether it's a Netflix or it's an Amazon Prime or it's on maybe Eros or Zee or Hotstar, what Just Dial's movie and online section does, this is just a single box search, you just name the movie, we tell you where you can watch it. It could be more than one destination you can watch it. So we feel there's a need for such a service, and we've added that. And this helps us also to learn how the users, the user behavior and what all kind of -- the kind of intent that user has. And this will probably, at some point, because of this deep learning, help us monetize that user better and also serve him better with the right kind of content. And this app has a full customizable feature, which you can say these are my interest areas. You could say my interest is technology. You could say my interest is on cricket or in Bollywood, whatever. Or even for that matter, your own business. You could be a dentist and your -- want to know what's happening latest in the dentistry world, what kind of new surgical equipment have come, new kind of methods are there. All kinds of that highly relevant content will be served to every business owner as well as the user. So this is really a very interesting app. And at some point, you will see that it's going to be so useful, at the same time, so addictive that you will see more and more people will start sharing it. The best way to do it is to download the app and experience it yourself and give us a feedback. And you would get the next question that you would ask like, oh my god, then why aren't people knowing about this? This is such a good app that everybody should know about it. And that's where we're heading towards actually.

[Pranav Kshatriya, Research Analyst]

Yes. That is actually leading with the next question that, will there be increase in the content costs or any advertisement expenditure related to promotion or?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Already, we have advertisements in these sections. In fact, one of the leading online player is advertising, spending about 10 lakhs a month or something like that. And there are a lot of inquiries from leading brands. The advantage of this section is, for example, if it's something to do with automobile, then the guys who are into selling cars, they can target that audience. Even for a specific automobile where there is an editorial content, that can also be converted into a lead, per se, test drive the car now or get a code now, things like that. You will soon see that each of those posts, the rich content posts that you see, whether it's video or static or a text, you will see each one of them will soon have a kind of an action tab which is monetizable for Just Dial. So the potential is huge, actually. And the local businesses can target their [ TG ] locally with their offers, sale, all kinds of information that they want to target. They can do geotargeting, they can do PIN code targeting, specific area targeting, we allow all of those.

[Abhishek Bansal, Chief Financial Officer]

And to answer your question on whether there will be any increase in costs. No, there isn't going to be any material increase in costs because all the content that is sold...

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Most of them from RSS feeds, voluntarily provided by the publishers. So we don't create any content ourselves. We only curate them, we aggregate them and present them as best as possible.

[Pranav Kshatriya, Research Analyst]

Okay. And the -- so I mean for advertisement expenditures, should we have some color on how we should be seeing it in FY '20? Will it be around 10% of the revenue? And also, I mean more on the broader margin -- how the margin should shape up for the company. Because my understanding was we'll have almost 50% incremental EBITDA margin on this business. Is that the number -- it sounds like that we should look at a slightly lower number?

[Abhishek Bansal, Chief Financial Officer]

See, firstly, on the ad spend. As we have mentioned in the past, 7% to 8% of the top line is broadly what we are comfortable with. But in case we find that, okay, the product requires more advertising in a particular year, we would definitely be open to do that. So far, the philosophy that we have followed is that every quarter, we keep evaluating out of the various platforms that we are advertising on, which medium is working the best for us and keep tweaking our spends accordingly. So even if we say allocate a 7% of top line budget, it could be 6%, 7.5%, whatever, depending on whatever value that we can draw. On the margin front, yes, on a gross margin basis, we make broadly about 60% gross margin, which is revenue less direct sales costs. So there is significant amount of operating leverage in the business, which I think is already playing out. So even at just 15% revenue growth, despite [indiscernible] good run rate of advertising spend, we are still able to deliver 26%, 27% adjusted EBITDA margin.

[Operator]

So we have the next question from Baidik Sarkar from Unifi Capital.

