JUST DIAL LTD (JUSTDIAL) Q4 FY23 Earnings Concall Transcript

JUST DIAL LTD (NSE: JUSTDIAL) Q4 FY23 earnings concall dated Apr. 18, 2023

Corporate Participants:

Abhishek Bansal — Chief Financial Officer

Analysts:

Vivekanand Subbaraman — Ambit Private Limited — Analyst

Nikhil Chaudhary — Nuvama — Analyst

Swapnil Potdukhe — JM Financial — Analyst

Darshil Jhaveri — Sapphire Capital — Analyst

Darshit Vora — RoboCapital — Analyst

Ruchi Burde Mukhija — Elara Capital — Analyst

Lavanya Tottala — UBS — Analyst

Abhishek Banerjee — ICICI Securities — Analyst

Raghav Behani — Citi — Analyst

Rupesh Tatiya — Intelsense Capital — Analyst

Sarang Sanil — RW Investment Advisors — Analyst

Mohit Motwani — Nuvama — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Just Dial Limited Q4 FY ’23 Earnings Call. [Operator Instructions]. Please note that this conference is being recorded.

We have with us today Mr. V.S.S. Mani, MD and CEO; and Mr. Abhishek Bansal, CFO, from Just Dial Limited. I now hand the conference over to Mr. Abhishek Bansal, CFO, from Just Dial Limited. Thank you and over to you, sir.

Abhishek Bansal — Chief Financial Officer

Thank you, moderator. Hi, everyone. Welcome to Just Dial’s earnings call for fourth quarter of fiscal ’23. Our operating revenue for the quarter stood at INR232.5 crores, witnessing 5% sequential growth and 39.5% on year-on-year basis. Year-on-year growth seems higher due to COVID- impacted quarters in last fiscal year, fiscal ’22. On a per day basis, Q-o-Q revenue growth stood at 7.4% in last quarter. Our adjusted EBITDA excluding non-cash ESOP expenses stood at INR35.6 crores, representing an adjusted EBITDA margin of 15.3%. Our employee expenses have increased 29.2% on a year-on-year basis led by about 37% increase in average headcount for the year. Last year, we have done primarily recruitment in our sales technology product and content teams. On a sequential basis, employee expenses were relatively controlled at just 3% Q-o-Q increase with headcount remaining almost flattish. Our advertising expenses for the quarter stood at about INR6 crores. Other income stood at a normalized level of INR74.2 crores for the quarter.

Profit after taxes stood at INR83.8 crores, representing a growth of 278% on Y-o-Y basis due to low base effect and 11.3% on a sequential basis. For the full year, revenue grew 30.6% year-on-year to INR845 crores. EBITDA margin excluding ESOP expenses stood at 11.3% for the year. Overall, as we see, fiscal ’21 and fiscal ’22 were impacted for us due to COVID, but the business has been able to bounce back very strongly this year.

In fiscal ’23, our collections [Phonetic] stood at almost INR945 crores, representing about 44% year-on-year growth. We sold about 68% of our contracts on monthly plans this year, as a result of which monthly ECS collections have witnessed very strong growth. Our March month ECS collections from customers stood at about INR45 crores, which was just about INR26 crores a year ago. This essentially demonstrates that we are exiting the year on a relatively strong note. As far as margins are concerned, they are also on an improving trajectory. And as we have mentioned earlier, most employee costs hit our P&L immediately, but corresponding uptick in revenue recognition happens with a lag as services are rendered.

So while reported EBITDA stood at INR96 crores for the year excluding ESOP expenses, there was a INR100 crore difference between accrued revenue and collections for the year. As and when revenue catches up with collections, margins will see expansion, which is also visible on Q-o-Q basis. Deferred revenue was also very healthy at all-time high of about INR438.2 crores, growing 29.6% on year-on-year basis and 8.9% sequentially. This was led by strong 4Q collections, which were about INR268 crores up about 9.5% sequentially.

Active paid campaigns at the end of the quarter stood at 538,000 approximately, which was up 16.6% year-on-year and 3.1% sequentially. Overall, cash and investments stood at INR4,067 crores as on 31st March. Coming to operating highlights, traffic stood at 159.3 million unique users for the quarter, growing 10% year-on-year. 86% traffic comes on mobile, and mobile traffic is growing at about 13% year-on-year. Total listings now stand at about 36.5 million. Both desktop and mobile platforms are seeing revamp and several user-friendly features are getting added as we speak.

Overall, if I were to summarize, FY ’23 was a very healthy recovery year for us. Our assessment is that we are exiting the year on a strong footing on most parameters. For example, traffic is close to pre-COVID peak levels [Indecipherable] also but current traffic came in at almost 65% lesser spends versus pre-COVID advertising run rates. [Indecipherable] have surpassed pre-COVID levels as well. Most of the top-line driving parameters such as collections, deferred revenue are all quite healthy. Pre-COVID, we used to get just about INR20 crores, INR21 crores on a monthly basis from our monthly plan customers. But that, as I just mentioned, stood at INR45 crores for the exit month.

Margins on reported basis are in mid-teens, but with respect to collections, they were still 25% plus in fourth quarter. Our endeavor this year would be to build on a strong base, which is laid down in fiscal ’23.

With this update, we shall now open the floor for questions for further discussions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. We have our first question from Vivekanand Subbaraman from Ambit. Please go ahead.

Vivekanand Subbaraman — Ambit Private Limited — Analyst

Hello, thank you so much for the opportunity. So I’ll start with the bookkeeping question. So could you help us, Abhishek, with the split of the paid campaign by top 11 cities versus the non-top 11 cities and the revenue split. That’s one. Secondly, Abhishek, I think in an interview today on television, I think you mentioned a little bit about JD Mart and its progress. Could you help us understand the journey of JD Mart? I mean it’s been almost three years since launch, what does it contribute to revenue, what is the percentage of manpower there, what is the realization? And obviously also in terms of, let’s say, if you are able to quantify the operating margins there or any other qualitative aspect, that would be very helpful. Thank you.

