MANAGEMENT DISCUSSION AND ANALYSIS

ECONOMIC REVIEW

The global economy continued to expand during 2014 at a moderate and uneven pace registering a growth rate of 3.4%, at par with the growth in 2013. The prolonged recovery process from the global financial crisis remained an issue as countries tried to address post-crisis adjustments. Nevertheless, the underlying drivers for a gradual acceleration in economic activity in advanced economies—easing financial conditions, neutral fiscal policy in the Euro area, lower fuel prices, and improving confidence and labor market conditions—remains intact.

Growth in emerging markets and developing economies is projected to slow from 4.6% in 2014 to 4.2% in 2015. The slowdown reflects the dampening impact of lower commodity prices and tighter external financial conditions, particularly in Latin America and oil exporting countries, economic re-balancing in China, as well as economic distress related to geopolitical factors—particularly in CIS nations and some countries in the MENA region. In 2016, growth in emerging markets and developing economies is expected to pick up, reaching 4.7%, largely on account of the projected improvement in economic conditions of distressed economies, including Russia and some economies in the Middle East and North Africa.

In India, improving economic parameters was led by a 7.4% GDP growth (under the revised methodology) rate and moderate CPI inflation at 6.2% during the year. Agriculture and allied sectors grew at 1.1% while growth in the industrial and service sectors were 5.9% and 10.6%, respectively. Factors like the steep decline in oil prices, increasing FDI, improved business sentiment and the impact of progressive initiatives of Government at the centre bode well for economic growth.

The global economy is expected to grow at a moderate pace in the near term. Factors such as softening commodity prices and persistently low interest rates in major economies, will support global growth momentum, especially by offsetting some of the headwinds to growth in oil-importing developing economies, the weak world trade poses a downside risk to growth. According to IMF's World Economic Outlook (WEO) global growth is estimated at 3.3% in 2015 and 3.8% in 2016. In India, improving macroeconomic fundamentals and reform measures by policymakers have infused a sense of optimism in the economy. Accordingly, the IMF expects the economy to register a 7.5% growth in 2015 (compared to 7.3°% in 2014).

INDUSTRY OVERVIEW

The online industry has witnessed remarkable growth over the past few years, leading to an expanded user base and rising online transactions. With over 350 million internet users in the country, the trend of going online for most needs from bill payment, ticket booking, shopping, to even tax filings has catalyzed the industry. While the urban market has not reached its saturation point yet, non-metros and rural regions are expected to drive internet growth. The advent of low cost smartphones coupled with low mobile tariffs have empowered consumers, resulting in increased use of data connectivity on a regular basis. During the year, around 4.4% of the total rural population used a mobile device to access the internet, a eleven-fold increase from just three years ago. Moreover, the Active Internet User (AIU) base in rural India was 6.7% of the overall rural population of 905 million and accounted for 61 million users

E-COMMERCE

The e-commerce sector has seen unbrcedented growth in 2014. With 893 million wireless subscribers, India is positioned as the second largest wireless market, globally. Growth has been driven by rapid technology adoption led by the increasing use of devices such as smartphones and tablets, and access to the internet through broadband and 3G, among others, which led to an increased online consumer base. The overall wireless market is expected to expand at CAGR of 43% by 2020 with e-commerce expected to account for 74% of the market.

The e-Commerce ecosystem

• Online travel, ticketing - Ticketing for air, rail, bus, movies, events

• Online retail - Retail products sold through online route

• Online marketplace - Platform where sellers and buyers transact online

• Online deals - Deals purchased online, redemption may or may not happen online

• Online portals classified - Includes car, job, property and matrimonial portals

E-Retail opportunities

India's overall retail opportunity is substantial, and coupled with a demographic dividend (young population, rising standards of living and upwardly mobile middle class) cheaper smartphones and rising internet penetration;strong growth in e-commerce is expected. From an investment perspective, the market is a primarily minority stake market, with maximum pull in early-stage deals.

The increasing involvement of vendors has resulted in near-doubling of sales in the recent past. The emergence and subsequent acceptance of marketing strategies like Cash on Delivery, easy exchange, among others, havefueled e-commerce growth.