[Baidik Sarkar, Research Portfolio Manager]

Abhishek, I'm sorry if I missed this in your opening remarks. Your advances have now been up in flat for 3 consecutive quarters. I understand this is best seen as a Y-o-Y metric. But just given that it's been flattish for 3 quarters, does it -- I mean, is it potentially setting us up for a weak traction for FY '20? Am I reading this right, your comments?

[Abhishek Bansal, Chief Financial Officer]

No, definitely not. See as I mentioned earlier that unearned revenue or advances received from customers, those should be looked more on a year-on-year basis. If you'll see in last 6 quarters, there have even been quarters where, sequentially, there has been a decline. Plus, there have been quarters where in just, say, the last March quarter, June quarter, there was significant jump in those particular quarters. So there could be quarters where the focus would be more on getting higher value. There could be quarters where focus could be on getting more sign-ups. Unearned revenue is best to look that on a longer time frame of 4 to 6 quarters and on a year-on-year basis.

[Baidik Sarkar, Research Portfolio Manager]

Sure. So the feet on street ramp-up, I think, began about 3 to 4 quarters back. So from an operating leverage perspective, has that begun to function in full throughput? Or is that due to be extracted on that front yet?

[Abhishek Bansal, Chief Financial Officer]

See, the feet on street team, over the last about 4 quarters, we have added broadly about 1,300 folks, 300 to 400 new additions every quarter. It takes time for -- say for those particular new hires, say anywhere 3 to 6 months to materially start producing results. So in last couple of quarters, like September quarter, we added about 18,000 paid campaigns, December quarter, about another 14,800. So those particular campaign additions itself are reflecting their particular ramp-up. Now this helps us in 2 ways. Obviously, one is more number of customers. Second, these customers obviously have great potential to get upgraded to higher-value contracts in future. So that also should be positive, considering ramp-up in paid campaigns.

[Baidik Sarkar, Research Portfolio Manager]

And if you could just jog my memory. I remember you mentioned this in the [ presentation ] that the unearned revenue represented about 65% to 70% of your revenue potential. Is that the right metric? Because you do have a lot of monthly payment things as well.

[Abhishek Bansal, Chief Financial Officer]

Right. So out of the total money that we received from our customers, broadly about 65% comes in upfront payment plans and rest, about 35%, also comes via monthly payment plans.

[Baidik Sarkar, Research Portfolio Manager]

Okay. And this 10% Y-o-Y growth that we've seen, how much is from the top 15 cities and how much is from beyond?

[Abhishek Bansal, Chief Financial Officer]

Sorry. Can you come again, please?

[Baidik Sarkar, Research Portfolio Manager]

Yes. No -- your campaign additions, your paid campaign additions, you're up roughly 10% Y-o-Y to like [ 485,000 ] now. I'm just trying to understand where the traction is coming from, top 15 cities? Beyond top 15 cities?

[Abhishek Bansal, Chief Financial Officer]

Got it. So Tier 2, Tier 3 cities, they broadly contribute today about 26% to top line and about 46% to count of campaigns. So in terms of revenue, they are gaining share by about 1.5% a quarter; and in terms of count of campaigns, about 1% per quarter.

[Baidik Sarkar, Research Portfolio Manager]

Okay, okay. And an interesting example that Mani spoke about, revenues from potential platform-ization. What's the revenue proportion from that come?

[Abhishek Bansal, Chief Financial Officer]

Sorry. Revenue from?

[Baidik Sarkar, Research Portfolio Manager]

I mean, so like Mani was giving the example of, looking for a movie on your platform, depending on which OTT has that movie, the user is directed towards that specific platform. So just this platform-ization of services of offering, I'm just trying to understand, what proportion of revenues began to flow from this segment?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

There is no such thing as we think about a product and came out with immediate revenue. Revenue comes as you learn more about the user. There are various ways to monetize that. For example, in movie section for us, we will not make any direct revenue from any of those platforms because these are apps which you are subscribing to already. The only problem is, you just do not know -- you have to go to 3 or 3, 4 different apps to see which one has this particular movie that you want to watch. But as you come to JD, you just put the movie name, we give you all those platforms where you can watch; usually it is exclusively available on one particular channel. But over a period of time, I will know that you are a Hollywood fan, you like comedy movies, you like action movies, and there are ways to monetize that. So there is a lot of deep learning that we're getting about our users now. Earlier, it was only category searches, the Internet research, basically. But now they are actually leaving their footprints on a daily basis on many things, so we know more about them. And there are a lot of interesting kind of business opportunities developing, but still premature to say anything in terms of real monetary terms right now. But have you tried the app yourself?