Abhishek Bansal — Chief Financial Officer

Vivek, on your first question regarding Tier 1 versus rest of the cities, so Tier 1 cities contributed about 61% to revenues and about 41% to paid campaigns. So essentially, our ticket size in Tier 1 is more than twice of what we have in Tier 2, Tier 3 cities. On JD Mart, the platform is shaping up well. The way we look at it is, B2B segment now contributes over 26% of our overall revenues. Versus three years back, this contribution was just about 20-odd percent or so. In terms of traffic as well, these particular categories now get almost 10% of our overall traffic and in order to monetize this segment better, there is 700-750 member dedicated team that is working on monetizing these B2B categories. Even going forward from next two to three years, I think this particular segment should be the key driver for growth for us because in B2B segment, most of the SMEs do require our platform such as ours to get — to reach out to customers pan India.

Vivekanand Subbaraman — Ambit Private Limited — Analyst

Okay. This is very helpful, Abhishek. Just a couple of follow-ups on JD Mart. So when you say 27% — 26% of revenue, this is exit or is it Fiscal ’23? That’s one. Secondly, could you give us any color on the realizations on the JD Mart side and also when I look at [Indecipherable], it shows that the traffic doesn’t seem to be very big in jdmart.com. Perhaps you are getting still a lot of traffic in these categories on justdial.com. So could you help us understand this better? And also when you say that this is going to be a key driver, how is it that you will drive revenue growth here? Is it going to be getting more SMEs to pay for JD Mart, or is it going to be getting more revenue from the existing ones who’re already paying you? if you could help us with some of these things, that would be helpful.

Abhishek Bansal — Chief Financial Officer

So that 26% revenue contribution is for the full year, the exit run rate would be probably 0.5% or 1% higher. As far as realizations are concerned, realizations on the B2B side broadly should be I think 10%, 15% higher versus the rest of the paid subscription business that we have. Coming to your point on traffic, see the way we look at this particular traffic is that pages which are specific to JD Mart all the B2B pages, which could be our product page for a particular B2B digital catalog or specific results page, those particular pages are available both within Just Dial ecosystem as well as the JD Mart ecosystem. For a merchant coming up B2B listing, it does not matter to them whether a particular inquiry was generated from Just Dial or JD Mart. Just Dial has a very strong STO [Phonetic] rankings. So it makes sense for us to be — to leverage those particular rankings for even B2B related pages. So overall, we look at it on a combined basis that out of the 159 million users that I’m getting, on a combined basis, about 10% of the traffic came for these B2B related pages.

Vivekanand Subbaraman — Ambit Private Limited — Analyst

Makes sense. Thank you so much. I’ll skip back in the queue.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Nikhil Chaudhary from the Nuvama. Please go ahead.

Nikhil Chaudhary — Nuvama — Analyst

Yeah, so I have a couple of questions. One is regarding the contribution of B2B, which is already at 26%, so what is your expectation going forward? What kind of contribution [Indecipherable] next couple of years?

Abhishek Bansal — Chief Financial Officer

So Nikhil. Good part this year was that there was relatively broad-based recovery. And even the B2C side of categories had a very strong rebound in our 50% year-on-year collections growth. B2B segment is having relatively higher growth. This 26% over the next two to three years, our assessment is, could go to say 33% to 35% or so. But we’ll obviously keep assessing as each quarter, each year passes by.

Nikhil Chaudhary — Nuvama — Analyst

Sure. Second is in one of your interviews in the morning, you mentioned about your collection margin hitting the 25%, so just wanted to understand what would be the timeline basically in terms of its conversion and its impact we can now fully see in our financial.

Abhishek Bansal — Chief Financial Officer

So I think pre-COVID, we used to be at a sustainable sort of 25% plus kind of margin and we exited last year at about 15% odd margin. So I think next year same time, we are targeting that we want to be at that pre-COVID margin levels. So as I mentioned during my interviews as well, the accrued revenue for the year stands at INR845 crores. And my total operating expenses of INR758 crores, in reality, they actually fetched me INR945 crores for the year. So while it P&L revenue recognition will catch up with collections. I think in another three to four quarters, that catch-up should happen.

Nikhil Chaudhary — Nuvama — Analyst

Okay, okay, understood. Just one more on bookkeeping side, Abhishek, tax rate since last three quarter has been relatively low and what is the reason for that and what would be the normalized tax rate going forward? That’s it from my side, Abhishek. Thank you.

Abhishek Bansal — Chief Financial Officer

Okay, so on our operating income, we attract complete 25.2% tax rate. There are one or two deductions that we get. Effectively, it should be around 24%, 24.5% or so. Having said that, in a year if operating income is on the lower side, those reductions result in a much lesser operating tax rate. But from next year onwards, I think 24%, 25% should be the tax rate on operating income. And other income so far used to attract about 12% to 13% tax rate. So as you know, that taxation norms have changed from 1st of April. So, the treasury that is already invested, the gains that will get realized out of these investments should on an average gate tax rate of 12% to 13%, assuming they are holding them for three years wherein it will be taxed at 20% with indexation.

Nikhil Chaudhary — Nuvama — Analyst

Okay. Abhishek, understood. Thank you so much and good luck for next year.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Swapnil Potdukhe from JM Financial. Please go ahead.

Swapnil Potdukhe — JM Financial — Analyst

Yeah. A couple of — hello.

Operator

Yes, sir, we can hear you.

Abhishek Bansal — Chief Financial Officer

Yah. Please go ahead.

Swapnil Potdukhe — JM Financial — Analyst

Yeah. A couple of questions, one on your headcount change. So, what you — I noticed that your sales headcount has come off recently on a sequential basis. Was that a particular effort that you took to save on cost or have you reached the required number of people to ensure that you continue to grow at a certain growth hereon? What was the reason exactly?

