MATRIMONY.COM LIMITED September 07, 2017 SMC Ranking (2.5/5) Issue Highlights Industry Online Matchmaking Total Issue (Shares) - Offer for sale 3,767,254 Total Issue (Shares) - Fresh Issue 1,319,797 Net Offer to the Public 5,087,051 Issue Size (Rs. Cr.) 500-501 Price Band (Rs.) 983-985 Retail & Employee Discount Rs.98/- per share Offer Date 11-Sep-16 Close Date 13-Sep-16 Face Value 5 Lot Size 15 Per Equity Share About the Company Incorporated in 2001, Matrimony.com is engaged in providing online matchmaking and marriage services. It offers its 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). It offers a range of targeted and customized products and services that are tailored to meet the specific requirements of customers based on their religious or caste preferences or other criteria such as marital status and age bracket. As of June 30, 2017, it had 140 retail centers distributed across India where customers can walk in and register on their websites. 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. Issue Composition In shares Competitive Strengths: Total Issue for Sale 5,087,051 QIB 3,815,288 NIB 763,058 Retail 508,705 Objects of the Issue The Offer consists of a Fresh Issue by the Company and an Offer for Sale by the Selling Shareholders. Offer for Sale Company will not receive any proceeds from the Offer for Sale. Objects of the Fresh Issue Shareholding Pattern (%) Particulars Pre-issue Post -issue Promoters & promoters group 55.97% 50.63% QIB 42.54% 42.34% NIB 0.00% 3.38% Retail 1.48% 3.65% Total 100.00% 100.00% *calculated on the upper price band Advertising and business promotion activities; Purchase of land for construction of office premises in Chennai; Repayment of overdraft facilities; and General corporate purposes. Book Running Lead Manager IDFC Bank Limited IIFL Holdings Limited Motilal Oswal Investment advisors limited Yes Securities (india) Limited Name of the registrar Karvy Computer share pvt Ltd Large Database of Profiles and Consequential Network Effect: The company being one of the first companies to offer online matchmaking services in India, it has an early mover advantage among customers seeking online matchmaking services and this has enabled the company to build a large database of profiles over several years. The company believes that its large database of profiles creates a consequential network effect that attracts more users to register or subscribe through its websites, mobile sites or mobile apps and also results in higher customer engagement on its websites, mobile sites and mobile apps, which in turn enables the company to maintain a leading position in the online matchmaking market in India. Micro-Market Strategy and Customized or Personalized Services: The company recognizes that its customers are making important life decisions and in this regard, it has adopted a micro-market strategy whereby it offers a range of targeted and customized products and services that are tailored to meet the specific requirements of customers based on their religious or caste preferences or other criteria such as marital status and age bracket. The company believes that its micro-market strategy differentiates the company from other players in India and enables it to grow in a fragmented and unorganized industry that has historically been difficult to monetize in a sustainable manner at scale. Strong Consumer Brand: BharatMatrimony.com has been ranked as India s most trusted online matrimony brand by The Brand Trust Report India Study 2014 (a study covering 20,000 brands across 16 cities) and has been featured in the Limca Book of Records for record number of documented marriages online. Based on a study on India s online landscape, the online research firm, JUXT, certified BharatMatrimony.com as the most used matrimonial search website in 2013-2014 by Indian online consumers. Wide On-the-Ground Network for Customer Acquisition and Support: As of June 30, 2017, the company had140 retail centers distributed across India where potential or existing customers can walk in and seek the assistance of retail executives to register on its websites and/or make payment for the matchmaking product or service of their choice. The company believes that its on-the-ground network of retail centers and service team helps in the customer education process builds trust among its customers and drives monetization by encouraging existing free members to take up paid subscriptions. Robust Technology and Analytics: The company leverages technology and analytics across all the stages of the matchmaking process such as acquisition and registration of 1
profiles, validation, mutual discovery process and member contact. As of June 25, 2017, its BharatMatrimony mobile app and apps for its regional and community sites have achieved 6.2 million estimated installs according to www.androidrank.org. A significant number of its members currently utilize its mobile sites and mobile apps for online matchmaking. Efficient Business Model: The Company believes that its business model is efficient and tailored for the Indian market. The company has maintained focus on capital efficiency and has grown without incurring any material indebtedness, and has instead funded the growth of its business primarily through internal accruals since fiscal 2009. Strategies: To expand its User Base : It is estimated that the population within the marriageable age bracket in India is expected to grow at an average rate of 0.84% until 2021 and that