[Baidik Sarkar, Research Portfolio Manager]

I haven't, Mani. In fact, I wanted to know [indiscernible] this particular...

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Do that, and then we look for your feedback.

[Baidik Sarkar, Research Portfolio Manager]

Look forward. Mani, so a good opportunity for me to engage you on one more thing. Obviously, Urban Ladder -- I'm just taking free to -- I'm getting free to take names here. It's obviously not a perfect comparable, but given the fact that still, they've taken ownership from end-to-end services, I understand that. So the delivery is completely different. There is a certain traction that those services are being met. Obviously, so are we doing -- given the cash on our balance sheet, given the resources that we are privy to, given we've got a significant amount of bandwidth that's core to building our platform, do we eventually see ourselves getting into fulfillment services?

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

I mean the example you gave is a furniture online company. Are you trying to look at services? UrbanClap probably.

[Baidik Sarkar, Research Portfolio Manager]

So our question's on services like say, for example, UrbanClap.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Okay, UrbanClap. Fair enough. So see it's like the high-touch model if you want to get in; you want to be a specialist in that business as well. So I don't think as a search engine, we are specialists in delivering those services. And that could be quite a risky area for us. But then we are not averse to selling traffic to these services as well. If you see on restaurants, we are selling traffic to many of these delivery services, online delivery services companies, we have been driving traffic to them. And we wouldn't be averse to driving traffic to even these online players who want to get into the -- actually fulfilling it themselves. But I think as a business, we also should not get in, but we will definitely encourage our vendors, and which we are already doing it in and very soon, you're going to see a difference there, that you'll be able to schedule a visit. Instead of just calling up those vendors and calling up many different vendors, you can just schedule a visit. You'll get to know the price that you will pay for the services and all that upfront. Yes, that, we will do it. But whether we will employ beauticians and provide beauty services at homes, no, I don't think that is going to happen ever.

[Baidik Sarkar, Research Portfolio Manager]

Sure. Abhishek, the number of churn this quarter?

[Abhishek Bansal, Chief Financial Officer]

Sorry, the number of...

[Baidik Sarkar, Research Portfolio Manager]

Churn, churn. Customer churn.

[Abhishek Bansal, Chief Financial Officer]

The retention rate has been broadly in the range of 56%, 57%, which is the one-year retention rate that we defined.

[Baidik Sarkar, Research Portfolio Manager]

Sure, sure. And given cash pile-up continues to I think happen at a decent rate, I understand buyback won't be a regular feature, but that's still leaves us with a lot of liquidity I think more than what we need. Any strategic direction on where we're headed with that?

[Abhishek Bansal, Chief Financial Officer]

See on cash on balance sheet, as you rightly said, that against INR 220 crores, the business has already replenished INR 240 crores. Last year buyback, the maximum permissible limit was 25% of free reserves plus paid-up capital was coming to INR 227 crores. So considering buyback is more tax-efficient, we would look to distribute money to shareholders via buyback. Apart from that, as of now, that particular cash will remain on our books and will continue to keep us in a healthy financial position.

[Baidik Sarkar, Research Portfolio Manager]

Okay, sure. And just last question before I get back to the queue. In areas like restaurants, which have seen solid capitalization from payers, what's the kind of traffic that you continue to get, like Mani mentioned, continue to drive to your partners? And if you could just give us some more relevant examples in other segments.