Apart from online ticket reservations and apparel, users have moved on to reservation of hotels, restaurants, movie tickets, play tickets and a variety of other options which make it easy to br-book things and enjoy the convenience. Discounts and heavy sale offerings have also made this sector a lucrative arena for business. (Source: India Internet Vendor Survey)

INDUSTRY GROWTH DRIVERS

Mobile to be the most influential aspect of e-commerce

With mobile apps being developed by most e-commerce websites, smartphones are increasingly replacing PCs for online shopping. According to industry players, over 50% of the orders are being placed through mobile apps, which is not only leading to substantial customer acquisition but also building customer loyalty for various brands. However, most mobile transactions so far are for entertainment, such as booking movie tickets and music downloads.

More business coming from smaller towns

E-commerce is increasingly attracting customers from Tier 2 and 3 cities, where people have limited access to brands but have high aspirations. According to e-commerce companies, these cities have seen a 30% to 50% rise in transactions.

Enhanced shopping experience

Besides general online shopping, customers are also shopping online for weddings and festivals, due to a wider range of products being offered and aggressive advertisements. The free and quick shipment of products, wider variety, along with the ease of shopping online compared to in-store shopping, is also helping e-commerce gather momentum. Further, e-commerce companies are doing rapid business due to discounts and sales.

Television and social media, particularly Facebook, are playing a proactive role in promoting e-tailing through aggressive advertisements. This has helped several e-commerce companies build substantial brand image.

Exclusive partnerships with leading brands

Over the year or so, there has been a trend of exclusive tie-ups between e-tailers and established boutiques, designers, and high-end lifestyle and fashion brands.

Expanding the product basket

There is a recent trend of relatively newer products such as grocery, hygiene, and healthcare products being purchased online. Similarly, lingerie and Indian jewelry have also been in great demand among customers outside India. Export comprises 95% of cross-border e-commerce, with the US, UK, Australia, Canada and Germany being the major markets.

Increased card transactions

The ease of carrying debit and credit cards and the enhanced security measure have impacted the use of cards significantly in India. Noted as a sign of social status in the past, going cashless has become a necessity today. Card transactions have increased by a CAGR of 21% over the last 7 years recording a total transaction value of Rs. 1,540 billion in 2014.

Government support

The Indian government's ambitious Digital India project and the modernisation of India Post will also affect the e-commerce sector. The Digital India project aims to offer a one-stop shop for government services that will have the mobile phone as the backbone of its delivery mechanism. The programme will give a strong boost to the e-commerce market as bringing the internet and broadband to remote corners of the country will give rise to an increase in trade and efficient warehousing and will also brsent a potentially huge market for goods to be sold.

For India Post, the government is keen to develop its distribution channel and other e-commerce related services as a major revenue model going ahead, especially when India Post transacted business worth Rs. 280 crore in the cash-on-delivery (CoD) segment for firms such as Flipkart, Snapdeal and Amazon. Both these projects will have significant impact on increasing the reach of e-commerce players to generally non-serviceable areas, thereby boosting growth.

BUSINESS REVIEW

Just Dial Limited (Just Dial) is India's leading local search related provider. Its 'Search Plus' Services are aimed at making several day-to-day tasks convenient, actionable and accessible to users. With this step, Just Dial is transitioning from being purely a provider of local search and related information to being an enabler of such transactions. Just Dial intends to provide an online platform to thousands of SMEs to get them discovered and fulfil transactions among consumersand SMEs.

Efficient and profitable Business model

_ Negative working capital and positive free cash flow, ensuring that the Company can promote its new products (Search Plus services and marketplace)

_ Paid Advertisers primarily across 11 large Indian cities (Contribute  to approximately 90% of the Company's revenues)

 _ Paid Advertisers pay fixed monthly/weekly or annual fees to run search-led advertising campaigns for their businesses on Just Dial's platform

_ Two types of paid memberships: Premium (Top 3 positions) and non-brmium packages which determine priority of placement in search results

_ Just Dial also runs multiple city campaignsfor pan-India customers

 _ 3,363 tele-sales executives and 1,193 'feet on street' and 986 Just Dial Ambassadors selling to SMEs

SERVICE PLATFORMS

The Company aims to be a one stop destination for search and transactions alike and provides its users with fast, user-friendly and free local search service through various mediums like internet, mobile internet, mobile applications, voice and SMS.