Abhishek Bansal — Chief Financial Officer

So, Swapnil, on headcount, fourth quarter typically lesser hiring because primarily there is a chunk of hiring that we directly do for the freshers from campuses and those joining that typically during the first quarter or so, so fourth quarter has relatively muted hiring. That is why you see that particular dip of around 250-300 employees in savings, but that is just an aberration. This year, the increase in manpower was significantly higher, which has yield this particular growth as well. Going forward, there will be hiring, but will be relatively calibrated.

Swapnil Potdukhe — JM Financial — Analyst

Will it be possible for you to quantify that, like versus the current year maybe?

Abhishek Bansal — Chief Financial Officer

So probably, I mean, it could be around, say, overall basis, 8% to 10% at best. And ever will be [Phonetic] that whatever hiring that we have done in the last two to three quarters, we get them to desired productivity levels and thereafter reassess that what kind of hiring we need to do for growth in later half of fiscal ’24 and even fiscal ’25.

Swapnil Potdukhe — JM Financial — Analyst

Got it. And second question is on your sequential paid campaign additions. Now if I see your last five quarters, your number has come up in this quarter, if I were to just compare that with the numbers that you were earning. So is that to say that the easier part is done now and hereon the paid campaign additions will come to a normalized state, which was at the time of just before the start of COVID?

Abhishek Bansal — Chief Financial Officer

Okay, see sequential trend in paid campaigns, I don’t think so, we should look at it in that much granularity that we were adding 18,000 and that has come to 16,300. Overall on a broader picture, if you see for the year as a whole, there was a decent — this particular 30% revenue growth was split as about 17%, 18% growth via realizations and rest via paid campaigns. Fourth quarter has, to say, lesser working days compared to third quarter. So, those things can play a bit of a role in terms of volume count. For next year and coming years, overall, we would look at growing our top-line, let’s say, half of the growth materializing from addition of paid campaigns and the rest half via realizations. There is nothing to say that growth has already come in and now it will be our previous sort of levels and so on.

Swapnil Potdukhe — JM Financial — Analyst

But with a base of 76,000 additions in this year, will that be possible to achieve?

Abhishek Bansal — Chief Financial Officer

Yeah, definitely. I would say that we are now at levels where we were pre-COVID. Already, we — this particular business should be at a much higher level, even at — from a top-down perspective, India has about 65 million small and medium businesses. Another 10 million to 15 million could be freelancers, so a universe of say 75 million to 80 million businesses. Why should 1% of the population at least not be spending on digital advertising? 1% is a very conservative number, which comes to 800,000. So that way, [Indecipherable] is not about opportunity size, etc. So the numbers that we have this 538,000, etc., these are also — I mean there can be very well growth on this particular numbers as well for coming certain years.

Swapnil Potdukhe — JM Financial — Analyst

Got it. Just one last question if I can go on and just squeeze in. Any update on JD Xperts? Last time, I think you had mentioned that a pilot was successfully conducted and you were expecting a full-fledged launch in the next quarter. So, any update on that?

Abhishek Bansal — Chief Financial Officer

So JD Xperts, in terms of user experience, things are getting fine-tuned now for whatever bookings that we are accomplishing, the cancellation rates, which were about 35%, 36% two quarters ago, have come down to almost about 20% levels. 91% of the bookings are happening — are being fulfilled on time. The average rating that we get from users for services rendered is 4.7 plus. So this way, user experience at least is so quite well established. And going forward, we shall look to scale up transactions for JD Xperts during first half of fiscal ’24.

Swapnil Potdukhe — JM Financial — Analyst

Is the JD Xperts by any chance supporting your realizations improvement or like that? How do you report that in your revenue record?

Abhishek Bansal — Chief Financial Officer

So at this point of time, there is no revenue contribution of JD Xperts that gets recognized as revenue in financials.

Swapnil Potdukhe — JM Financial — Analyst

Got it, got it. Thanks a lot for the answers.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Darshil Jhaveri from Sapphire Capital. Please go ahead.

Darshil Jhaveri — Sapphire Capital — Analyst

Hello, hi, good evening. Am I audible?

Operator

Yes, please go ahead.

Abhishek Bansal — Chief Financial Officer

Yes, please go ahead.

Darshil Jhaveri — Sapphire Capital — Analyst

Yeah. So thank you so much for taking my question and congratulation on a great set of results, so I would just like to ask, now I think we are back to pre-COVID levels, so kind of whatever our growth ambitions were, so they would have gotten delayed by two years, so what trajectory do we see over the next two, three years? Would we be able to grow at this 30%, 40% growth rate? That was my first question.

Abhishek Bansal — Chief Financial Officer

So, Darshil, you are right, COVID did set us back by almost about two years. But the good part is that this particular year, one in a single year, we were able to grow several of our top-line parameters by 45% to 50%. Second, the exit run rate is much healthier versus where it was pre-COVID. So as I mentioned in my opening remarks, we used to get about INR20 crores, INR21 crores from our ECS — monthly ECS customers way back in March ’20, but I exited March ’23 at INR45 crores. So basis that, overall fourth quarter collections were, say, about INR268 crores and pre-COVID run rate was about 235 [Phonetic], so on that basis, we are already about 17%, 18% higher versus pre-COVID levels. Since we have been able to achieve such a strong growth in one particular year, we do think that we will be able to have sustainable growth in coming years. Now in quantifying the same whether that would be 20%, 30% of whatever, that we will have to see as we go along.

Darshil Jhaveri — Sapphire Capital — Analyst

Okay, sir. Okay, so the current quarter is — sir, with regards to margins, I think our target could be to pull back from pre-COVID levels. Would that be early year-type of growth that we could you know — see quarter-on-quarter improvement or would it come after a jump when we hit a certain benchmark revenue level?