[Abhishek Bansal, Chief Financial Officer]

See, on any of the particular verticals, considering the traffic monetization, all these things are so diverse in terms of contribution. I don't think so any particular single category even in terms of traffic might be contributing 1% of my overall traffic. So to that extent, difficult to say how much traffic exactly comes from our restaurants or any of these categories. In terms of monetization, as we have mentioned in the past, 2/3 comes from service-oriented categories, and those are the ones where we have our strengths such as packers and movers, pest control services, real estate agents and all those things. So yes.

[Operator]

We have the next question from Prajwal Gote from [ Bank ] Security.

[Prajwal Gote]

Sir, I actually missed the opening remarks. I just wanted -- I had just 2 questions. Firstly, the revenue guidance and margin guidance for the year '20 and advertisement spend for this current quarter.

[Abhishek Bansal, Chief Financial Officer]

See ad spend for December quarter was about INR 19 crores. Coming to revenues and margins, so this particular year, the beginning of the year, as we had mentioned, that we are targeting meeting for the year which we seems to be achieving comfortably. On the margins front, again, we have been cost-conscious, plus operating leverage has ensured that we have delivered about 27%, 28% adjusted EBITDA margin on a 9-month basis. So the idea both on revenues as well as margins is to improve from current growth rate. A bit too early to guide for what we are expecting next year, so let us see how it goes. In terms of inputs like on the revenue front, as I mentioned, that feet on street cold-calling team is delivering phenomenal results where we have expanded pretty well. So I presume that all these initiatives should put us in even better position for FY '20 versus '19.

[Operator]

We have the next question from Alankar from Macquarie.

[Alankar Garude, Analyst]

Firstly, realizations have been largely stagnant over the last 3 quarters. Now with the continual focus on Tier 2 and 3 cities, how should we look at realization growth going ahead?

[Abhishek Bansal, Chief Financial Officer]

See, on realizations, on a blended basis, there is expected downward pressure, because, as I said, that 26% revenue comes from Tier 2, Tier 3, but they contribute 46% by count of campaigns. However, despite the downward pressure, we have been able to maintain or even grow our particular realization. The good positive signs that we are seeing in some of our Tier 2, Tier 3 markets are that our sales teams itself is requesting for certain price hikes. For example, a Tier 2, Tier 3 town which was actually entry-level of, say, INR 1,000 a month. We are getting requests of increasing that to INR 1,200, INR 1,250, which means that SMEs in that particular territory are now more amenable to pay higher prices. So those kind of price increases, plus our bundled product approach, should help us have certain percentage of growth being delivered through realization as well versus the inherent drop that is expected.

[Alankar Garude, Analyst]

Understood. So maybe a quick follow-up to that will be, broadly, do you expect the difference in the paid campaigns growth and the realization growth to be similar to the third quarter performance?

[Abhishek Bansal, Chief Financial Officer]

See we started the year where it was more about realization driving the growth. Then second quarter, we both -- we had both the levers contributing almost equally. Last quarter, it was more about paid campaigns. So we have to see which particular lever is able to deliver what kind of growth. Overall, our first objective is to maximize revenue. And that's on 2 fronts: revenue per sales employee, revenue per SME. So when I give target to my particular sales employees, I don't state that I need x campaigns for this particular month, though there might be incentive policies which inherently make them focused more on either campaigns or value. But overall, the first objective is there should be growth in the money coming into the company.

[Alankar Garude, Analyst]

Understood. And secondly, you mentioned about 90% of mobile traffic being through the website and that app and mobile site are almost replica of feature. So do you really remain comfortable with this 90% number? Or as a company, we are taking steps to increase the traffic contribution from the mobile app?