Internet

Features like brdictive auto-suggest, maps and directions, ratings and reviews and search by Category, Company and Product adds to an enhanced user experience. The Company has adopted indigenous technology, using open source platforms and has leveraged the benefits of technological expertise to the hilt to enhance the experience for its digital users.

Mobile internet

The Company has mobile applications across the operating platforms like Android, iOS, Windows and Blackberry. Since launch, these apps have been downloaded more than 5.8 Million times till March 31, 2015. With advanced location-based results being displayed, the efficacy of search is enhanced greatly on mobile devices. The users can enable the service on their internet browser on their mobile internet enabled devices (<http://t.justdial.com> or).

Voice & SMS

Since inception of the Company, voice based search services form an integral part of the business. The multi-lingual service is available 24 hours a day and seven days a weekthrough its hotline number. Apart from the national hotline number, 8888888888, it also has eight local numbers specific to certain cities. Another quick and easy local search mode, SMS search have been designed for users who seek instant information. The Company has eight in-house call centres in Ahmedabad, Bengaluru, Chennai, Noida, Hyderabad, Kolkata, Mumbai and Pune.

SEARCH PLUS

In order to make the search process more convenient and intuitive Just Dial introduced the Search Plus service to align with the requirements of users. Search Plus marks Just Dial's shift from being a local search provider to becoming a platform to enable transactions between users and SMEs. The platform will augment its core business.

The services provided on this platform may be broadly classified under:

• Ordering Services

• Scheduling Services

• Travel/ Leisure Services

• Buying products/ Price Discovery through Reverse Auction

The Company plans to build a combrhensive business network across every pin code and is popularizing Search Plus transactions on the basis of a free trial. Just Dial intends to develop a technology platform to enable users to search and transact simultaneously, which is both, economical and efficient for the user.

The Company's mobile application enables deepened engagement with users through tags, ratings and reviews ensuring trust. Currently, the Company has 25 Search Plus services which extend from ordering groceries online to scheduling a doctor's appointment and also booking a table at a restaurant.

Value Proposition

The Company has replaced Google maps with maps solution, JD Maps, for directions on its platform. The Company has witnessed a growth of 38% in user ratings and reviews across categories on its portal from 37 Million ratings and reviews in FY 2013-14 to over 51 million ratings and reviews in FY 2014-15. In addition to this, with social features like Friend's Ratings, the users get enhanced credibility and confidence to source the right vendors and with functional features like Maps and transactional tabs, the Company is well poised to be a 'one stop destination' for most of the day-to-day needs of the users.

Listings

The main revenue generation for the Company comes from the advertisers who list themselves with the Company on various subscription and fee-based packages. A large portion of listings comprises SMEs from a wide range of industry sectors. The SMEs, with limited marketing resources, find Just Dial as the perfect advertising platform at the micro level and in a cost effective mode. In the paid listings, the Company offers the advertisers to choose between Premium and non-Premium packages. Overall, the Company has grown its listings by 27% from 11.8 Million in FY 2013-14 to 15 Million listings in FY 2014-15 and these establishments enjoy access to users and potential buyers.

Ensuring Data Integrity and Quality

The Company ensures its database is updated with relevant information on all businesses. A dedicated team regularly monitors and updates the information of businesses, supplementing with new entries to ensure accuracy of the information provided to its users. The data collected (like geographical location, images, videos and category of each business) is periodically verified by the database team. The Company simplified the searches on its database through an innovative Geo-Coding tagging process that facilitates location-based searches.

OPERATIONAL REVIEW

Sales and Marketing

The Company's pan-India operation is supported by a strong sales and marketing team consisting of Tele-sales executives, Feet-On-Street and Just Dial Ambassadors. The Company conducts regular training programs to ensure the team converts its free business listings into paid listings. The sales and marketing team works closely with the database team to identify and reach out to potential advertisers. Various promotional schemes are carried out which are focused on SMEs, with customized membership packages to create a cost-effective platform forthe SMEsto expand their businesses.