Abhishek Bansal — Chief Financial Officer

So the way revenue recognition works for us is that if I pick up a contract of say INR24,000 from a customer, revenue recognition is on a daily basis for say INR24,000 divided by 365. Most of my expenses, they tend to be front-ended, So if I have ramped up my hiring, most of my employee expenses hit my P&L in that very month, which is why this particular year, my reported margins are relatively on a lower side. So as and when revenue recognition keeps improving in future quarters, margins should keep expanding. So you could take from last two to two three quarters the kind of sequential improvement we have been able to demonstrate. Similar sort of trend should continue in future quarters assuming we are able to grow our sales in a similar fashion.

Darshil Jhaveri — Sapphire Capital — Analyst

Okay, sir and if I may ask one more question regarding topline, sir, do we face any seasonality in our top-line or would we be able to see kind of Q-on-Q increasingly?

Abhishek Bansal — Chief Financial Officer

So typically, fourth quarter tends to be relatively stronger for us. First quarter slightly softer, primarily reason being that historically, March month, which is the year end month has seen surge of customers who have signed up and year-on-year, the renewals keep coming in. So slight seasonality is there. Otherwise, there isn’t much of our seasonality, though at a specific category level, there could be, for example, in first quarter or summer months, there could be customers for easy repairs kind of categories, who could be signing up; in wedding season, it could be related categories and so on, but since overall revenue base is very diversified across categories, there isn’t much of a seasonality that way.

Darshil Jhaveri — Sapphire Capital — Analyst

Okay. I think that helps me a lot. Thank you, sir and all the best.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Darshit Vora from RoboCapital. Please go ahead.

Darshit Vora — RoboCapital — Analyst

Yeah, hello, am I audible?

Operator

Yes, sir.

Darshit Vora — RoboCapital — Analyst

Yeah, good evening. So my question is quite simple. I just need a basic ballpark view of revenue and margin guidance going in FY ’24 and ’25.

Abhishek Bansal — Chief Financial Officer

So, Darshit, in terms of explicit guidance, we do not issue a particular guidance, but I think some of our parameters should be able to give some views on where things could be headed. For example, as I mentioned, against INR845 crores of revenue, we had about INR945 crores of collections. The realizable value, which is the amount of money that I expect to receive in next one year from sign-ups that I have done in last year, that stood at broadly about INR1,000 crores or so. My deferred revenue stood at INR438 crores, and that has been growing at 30% year-on-year. So, basis this, there could be — I mean, there should be healthy revenue growth next year. As far as margins are concerned, they should see sequential improvement and the target would be to exit next year or even earlier at about pre-COVID margin levels. And in case there is scope for additional margins, we would take a call whether we would want to deploy those incremental margins towards advertising to grow the user base, which would aid monetization in future years.

Darshit Vora — RoboCapital — Analyst

Okay. Thanks so much.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Vijit Jain from Citi. Please go ahead. Mr. Vijit Jain, please accept the prompt on your screen and unmute your microphone. Since there is no response, we’ll move on to the next question from Vivekanand Subbaraman from Ambit. Please go ahead.

Vivekanand Subbaraman — Ambit Private Limited — Analyst

Okay. Thank you so much for the follow-up opportunity. Abhishek, could you talk a little bit about the INR30 crore intangible assets under development money that was spent in fiscal ’23? Could you give us some color on how much got spent in experts, shopping and other discretionary projects and how to think about this number getting operationalized in the P&L?

Abhishek Bansal — Chief Financial Officer

So, Vivek, we had about INR30 crores spent towards these particular newer initiatives. And this particular development happens in a phase wise manner. Most of these particular developments for the first phase are coming to an end. So I think sometime during the next or subsequent quarter, they should start getting capitalized. So basically, they should move from intangible assets under development to capitalized assets and thereafter, they would get depreciated over the useful life [Phonetic] of these platforms, which could be broadly around two and a half to three years.

Vivekanand Subbaraman — Ambit Private Limited — Analyst

Great. This is helpful. Thanks a lot.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Ruchi Mukhija from Elara Capital. Please go ahead.

Ruchi Burde Mukhija — Elara Capital — Analyst

Thank you. Hope I am audible.

Operator

Yes, you are. Please go ahead.

Ruchi Burde Mukhija — Elara Capital — Analyst

Yeah. Okay. Abhishek, since you last spoke to this forum, has there been any strategic discussion on the use of cash?

Abhishek Bansal — Chief Financial Officer

So, Ruchi, right now, the INR4,050 crore treasury is deployed in safe instruments. They yield about 7.2%. There is no explicit thought process right now on utilization or dispersal of this particular cash. The idea is that the macro-environment remains uncertain. We operate in a very disruptive sector, so to say. So there could be opportunities in future, either on the organic side, for example, some of our newer initiatives, they might require part of the cash, though our core business itself throws sufficient free cash flows or the way environment is panning out, there could be some inorganic opportunities as well. So having said that, there are no incremental discussions over last say quarter regarding this particular usage of cash.

Ruchi Burde Mukhija — Elara Capital — Analyst

Got it. Secondly, we used to see a typical seasonality for your advertisement expense, which used to fall more industry wide on June quarter, do we expect similar to happen this year? Have you started some new advertising spends for this quarter?

Abhishek Bansal — Chief Financial Officer

So, advertising spend in the past, it has seen seasonality whenever we have done typically TV advertising because that tends to be lumpy in nature. Last year, bulk of the advertising was digital in nature. So that was quite smoothened down. For next year, we could — we think INR35 crores, INR40 crores we are earmarking for digital and related initiatives. In case we assess that we need to spend more either for new initiatives or otherwise for the core business, we will assess at that point of time. So as of now, I would not build in any particular seasonality for advertising spend

Ruchi Burde Mukhija — Elara Capital — Analyst

Got it, and the last bit, Abhishek, we know that — I mean Just Dial has started integration process with ONDC. Does that have any overlap with some of the new initiatives that Just Dial is pursuing?