[Abhishek Bansal, Chief Financial Officer]

See if you were to ask me that, okay, Abhishek, what would your preferences be for the company for, say, 3 years down the line? Definitely, we would also want as many users to have our app into their mobile phones, such that they use that particular app on a daily basis. The user experience do vary, similar on mobile side as well as app, app tends to be a notch better. So we do have -- we would want to have more and more apps being installed. But at the same time, we are conscious that we would not pay some crazy amounts of INR 200, INR 300 per app download and see the normal consumer behavior of 70%, 80% of that app being uninstalled, or some continuous incentive being required to have those particular apps stay in that particular mobile phone. So to that extent, the first objective is to have users come, take that particular information, be platform agnostic. Over time, have your product sort of relate such that there is higher retention for your particular app, which should be coupled with other advertising campaigns focused on apps installed, et cetera.

[Operator]

Mr. Ashwin, you may go ahead.

[Ashwin Mehta, Regional Head of Software & Services Research]

Yes. So I had one question, in terms of paid listings momentum going forward. So now given the churn of close to say 43%, 44%, do you see enough scope in terms of Tier 2, Tier 3 monetization to up your paid listings momentum materially ahead of where we are? We've been in the 15,000 to 18,000 range for the last 2 quarters. So going forward, do you think there is enough momentum available to kind of raise that?

[Abhishek Bansal, Chief Financial Officer]

Ashwin, so if we look on a macro basis, right? So Indian government broadly says there are about 65 million SMEs in India, another 10 million to 15 million could be freelancers, such as, say, a yoga teacher, a gym instructor who are not technically SMEs, but they classify as listing for us. So broadly, I would put the universe, I'd say, around 80 million listings or so. Against 80 million listings, I today have only 25 million listed with us. And most likely, those -- the rest are yet to be present online on any platform. And out of those 250 -- or 25 million, it's only about 390,000, 400,000 unique customers that are paying us and results -- and took paid campaigns up 485,000. So overall, there is significant room for paid campaigns to actually grow. It is a function of the markets that we are able to penetrate, the productivity levels that we are able to draw from our sales force. So all those factors, we have to closely monitor to see that this 15,000 sort of run rate continues. On the macro side, there is no particular [ downward ] saturations, so to say.

[Ashwin Mehta, Regional Head of Software & Services Research]

And if you were to think strategically from say a 3- to 5-year perspective, would you say the current business model or the current revenue model through paid listings would be able to sustain your growth? Or you would need to add more revenue streams to your business model? And what could these new revenue streams be?

[Abhishek Bansal, Chief Financial Officer]

See for a -- from a 3- to 5-year perspective, okay, firstly what is, so to say, on the vision part, right? The vision that the company has is that our key responsibility is to get customers for SMEs. Now with that particular philosophy, there could be multiple ways to actually monetize from SMEs. We definitely think that even 3 years, 5 years down the line, our key revenue will come from these particular SMEs. SMEs today are paying me -- for getting paid listing on my platform, they are getting -- they buy products such as, say, a website from -- customized website that we sell to them. So there could be other tools or technology-related products which we might sell to these SMEs. So as and when -- over time, we will sort of see that which particular areas or streams of revenue are gaining traction. So overall, core, for us itself, has indeed significant room to continue growing. There could be other streams which could add on to these particular current core revenue areas.

[Operator]

We have the last question in the queue from Nikhil Jain from -- individual investor.

[Unknown Attendee]

Yes, just one question. Taken from the last question itself, so do we actually quantify or let's say measure what is the reason for this 43%, 44% churn that happened on Y-to-Y basis? And do we also track, let's say, whether these returning customers when we are charging, are they coming back again after leaving us? Let's say, for one year, they paid, then the next year, they did not pay. And after that, the next to next year, they come back again, and -- see, I'm just trying to understand what's the pull? And what's the reason for them going away in such a large number, because INR 2,000, INR 3,000, INR 5,000 should not be such a big amount for them to pay?