Marketing and business development

The Company advertises regularly to strengthen its brand and enhance its exposure to a wider user base. The Company uses digital marketing tools, such as virtual marketing and online display banners, and has a strong brsence across social media platforms (like Facebook and Twitter) as well. Besides this, the Company has created a team of marketing executives called 'Just Dial Ambassadors'. These executives educate the SMEs about Just Dial's range of services, collect data from SMEs and market the Just Dial brand. The Company has seen a growth of 26% in paid campaigns from 262,150 in FY 2013-14 to 331,200 in FY 2014-15

TECHNOLOGY AND INFRASTRUCTURE

The success of the Company's business is highly dependent on efficient and upgraded technology and sound infrastructure. These two factors are integral for the success in operation and management of assets. The Company has an in-house team of technology experts with wide industry experience. The team develops new software applications for daily business needs.

The systems infrastructure, internet and database are secured at IDC plus all centres and are continuously monitored by a strong engineering support team. The open source platforms are powered by more than 900 servers for various intranet and extranet applications. The strong information technology system allows the Company to promptly process user inquiries and requests in the shortest possible timeframe.

SECURITY

Possessing information of the buyers and advertisers, the Company maintains a stringent security on the information database. It has strong controls, policies and procedures pertaining to information security which ensure brvention of any fraud or loss of information. All the installed servers of the Company at all data centres and offices are secured with firewalls to brvent hacking.

FINANCIAL REVIEW

In FY2014-15, the Company continued with its focus on adding new services and expanding its SME base to a large number of vendors. The Company is focused on increasing its brsence in more cities and towns. The all-round operational and technological excellence has led to consistent increase in revenues and profitability over the years.

Revenue (from search and other related services) increased by 27.86% from Rs. 4,612.93 Million in FY 2013-14 to Rs. 5,897.98 Million in FY 2014-15. The increase in revenue demonstrates the popularity of our platform among SMEs which enables them to reach a wider audience. We continue to be the most popular and dominant platform for local search among the user community. This fact is reflected in the number ofadvertisers and, as a consequence, our revenue.

Other income increased by 22.29°% from Rs. 399.49 Million in FY 2013-14 to Rs. 488.55 Million in FY 2014-15 primarily due to increase in profit from sale of non-current investments. The current investments are disposed and reinvested in more efficient investment portfolios on an ongoing basis.

The total income increased by 27.41% from Rs. 5,012.41 Million in FY 2013-14 to Rs. 6,386.53 Million in FY 2014-15 rebrsenting the overall growth in business during FY 2014-15.

Profit before tax and exceptional items increased by 15.58% from Rs. 1,648.56 Million in FY 2013-14 to Rs. 1,905.42 Million in FY 2014­15. The operating leverage of the Company is reflected by the increase in the operating profit which has grown from Rs. 1,421.98 Million in FY 2013-14 to Rs. 1,657.86 Million in FY 2014-15.

Profit after tax for the year increased by 15.16% from Rs. 1,206.08 Million in FY 2013-14 to Rs. 1,388.90 Million in FY 2014-15.

The Company has seen increase in cash flows from operations by 39°% from Rs. 1,330.36 Million in FY 2013-14 to Rs. 1,846.53 Million in FY 2014-15.

Basic Earnings per share increased to Rs. 19.76 in FY 2014-15 as compared to Rs. 17.23 in FY 2013-14 despite the increase in the average weighted number of shares from 69.99 Million shares in FY 2013-14 to 70.28 Million in FY 2014-15. Diluted Earnings per share increased to Rs. 19.62 in FY 2014-15 as compared to Rs. 17.11 in FY 2013-14.

