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Sep 11, 2017 11:53 AM IST | Source: Moneycontrol.com

Matrimony.com IPO opens: Should you subscribe?

IIFL Private Wealth feels unlike developed countries, there's a huge demand for matchmaking within communities/castes in India.

BySunil Shankar Matkar
Matrimony.com IPO opens: Should you subscribe?

Moneycontrol News

Matrimony.com, the online matchmaking services provider, has opened its Rs 500-crore initial public offering for subscription on Monday, with a price band of Rs 983-985 per share.

The public issue, which will close on September 13, comprises of fresh issue up to Rs 130 crore, and an offer for sale of up to 37,67,254 equity shares by promoter group (Murugavel Janakiraman and his mother Indrani Janakiraman) and investors - Bessemer India Capital Holdings II, Mayfield XII (Mauritius) and CMDB II.

It will be the first company from the online matchmaking services space to be listed. Hence, analysts expect high demand for the issue and also expect lot of new investors to come forth.

Majority of analysts recommended subscribing to the issue, citing financial stability, leadership position in online matchmaking business, large potential in matchmaking services space and unique business model.

GEPL Capital assigned a subscribe rating to the IPO as it believes Matrimony.com has a unique business model and strong growth metrics which will make it lucrative. The company stands to gain from operating leverage, it feels.

Immense potential in the matchmaking services space, scalability of marriage services segment, pricing power due to strong brand image and non-linear business model will be four key triggers for the company going ahead, KR Choksey said while having a subscribe rating on the issue.

Matrimony.com currently operates its business in two segments -- matchmaking services and marriage services and related sale of products. It offers matchmaking services through internet and mobile platforms in India and internationally. It is one of the first companies to provide online matchmaking services in India, having database comprising 3.08 million active profiles (being profiles that have been published or logged in at least once during the prior 180-day period).

At the end of June 2017, Matrimony had 140 retail centers across India. Its flagship brand, BharatMatrimony, has 15 language-based domains under its umbrella. It also has other portals like EliteMatrimony, CommunityMatrimony, MatrimonyDirectory, MatrimonyPhotography, MatrimonyBazaar, MatrimonyDirectory and MatrimonyMandaps.

IIFL Private Wealth feels unlike developed countries, there's a huge demand for matchmaking within communities/castes in India. Adopting a micro-market strategy for addressing this need, the company has built over 300 community portals.

There is no comparable peer to the company but as a internet company, analysts compare it with listed entities like Just Dial, Info Edge.

At a upper price band Rs 985, the company is trading at FY17 P/E multiple of 46.2x which is considerably high given comparable peers such as Just Dial are trading at 30.2x FY17 multiple, KR Choksey said.

However, given its nature of an internet company, leading position in the online Match-making services industry, presence in a promising industry and higher profitability compared to Just Dial and Info Edge (net loss as of FY17), the reseach house believes the company commands a higher multiple.

Matrimony.com has clocked a revenue CAGR of 11.6 percent, EBITDA of 38 percent and profit of 43 percent between FY13 and FY17. The company earns more than 95 percent of revenue from its matchmaking services.

Brokerage houses feel the litigation faced by the company in the US court, which had hit its financials in the past, is already priced in and that is why the company turned profitable again in FY17 after losses in previous two years.

KR Choksey believes negatives such as settlement of lawsuit with US counterpart have been factored-in.

In connection with the New Jersey proceedings (the cast between US Plaintiffs and its subsidiary Consim USA) and the Chennai proceedings, the company incurred legal expenses amounting to Rs 57.36 crore between FY13 and FY16 towards legal or other fees and expenses as well as the settlement cost of Rs 53.01 crore in FY16 in connection with the settlement of such proceedings.

Now that the litigation is settled, the company’s profitability has gradually looked up with a PAT of Rs 43.8 crore and Rs 14.6 crore in FY17 and Q1FY18, respectively.

Matrimony.com's negative net worth of Rs 16.2 crore as of June 2017 is a vast improvement from the March figure of negative Rs 76.1 crore, largely the outcome of the post FY17 profitability, IIFL Private Wealth said.

According to IIFL, IPO proceeds are expected to be gainfully utilised leading to higher revenues from increased brand awareness and lower rentals and interest expenses.

Focused expansion of its marriage services business through cross-selling and assisted services could also help the company move up the value chain, the research house said while recommending subscribe for listing gains.

Matrimony.com will use fresh issue proceeds for advertising & business promotion activities (around Rs 20 crore), purchase of land for construction of office premises in Chennai (Rs 42.58 crore), repayment of overdraft facilities (Rs 43.34 crore), and general corporate purposes.

Analysts find some risks and concerns that have to be considered while subscribing for the issue.

One of the key risks that BharatMatrimony faces is competition from dating websites/Apps and other matrimonial websites/Apps, they said.

Diversification of business, other strategic initiatives may be unsuccessful. Tambulya.com and Matchify.com were ideas which did not materialise as planned.

According to them, the company may fail to convert free members to paid members or fail to retain existing base of paid members.

Reputation of the company could get hampered, if its service platforms are misused by any of its users, they feel.
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