[Abhishek Bansal, Chief Financial Officer]

Okay. Let us understand. See, 2, 3 things there. First, this particular 43%, 44% 1-year retention rate that we define, it does -- trends have been similar for the last say 10, 15 years. It's not like earlier when bulk of the traffic used to come on our VoIP platform. At that time, churn rates were any different. Second, out of this 43%, 44%, 10%, 12% is due to business mortality itself. A new business, when it opens up, they have the most requirement of a platform such as website, they take up the subscription maybe after a year's time frame they themselves move on to doing another business, so that leads to mortality. Third, some of these particular customers, out of the remaining 30%, 32%, those particular customers might want to pause their particular campaigning for a brief period of time and then come back into the paid ecosystem later. I'll give you one particular analogy. When -- over the last 2 years, the advertising that Just Dial has done, right, we started with advertising on news channels we continuously did for about 6 months last year. Then we paused it. We again came back for a period of 2 months. Last particular quarter, in October, we did a full-fledged campaign for a period of one month and then we paused it. Now whether it should be seen that Just Dial as a customer is actually churning out of those particular platforms, I don't think so. Advertising is something which tends to be discretionary in nature, whether it is INR 2000, INR 200,000, every person tries to evaluate advertising from time to time and they take their decisions of allocating their advertising budgets accordingly.

[Unknown Attendee]

I understand that. So that's -- thank you for the explanation, but let's say if I am an SME, right, and I'm advertising on Just Dial and I am getting the good leads and all. So why would I actually go out? I understand the point that 10%, 12% is not actually, let's say, the business mortality is there and hence they will not come back. So why will I go out -- and if I even go out, then where would I go? So who are my competition in this space, where my people or my customers may be moving actually? I don't find any.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Okay. One by one, let's take it. Mortality of company is not in our hands, not in the hands of the person who's running the business. Business is shut down. 18% of businesses won't be there next year, 18%. So you cannot really renew those contracts. So that's the reality. And the other reality is that SMBs by nature are not as rational or as analytical as you and I are. They take random decisions. There are multiple people taking a decision in the business, one son takes a decision, the and other brother will shoot that idea next year. So it's a like a thing which you have to deal with. So that's another reality, which is they don't use analytics to really kind of take the business to the next level. So you -- these 2 things are just not completely in our hands, it is now -- it's been -- well, for the last 20 years actually since the time we have been running this business. And it will be no different in any part of the world. SMBs, they are pretty much the same in every part of the world. SMB mortality is also pretty much the same. So that is where we don't have to really worry about. We know with certainty about this particular thing because it's been there for the last so many years.And so 10% to 15% could be genuinely not satisfied with the kind of return on investment that it got. Probably, they were not converting the leads. They got the needs but they're not good in conversion, the competition was smarter. Many such things are possible. But then again it's a business thing, you just have to kind of -- at some point, you will just leave it.

[Operator]

We have the last question in the queue from Arya Sen from Jefferies.

[Arya Sen, Equity Analyst]

Firstly, if you could remind me, so when you say top Tier 2, 3 cities, how many would that be that you're monetizing or getting listings out of currently? And is there a number of cities that you have in mind?

[Abhishek Bansal, Chief Financial Officer]

See, Tier 2, Tier 3 cities, broadly, it would run total into more than 200 cities. So top 11 is one bucket that we define and beyond that is the rest Tier 2, Tier 3. But one thing to understand there is even in Tier 2, Tier 3, there might be geographies where the number of listings that are present, our particular manpower present on the ground might be very low. So for example in maybe Baroda might require me to put say 15 feet on street, but today I might have deployed only 5. So it's not that those particular territories are also fully monetized at this point of time.

[Arya Sen, Equity Analyst]

Understood. But I mean, out of the 200, say, cities that you talked about, how many would be where you -- are there any which are not at all covered by listings? And secondly, are there any which are not at all covered by sales?

[Abhishek Bansal, Chief Financial Officer]

No. In terms of listings, I think we would be covering most of the town cities, total they are writing about 18,000 PIN codes in India. We would be having some listings other in those particular PIN code. Again, in Tier 2, Tier 3, the extent of comprehensiveness might be low, so out of the 80 million, if there is a universe of listings, we only have 25 million. So 65%, 70% is yet to come online, and a good portion of that will be from Tier 2, Tier 3 cities.