Revenue

Revenue from local search operations is derived from various service offerings to Small and Medium Enterprises (SMEs). The SMEs subscribe to either the brmium packages (Platinum, Diamond and Gold) or non-brmium packages by paying the listing fees through upfront payments or installments under Electronic Clearing Systems (ECS

The Company operates a brpaid revenue model and advances are received from advertisers as listing fees. The difference between the collected revenue and accrued revenue is accounted as unearned revenue in the Balance Sheet. The unearned revenue has increased to Rs. 2,102.29 Million in FY 2014-15 from Rs. 1,618.41 Million in FY 2013-14 demonstrating the faith reposed by customers on an ongoing basis as a result of the brmium qualityservices provided bythe Company.

Other income

The profit from sale of current and non current investments has increased to Rs. 348.66 Million in FY 2014-15 from Rs. 348.19 Million in FY 2013-14 due to gain on sale of mutual funds and bonds. The interest income from non current investments has increased to Rs. 130.01 Million in FY 2014-15 from Rs. 30.48 Million in FY 2013-14.The Company switches out its investments from funds based on performance of such funds and reinvests the amount in other funds to optimise the yield on current investments. The profit from sale of current investments is a result of this strategy.

Employee benefit expense

The employee benefits expense increased by 35.01% from Rs. 2,287.00 Million in FY 2013-14 to Rs. 3,087.72 Million in FY 2014-15 primarily due to increase in employee strength. Our focus on enhancing technology infrastructure and expanding our geographic footprint necessitated employee augmentation during the year. The employee benefits expense as a percentage of total expense has increased to 68.91% in FY 2014-15 from 67.99% in FY 2013-14. The employee benefits expense as a percentage of total revenue has increased from 45.63% in FY 2013-14 to 48.35% in FY 2014-15. The number of employees has increased to 9,533 employees in FY 2014-15 from 8,543 employees in FY 2013-14.

Finance costs

As the Company has no debt on its Balance Sheet, there is no interest burden on the Company.

Debrciation and amortization expense

The debrciation and amortization expense has increased by 39.38% from Rs. 172.91 Million in FY 2013-14 to Rs. 241.00 Million in the FY 2014­15. The Company has been investing in upgradation and expansion of infrastructure and has invested Rs. 134.72 Million (About 21% of the total outlay) on Information Technology and Rs. 10.24 Million (about 2% of the total outlay) on increase and upgradation of the technology required for conducting efficient operations. The Company's resolve is to complement the increase in employee strength with best possible technological support for attaining a niche position in conducting the operations.

Other Expenses

Other expenses have increased by 27.49°% from Rs. 903.94 Million in FY 2013-14 to Rs. 1,152.40 Million in FY 2014-15. The increase in other expenses is due to increase in communication costs, database and content charges, power and fuel, rent charges, and advertising.

Income Taxes

The Income Tax provision increased from Rs. 442.48 Million in FY 2013­14 to Rs. 516.51 Million in FY 2014-15, primarily due to increase in profits. The effective tax rate for (Income Tax) has increased from 26.84% in FY 2013-14 to 27.11% in FY 2014-15 primarily due to increase in profits.

Current investments

The Company has substantial liquid cash reserves to support the growth of its business. The Company's investments in mutual funds have increased from Rs. 4,709.92 Million in FY 2013-14 to Rs. 7,496.28 Million in FY 2014-15. The Company has also invested in tax free bonds of Rs. 225.44 Million in FY 2014-15 as compared to Rs. 1,547.08 Million investment in tax free bonds in FY 2013-14. The Company has deployed its current investments in debt based mutual funds and tax free bonds to attain a balance between returns and brservation of capital. The funds are available for redemption as per the fund requirements of the Company.

OPPORTUNITIES AND THREATS

Opportunities

Favorable demographics in India

According to McKinsey, the country's income pyramid is expected to change, with India's middle class (i.e. households with annual income of between Rs. 200,000 to Rs. 1,000,000) expected to grow tenfold to 583 million people by 2025. The rising level of disposable incomes coupled with a primarily young populace means that India is more open to the idea of going digital with increased online transactions and high adoption rates for new technology.

The switch to mobile internet

The rapid and widesbrad adoption of mobile devices aided by fall in prices of 3G data tariffs and smart phones, makes it easier to serve hyper local, location-based content to users.