Abhishek Bansal — Chief Financial Officer

So with ONDC, the integration, etc., is in relatively initial stages itself. We do understand that ONDC as an architecture is still getting finalized. Some particular partners have come in onboard as buyer apps and come in as seller apps. Our core strength historically has been service-oriented categories. So we would see how this particular thing pans out and what role we can play either as a seller side app wherein we can onboard vendors whose digital catalogs we could create such that those vendors could sell online via any of buyer side apps that are out there. But it should not conflict so to say with any of our existing initiatives.

Ruchi Burde Mukhija — Elara Capital — Analyst

Okay, let me add more details around this. As you said, you have strength around the service categories. So, do you see ONDC having some kind of play in JD Xperts at least at conceptive level?

Abhishek Bansal — Chief Financial Officer

So my understanding — my limited understanding is that ONDC plays a role more on the product side, wherein if you are selling a particular product, you have a flexibility to sell via any particular consumer app, front-end app and you also have the flexibility to choose any logistics partner for fulfillment of those. On the services side, I don’t think so at this point of time ONDC shall pay that significant role.

Ruchi Burde Mukhija — Elara Capital — Analyst

Thank you, Abhishek. All the best.

Abhishek Bansal — Chief Financial Officer

Thank you so much.

Operator

Thank you. [Operator Instructions]. We have our next question from Lavanya Tottala from UBS. Please go ahead.

Lavanya Tottala — UBS — Analyst

Hi, hope I am audible. Thanks for the opportunity.

Operator

Yes.

Lavanya Tottala — UBS — Analyst

Yeah. Hi, Abhishek. So most of my questions are answered. I just wanted to understand your view about the incremental paid campaigns increase given the macro-environment, which is making it a bit difficult for SMEs. So how do you see the incremental increase next year, FY ’24 specifically?

Abhishek Bansal — Chief Financial Officer

So, Lavanya, while you rightly pointed out, the macro remains challenging, but the good part for our particular business is that post-COVID, most SMEs have a realization that if they have even INR10,000 to spend for advertising, they should ideally spend on some digital initiative rather than any traditional media or so. And our particular subscriptions are quite affordable at just average ticket size of INR18,000 per annum. So to that extent, so far we have been able to grow our campaigns in the last three to six months as well when these macro challenges have been unfolding. We’ll see how things proceed. But at this point of time, I think we are fairly confident that we should be able to manage this macro and be able to grow both our campaigns as well as realizations for next year’s growth.

Lavanya Tottala — UBS — Analyst

Okay, so I mean I just wanted to make my understanding clear. So even the exit rate in the month of March and April, more or less, the situations are not that bad as one would assume, right?

Abhishek Bansal — Chief Financial Officer

So March historically has been a seasonally strong month for us, and this year was quite strong, like it used to be pre-COVID. April, it is still very early days, first two weeks itself, and in our business, it is not possible to ascertain just on weekly trends whether there is softness or not. So, so far, I do not see those concerns.

Lavanya Tottala — UBS — Analyst

Okay, got it. So I just have missed this part, in B2B, contribution is 26% and within that, JD Mart — what will be the proportion of JD Mart?

Abhishek Bansal — Chief Financial Officer

So when we refer to JD Mart, we are essentially referring to the B2B side of the business. So 26% of our overall revenue came from SMEs who deal in B2B related categories.

Lavanya Tottala — UBS — Analyst

Yeah. Out of that, how much is through Just Dial and what will be the share of JD Mart, the direct hit?

Abhishek Bansal — Chief Financial Officer

So there is no segregation that happens. So when a particular ball-bearing manufacturer signs up with us, that particular amount results in services being rendered across all platforms, be it JD, be it JD Mart, be it the mobile platform, desktop platform, voice platform. There is no platform wise segregation of that revenue.

Lavanya Tottala — UBS — Analyst

Okay, okay, got it. And on the ad spend that you have mentioned INR35 crores, that’s for the full year, which you have earmarked or?

Abhishek Bansal — Chief Financial Officer

Yes, for the full year, fiscal ’24.

Lavanya Tottala — UBS — Analyst

It’s the overall ad spend, not just…

Vivekanand Subbaraman — Ambit Private Limited — Analyst

So this INR35 crores, INR40 crores, we have earmarked primarily for the core business itself. For other initiatives, that will have to be looked at separately.

Lavanya Tottala — UBS — Analyst

So, that you are planning anytime soon in the next coming one, two quarters for JD Mart or JD Xperts specific advertising in coming few quarters?

Abhishek Bansal — Chief Financial Officer

So as and when we have more clarity on the same, we shall share. So immediately, I think in next or the ongoing quarter, there is unlikely to be a meaningfully spend on the same.

Lavanya Tottala — UBS — Analyst

Got it, got it. Thank you. Thank you so much.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Abhishek Banerjee from ICICI Securities. Please go ahead.

Abhishek Banerjee — ICICI Securities — Analyst

Hi, Abhishek. Thanks for the opportunity. Obviously, a great set of numbers. Just wanted some clarity on your plans for JD Mart going ahead. So you gave some details on how the transaction level KPIs have turned out for JD Xperts. Can you give something similar for transactions that are happening in JD Mart?