[Arya Sen, Equity Analyst]

And what about sales monetization? Or wherever you have listings you're already monetizing? Or is there a gap in that?

[Abhishek Bansal, Chief Financial Officer]

No, there are a lot of cities where say Tier 3, Tier 4 towns where we might still have not deployed the manpower. So as and when a particular branch has managerial bandwidth, they keep deploying. Because for deploying manpower, we do need a local team lead or a local manager also to be stationed. So as and when we have that managerial capabilities, we expand into those particular cities.

[Arya Sen, Equity Analyst]

Great. And you talked about 46% of the campaigns coming from these. So what's the listing count?

[Abhishek Bansal, Chief Financial Officer]

Listing count broadly would be about 50% or so. 50% in Tier 1, the rest 50% in Tier 2, Tier 3.

[Arya Sen, Equity Analyst]

Okay. So the conversion is not too bad as of now?

[Abhishek Bansal, Chief Financial Officer]

No.

[Arya Sen, Equity Analyst]

Understood. And lastly, any plans on a larger payout given the amount of cash you have?

[Abhishek Bansal, Chief Financial Officer]

See the larger payouts, as of now, as I understand could be by way of any special dividend or something. But considering tax implications, we would want to go primarily to a buyback route. So the next buyback can be earlier, done after a period of 1 year. So at that point of time, board and the company will evaluate what's the best use of cash that the business has generated.

[Arya Sen, Equity Analyst]

Understood. And sorry, one more question. The 90%-plus of browser-based traffic that you talked about, what's the split between direct people entering Just Dial? Was this Google Search...

[Abhishek Bansal, Chief Financial Officer]

Of the total traffic, broadly 1/4 comes directly to us and 3/4 comes via other search engine.

[Operator]

We have the next question from Nikhil Jain, individual investor.

[Unknown Attendee]

I just had one more question, actually. I just wanted to know if Just Dial run their listing, anybody, are they doing any quality check or sanity check on that particular SME or supplier or a person? Let's say, if you have 4 or 5 people in the same industry from the same place, who are advertising or doing a listing on Just Dial? So do you do any quality checks? Or it's only based on what's the kind of advertising that, that person wants? And hence, the price that he is paying and he is put on top?

[Abhishek Bansal, Chief Financial Officer]

See, 2, 3 things happen here. One, our particular feet on street, when they actually visit these particular businesses, they actually click pictures of these particular businesses. These pictures, one, they act as a sort of verification check. Second, they also help us gather geocodes, which is the physical latitude, longitude of these particular businesses. Secondly, there is a database of 91 million mobile-verified ratings and reviews that we have. So even if there is a business who is not providing adequate service, even if they were to pay to Just Dial, they would end up getting weak ratings which would result in to users not actually availing services from them. There are filters and sorting options that are available for users for easy use. In any case, today, 90% to 93% traffic comes on our Internet platform where it is very easy for a user to scroll down in case they find ratings of a particular listing that are not appropriate.

[Unknown Attendee]

Okay. And if there is a consistent user feedback which comes in across a particular service provider which is inadequate, then will Just Dial remove or, let's say, they'll keep it down in the ratings?

[Abhishek Bansal, Chief Financial Officer]

Yes. So in case there is -- suppose we get user complaints about any particular problems with any vendor, we do take off those particular listings post our internal evaluation.

[Operator]

We do not have[Audio Gap] return the program back to you for the final remarks.

[Abhishek Bansal, Chief Financial Officer]

Thank you, everyone, for joining us. As we have mentioned earlier, focus continues on keeping our focus on core search, which has enormous room to keep growing. In case you have any queries, please do reach out, we will do our best to address. That's it from my side. Thank you.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Thank you.

[Operator]

Thank you, panel members. Thank you, speakers. Thank you, participants. That does conclude the conference call for today. Have a wonderful evening ahead. Thank you, and have a nice day.

[Venkatachalam Sthanu Subramani Mani, Founder, MD, CEO & Executive Director]

Thank you.