Changing lifestyles

Busier lifestyles, urban traffic congestion and lack of time for offline shopping mean that consumers are going to explore and exploit online mediums soon. In this case, since our model revolves around instant gratification and 'online to offline' shift - we potentially have a consumer base that needs these services.

Real-time price discovery

Price discovery of products remains a key value proposition. We intend to provide this feature to our users via our unique model, which in turn will be beneficial for users and paid advertisers alike.

No-inventory based model

The lower prices thanks to the no-inventory based model we follow will aid in effectively competing in this challenging landscape.

Threats

Lack of growth and scalability

Our failure to manage our growth and scalability or adapt to technological developments or industry trends could affect the performance and features of our products and services and reduce the attractiveness of our platform to users and paid advertisers. As our operations grow in scope and size, either through new product offering or expansion into new markets in India, we must continuously improve, upgrade, adapt and expand our systems and infrastructure. We also need to offer enhanced services, features, and functionality ahead of rapidly evolving consumer demands to our users and paid advertisers. These initiatives need to be in focus while maintaining the reliability and integrity of our systems and infrastructure in a cost-efficient and competitive manner. Execution is going to be a key area, especially in the Search Plus domain where consumer experience is critical; our inability to execute well might hinder the overall brand  pull.

User dependency on search engines

We may not be able to reduce our dependency on search engines to direct users to our website. In addition, the world's largest search engine - Google - has been brsent in India for many years, providing search and navigation services. Any new offering in local search by Google will impact us.

Competition from vertical players

There is a proliferation of many vertical specific players that are heavily funded by Private Equity firms and engage in aggressive advertising. Any intensified competition will impact the overall demand from users for these verticals and may impact our share of the pie adversely.

Reduced brand awareness

We believe that brand recognition is important for our business due to relatively low barriers to entry in our market. As the market becomes increasingly competitive, maintaining and enhancing our brand will become critical to ensure that we continue to remain one of the leading local search services providers. Also, any negative publicity about us or our products and services, especially when we face intense and increasing competition, could harm our brand reputation and consequently our business.

Misuse of service platforms

If our service platforms are misused, it could lead to user dissatisfaction and discourage the use of our products and services and have a material adverse effect on our business and reputation.

Reliance on SMEs

Our business may be materially and adversely affected by our reliance on SMEs as our target paid advertisers.

LaCK of high speed data infrastructure growth

The lack of growth in proliferation of adequate high speed (3G and above) data bandwidth growth could impair user experience in some cases and cause slowness in adoption of mobile internet, which in turn can impact growth of our user base.

RISK MANAGEMENT

The Company has incorporated a strong risk mitigation strategy which is developed by taking into account all the possible risks. It has a detailed risk mitigating procedure with sound monitoring to anticipate and manage the risks

HUMAN RESOURCE MANAGEMENT

The Company recognizes the importance of its human capital. Being a growth oriented and progressive organization, it recognizes the importance of professionalism. The Company has embarked on several human resource initiatives to enhance the productivity of the organization and each individual. Nurturing people is a key organizational goal and leadership mandate and hence initiatives were taken in order to impart training in various locations of the Company. Attached to the cause of education as a corporate citizen, the Company also ensures that children of all the blue-collared employees of the organization get an equal opportunity to study and takes responsibility of enrolling them in English medium schools with the basic costs borne by the Company.

INTERNAL AUDIT AND CONTROLS

The internal control system is designed to ensure that financial and other records are reliable for brparing financial information and other data, and for maintaining accountability of assets. The internal  control system is supplemented by an extensive program of internal audits, reviews by management, and documented policies, guidelines and procedures. The internal audit findings provide input for risk identification and assessment. Further periodic assessment of business risk is carried out to identify significant risks to the achievement of business objectives.

DISCLAIMER

Statements in this management discussion and analysis describing the Company's objectives, projections, estimates and expectations are categorized as 'forward looking statements' within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those exbrssed or implied. Important developments that could affect the Company's operations include an onward trend in the domestic auto industry, competition, rise in input costs, exchange rate fluctuations, and significant changes in the political and economic environment in India, Environmental standards, tax laws, litigation and labor relations