Abhishek Bansal — Chief Financial Officer

So, Abhishek, JD Mart is also a paid subscription basis model. The key difference versus the core Just Dial platform is that JD Mart is focused towards B2B and search for JD Mart originates primarily as a product-based search. So earlier on Just Dial, you would search for, say, coffee machine manufacturer, but in case of JD Mart, you would specifically search for coffee machines, you will get various products out there and from there, you navigate to the specific merchant and then get in touch with that particular vendor. In essence, both are primarily lead generation models because in B2B, many of the user requirements are customized in nature. Buyer and seller need to agree on delivery terms, payment terms, quality of the product associated etc., etc. So to that extent, the key difference, as I said, it is about the products being brought in and those products have been brought in on JD also in those B2B listings and there is a dedicated platform, JD Mart, as well. In terms of numbers about I think, we have 6.5 million, 7 million businesses, which qualify for these B2B categories and out of those, for about 1 million listings, we have catalogs on our platform. Those catalogs are being enriched on a day-to day basis. And B2B categories currently contribute about 10% to our overall traffic that we get in any quarter.

Abhishek Banerjee — ICICI Securities — Analyst

Understood. So you will not be getting into the ordering and fulfillment part of the value chain with JD Mart?

Abhishek Bansal — Chief Financial Officer

See, the ordering and fulfillment part in case of B2B primarily happens for bulk purchase of, say, branded goods itself. So you need, say, 10,000 pieces of 100 mL Dettol hand sanitizer. Yes, those particular transactions can take place. But that, again, is a low-margin e-commerce business. For us, the low-hanging fruit is to grow our revenues from the subscription business on the core B2B side, wherein we are able to get quality buyers for sellers listed on the platform.

Abhishek Banerjee — ICICI Securities — Analyst

Got it. And then JD Shopping is going to get even more defocused from here on?

Abhishek Bansal — Chief Financial Officer

So again, in JD Shopping, as we briefly discussed last quarter as well, the key thing that we are evaluating is the kind of unit economics that can be there. So we did certain pilots, but clearly, if we are making 7% to 8% margin, the ecosystem is such that there is no way we can even break even on those particular orders in near future or maybe in a couple of years. The approach that we intend to take is slightly different, use JD shopping also as a lead-gen vehicle wherein we bring in our concept of, say, reverse auction, where if a user is willing to buy a Samsung mobile phone, the user is able to get quotes via our platform from local vendors, and in case the user likes a particular quote, they could use our particular payment solution to make online payment also to that vendor. We pass on that particular order to that particular merchant. The merchant can either do their delivery on its own or they can even avail third-party logistics, which are integrated with our platform. The difference in this approach versus a conventional e-commerce or an inventory-led model is that in this particular case, the fulfillment is primarily being handled by the merchant. But we believe that this particular model will be much better in terms of unit economics. So that is how we are looking at this at this point of time.

Abhishek Banerjee — ICICI Securities — Analyst

Yeah, understandable. But at the same time, that would also mean you would have limited control on quality.

Abhishek Bansal — Chief Financial Officer

So you are right. See, one approach could be that, okay, if you want to have absolute control on quality, that would require a significant amount of investments. And not just that, we have seen that user behavior in India is not that loyal. So even if I were to give a great user experience, I need to be very competitive or lower in terms of pricing as well, which could consume a huge amount of cash. So since our strength historically has been services, within services versus products, I would try to scale up on services bit first and then possibly see how to play the product side.

Abhishek Banerjee — ICICI Securities — Analyst

Understood, understood. And just one last question. On spends on JD as well, so you mentioned that now you are almost ready to ramp up JD Xperts. So any indication on the timing? And exactly what — so would it mean that you’re going to do a lot of advertising? Or does it still require more operational pieces to be put in place before you can really ramp it up to a pan-India level?

Abhishek Bansal — Chief Financial Officer

So there are two parts to it. One is the platform becoming commercially live. That should happen over the next three to four months. The second part is ramping up transactions for that particular vertical. Now, we are also conscious of the fact that from the same set of categories, we are even today earning a decent subscription revenue as well. So while there would be a bit of cannibalization as we ramp up those particular transactions, so we will assess that at what point of time we want to deploy advertising money to ramp up those transactions, so that we will communicate as and when we crystalize our advertising plans for the same. But in terms of platform becoming commercially live with the majority features, that should happen in another quarter or so.

Abhishek Banerjee — ICICI Securities — Analyst

Understood. Thank you all. Thank you, Abhishek. [Technical Issues].

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Raghav Behani from Citi. Please go ahead. Mr. Raghav Behani?

Raghav Behani — Citi — Analyst

Hi, am I audible?

Operator

Yes.

Raghav Behani — Citi — Analyst

Yeah. So last three years, based on B2B going from 20% of revenues to 26%, it implies B2C is down 20% over FY ’22, ’23. Given you have also taken some price hikes of 10% during this period, paid campaigns must be further down. That’s my first question.

Abhishek Bansal — Chief Financial Officer

So you mean paid campaigns on B2C side?

Raghav Behani — Citi — Analyst

Yes.

Abhishek Bansal — Chief Financial Officer

So paid campaigns on B2C side, out of the 5,38,000, yes, B2B side would be bit down versus pre-COVID levels that would have been offset partly by B2B campaigns. Having said that, B2B, the contribution is more from the realization side rather than the campaign side, because historically, our B2B realizations were very close to B2C, whereas the thought process was that once we have a dedicated platform in place, we should be able to monetize much better on the B2B side from the same customer.

Raghav Behani — Citi — Analyst

Okay. And also one follow-up question. So in the balance sheet, I see that the other current liabilities is up INR100 crores year-on-year. Any reason behind this sharp increase?

Abhishek Bansal — Chief Financial Officer

So the deferred revenue, which increased by INR100 crores, we collected INR945 crores and we consumed INR845 crores of revenue. That incremental INR100 crores is what sits as deferred revenue on the balance sheet.

Raghav Behani — Citi — Analyst

Okay, yeah, sure. That answers my questions.

Operator

Thank you. We have our next question from Rupesh Tatiya from Intelsense Capital. Please go ahead.

Rupesh Tatiya — Intelsense Capital — Analyst

Hello, sir, can you hear me?

Abhishek Bansal — Chief Financial Officer

Yes, please go ahead.

Rupesh Tatiya — Intelsense Capital — Analyst

Yeah. My — most of my questions have been answered. My first question is, what is the number of paying subscribers on JD Mart?

Abhishek Bansal — Chief Financial Officer

So, number of paying subscribers on JD Mart should broadly be, I think, in the range of about 120,000 or so, though I don’t have the exact figures. But I think about 20%, 22% of the overall paid subscribers would be for B2B-related categories.

Rupesh Tatiya — Intelsense Capital — Analyst

Okay, okay. So this number I had for Q1, which was around 1 lakh. So now you’re saying 1.2 lakhs.

Abhishek Bansal — Chief Financial Officer

Broadly anywhere between 110,000 to 120,000 or so.

Rupesh Tatiya — Intelsense Capital — Analyst

Okay. And then my second question, sir, is this — I mean JD Xperts, what is kind of like revenue of the — let’s say, largest player in the industry? And what kind of revenue do you expect to do in, let’s say, ’24 and then ’25?

Abhishek Bansal — Chief Financial Officer

So the biggest vertical player in this particular segment, as I know they do anywhere about, I think, INR350 crores to INR400 crores, though there is an overseas contribution also they have. But I think more importantly, they also spend INR800 crores to INR900 crores to get that revenue. So this is the kind of mismatch that exists in the ecosystem right now, in which we keep grappling with that. The pricing for most of these services are at very healthy levels. For example, our haircut is at INR299, I don’t think there is scope to increase prices. And the top segment of population, which wants to avail these services, a good chunk of them are already using these services. So in light of that, we have to see that while revenue is one part of it, how much do we spend to get that revenue? We are very clear that while we want to do investments, but just putting money something — after something which is clearly negative unit economics, that is not prudent in the long term, which is what the entire ecosystem also, I think, is realizing over the last 12 to 15 months.

Rupesh Tatiya — Intelsense Capital — Analyst

Okay, okay, understood. Thank you. Thank you, sir.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Sarang Sanil [Phonetic] from RW Investment Advisors. Please go ahead.

Sarang Sanil — RW Investment Advisors — Analyst

Hello, sir. Am I audible?

Operator

Sir, your volume is a little low.

Sarang Sanil — RW Investment Advisors — Analyst

Hello, am I audible now?

Operator

Yes, sir, please go ahead.

Sarang Sanil — RW Investment Advisors — Analyst

Sir, I would like to know what’s the gap between those deferred revenue growth and revenue growth on a sequential basis. Our deferred revenue grew about 9%, while our revenue grew about 5%, while we are also moving towards higher monthly packages. So is there any accounting policy that’s driving this? Or something else that I should know of?

Abhishek Bansal — Chief Financial Officer

No. So last particular quarter, we collected INR268 crores from our customers, and we rendered services amounting to INR232.5 crores. So deferred revenue is nothing but increase in collections less the amount consumed. So that is what resulted in that INR35 crores, INR40 crores increase in deferred revenue. So there is no accounting policy change. It’s straightforward. Whatever money that comes in, that sits in deferred revenue and whatever is existing deferred revenue, part of it gets recognized as revenue in coming quarters.

Sarang Sanil — RW Investment Advisors — Analyst

Okay. So it’s not because we are moving to more multi-monthly plans, right?

Abhishek Bansal — Chief Financial Officer

So whether I sell a subscription as INR2,000 a month or I upfront collect INR24,000 for the year, the revenue accrual remains the same. So it will be on a INR24,000 divided by 365 basis. So revenue is basically what is the worth of each day service that I’m providing to a customer. Whether I collect it monthly or I collect it upfront, that does not impact revenue recognition.

Sarang Sanil — RW Investment Advisors — Analyst

On the deferred revenue side?

Abhishek Bansal — Chief Financial Officer

Yeah, it will impact on the deferred revenue side because in upfront mode, that adds to deferred revenue. But now the monthly ECS has become so healthy that despite selling [Indecipherable] monthly plan, still we were able to have INR268 crores of collections for the quarter.

Sarang Sanil — RW Investment Advisors — Analyst

Sure, sure. Sir, another question. So you were citing about JD Shopping that the unit economics is not working. So, sir, what is our plan with the new JD Home while other players in the space are just burning a lot of cash, and we are entering right now, what is the plan right there?

Abhishek Bansal — Chief Financial Officer

So in JD Homes or JD Real Estate, the key thought process is that in erstwhile ecosystem, our user was coming to our platform and searching for estate agents or property dealers. Now as a user, I want to be able to search for properties as well. So if I want to search for a two-bedroom apartment in Malad West, I should be able to see those two-bedroom apartments and then navigate to the vendor. This philosophy is similar to what we have adopted in B2B as well, that you first search for a product and then navigate to the seller of that particular product. So the idea is simply to give a better user experience where user sees what is their requirement and then gets connected to the seller instead of connecting with four or five sellers and then figuring out that these four are not suitable for me and this one suits my requirement.

Sarang Sanil — RW Investment Advisors — Analyst

Okay. But the competitor space is [Indecipherable].

Abhishek Bansal — Chief Financial Officer

So the — yes, the competitive space is intense. But for me, the way I look at it is that if I am earning INR20 crores from this vertical, can I make an attempt to make INR40 crores, INR50 crores from this particular vertical? And from that perspective, that profitable revenue from that vertical, we do think that will materialize with these particular product changes that we have done.

Sarang Sanil — RW Investment Advisors — Analyst

Sure. So in order to gain more market share, we won’t be burning a lot of cash, right? Just for the sake of getting more [Indecipherable] that, right?

Abhishek Bansal — Chief Financial Officer

We haven’t done it for past many years. So I think one can assume that that will not be the philosophy going forward as well.

Sarang Sanil — RW Investment Advisors — Analyst

Sure. Sir, a couple of more questions. So any expected campaign addition for next year? So last quarter, when we came in, when it had 18,000 marks, the commentary was that it was a festive quarter and that’s why the muted paid campaign addition. And this quarter, we see 16,000, right? So any expected paid campaign addition for next year? Could we do 20,000 per quarter?

Abhishek Bansal — Chief Financial Officer

Okay. Let me put it this way. See, the total active paid campaigns are 5,38,000. 1% of 5,38,000 itself is 5,300 campaigns. So falling short or being accessed by 2,000 or 3,000 campaigns doesn’t really matter much in the broader scheme of things. What exactly matters is that, okay, for fiscal ’24, overall, how much revenue growth will we be able to get? And what will that be distributed across campaign and ticket size? It can be very easy to possibly not take price increases or even slightly reduce prices and that 20,000 can be even 25,000. But whether it will result into overall collections, revenue growth or not, that is what is the key question.

Sarang Sanil — RW Investment Advisors — Analyst

Right. Yes. Understood. So the next question on JD Pay, any transaction details that you can provide with, how much of the total transaction go through JD Pay?

Abhishek Bansal — Chief Financial Officer

So JD Pay is in very nascent stages. We are in the process of enabling UPI transactions, etc. So at this point of time, I think it wouldn’t be meaningful to discuss quantum of transactions on that.

Sarang Sanil — RW Investment Advisors — Analyst

Got it, sir. Sir, and the final question is on the productivity of sales force. So when we see pre-COVID campaigns [Indecipherable] was much higher to what it is right now or what it has been for the last four, five quarters. So any target that you would have going forward?

Abhishek Bansal — Chief Financial Officer

So the way we look at this particular metric is overall cost of sales. So our cost of sales pre-COVID used to be at about 40-odd percent or so. That currently stands at about 46%, 47% or so. So there is a significant amount of hiring that has happened. [Indecipherable] this particular year would be to bring this particular cost of sales back to 40%, 42% kind of levels.

Sarang Sanil — RW Investment Advisors — Analyst

Got it. Okay. Understood, sir. Thank you and all the best.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We have our next question from Mohit Motwani from the Nuvama. Please go ahead.

Mohit Motwani — Nuvama — Analyst

Hello. Hi, Abhishek. Thanks for the opportunity. Just one question from my end. So you spoke about increasing the productivity of the hired sales force recently that you have hired in the last few quarters, right? And you did about INR260 crores in collections. So just wanted to get your thoughts on if they improve the productivity, what kind of the collections do you expect from the current sales force that you have, meaning that they would be able to contribute to the growth in addition to the new sales force that you will hire in the coming quarters? Just wanted to get a sense on that. Thank you.

Abhishek Bansal — Chief Financial Officer

So when we talk about productivity, we essentially mean that, okay, the same sales person, if they were getting me INR100,000, how much extra money that I can get? Whether that extra money is coming via additional campaigns or via ticket size increases, that is a relatively secondary factor. So INR945 crores we did for the full year, and the sales headcount is, I think, higher versus pre-COVID levels by probably 1,000, 1,500 or so. So the idea would be, can we get another 10% sort of revenue with productivity improvement in the existing sales force itself? And thereafter, whatever is the additional growth that we want to do for the year and coming years, part of it will require additional manpower.

Mohit Motwani — Nuvama — Analyst

Got it. Thank you so much.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. We’ll take our last question from a connection as HSSA Self. Please go ahead with your question.

Unidentified Participant — — Analyst

Hello. Hi, can you hear me?

Operator

Yes.

Unidentified Participant — — Analyst

I just have one quick question. What is the realizable value for quarter four? You gave it for the year, but I don’t know for the quarter four itself.

Abhishek Bansal — Chief Financial Officer

It stood at about INR270 crores to INR280 crores.

Unidentified Participant — — Analyst

Okay. So obviously, you had mentioned last quarter it was INR265 crores, as I understand. And you said it was a relatively weaker quarter. But do you feel that the realizable value, given your current manpower, has it flattened? Or do you expect this to further grow quarter-on-quarter towards like whatever benchmark of the next 10% or 20% that you have? Or is this that now you feel it’s flattened given this employee base?

Abhishek Bansal — Chief Financial Officer

See, the realizable value, let us understand, it’s an estimate that I do versus my historical trends to assess that what is the money that I expect to receive over the next one year? So that estimate obviously keeps getting revised every particular quarter. So last quarter did have a sequential improvement. And there is scope for these particular realizations to further improve as and when the existing sales force becomes more tenured in the system.

Unidentified Participant — — Analyst

Okay. And an absolute final question from me. Thank you for that. And the employee cost this year was around INR65 crores. So do you believe that next year, would it be wise to say INR72 crores would be what you would be looking at? Would it be a fair number for me to take?

Abhishek Bansal — Chief Financial Officer

You are considering it on a monthly basis? Or how you’re taking it?

Unidentified Participant — — Analyst

I’m sorry, annually — annual basis.

Abhishek Bansal — Chief Financial Officer

So annual was about INR650 crores.

Unidentified Participant — — Analyst

Yeah. Sorry about it. INR650 crores, yeah. And so would that be — INR720, would that be a fair number to take?

Abhishek Bansal — Chief Financial Officer

So I think yeah, 10% to 12% increase on overall employee expenses could be the case.

Unidentified Participant — — Analyst

Okay. Thank you. That’s helpful. That’s all from my side.

Abhishek Bansal — Chief Financial Officer

Thank you.

Operator

Thank you. I would now like to hand the conference over to Mr. Abhishek Bansal for closing comments. Over to you, sir.

Abhishek Bansal — Chief Financial Officer

Thank you everyone for joining us. In case you have any further queries, please do reach out. We would do our best to address and that’s it from our side. Thank you.

Operator

[Operator Closing Remarks]