approximately 60.5 million weddings will take place in India from 2017 to 2021. To take advantage of this opportunity, the company intends to continue to drive profile registrations and expand its user base by enhancing its user experience and engagement to ensure that existing users continue to visit, and new users are attracted to visit, its websites, mobile sites and mobile apps and that both existing free users and new users subscribe to its paid services. It also intends to deepen its geographic penetration across all parts of India and continue to drive registrations through its mobile platform. Continue Investments in Mobile Platform: The Company intends to continue to invest in its mobile platform in view of the increasing mobile usage among users in India. To increase its footprint on the mobile platform, the company has developed a range of mobile apps across mobile platforms including ios, Android and Windows and intend to continue to expand its mobile offerings. It has recently introduced mobile apps for its BharatMatrimony regional sites and certain community sites which have led to an increase in profile registrations. Drive Monetization: The Company intends to drive monetization of its existing user base by increasing the value of its network through expanding its user base, improving the quality of user profiles and improving the ease of searching profiles and the quality of search results and responses. The company aims to do these by investing in technology to make its websites, mobile sites and mobile apps more user-friendly, continuously improving on existing products and services and creating more relevant new products and services, improving the quality of user profiles by encouraging users to include photographs and complete profile information through marketing campaigns, and developing better matchmaking algorithms (in addition to its existing MIMA algorithm) to ensure more relevant matches in searches. It intends to further drive monetization of its user base by increasing the use of analytics to identify prospective users who may opt for paid subscription. Further Strengthen the Brands: The Company has decided to continue to spend a significant portion of its revenue on promotional and marketing activities. It believes that such efforts would enhance the visibility of its brands, drive registration levels and result in increased conversion to paid subscriptions, which will consequently enable it to retain its leading position in the online matchmaking services market in India as well as maintain its position as the most used online matchmaking website in India. Continue to Expand into Marriage Services: A key strategy for driving monetization is to increase the length of the company s relationship with its customers and increase the amount of revenue earned from the company customers by offering additional marriage services to its online matchmaking user base. The company intends to continue to invest in building its marriage services verticals, with a focus on adjacent areas with a synergy with its core online matchmaking business, to target the existing online matchmaking clients and also clients who require marriage services. The company has also recently launched MatrimonyMandaps.com, a wedding venue discovery platform, to help customers find the right venue for their wedding in Chennai, Coimbatore, Madurai and Trichy in Tamil Nadu, Hyderabad and Secundrabad in Telangana, Bangalore in Karnataka and Kochi in Kerala. 2
Risk Negative net worth: The firm had negative net worth of Rs 3113.2 crore as of March 31, 2017. The firm also restated losses in three of the past five fiscal years. For example, it sustained restated consolidated losses of Rs 915.9 crore, Rs 292.9 crore and Rs 7506.9 crore in fiscal 2014, fiscal 2015 and fiscal 2016, respectively. Incurred substantial legal expenses in the recent years: The Company has incurred substantial legal expenses in recent years on account of litigation with Rajan Desai and Real Soft Inc. and its settlement. Further, Consim USA (or the Company if Consim USA fails to do so) is required to make each Settlement Payment by a certain due date and any failure and/or delay in making the Settlement Payments or failure by its Promoter to comply with the terms of the Inter Se Agreement may materially and adversely affect its business prospects, financial condition, results of operations and cash flows. Rely on telecommunications and information technology systems: The Company relies on telecommunications and information technology systems, networks and infrastructure to operate its business and any interruption or breakdown in such systems, networks or infrastructure or its technical systems could impair its ability to effectively provide its products and services. Growth of the business depends on the growth of mobile Internet penetration: The growth of the business depends on the growth of mobile Internet penetration and supporting infrastructure in India, and the steady emergence of mobile technology as a viable medium for receiving matchmaking and marriage services. Revenue is subject to seasonal fluctuations: The revenue of the company is subject to seasonal fluctuations and the second quarter of each year is considered inauspicious by its members and therefore subscription revenues during such quarter would register a slight dip which could in turn affect the price of its Equity Shares. Peer comparison Co_Name Net Sales PAT EPS P/E P/BV BV FV CMP MCAP Info edge 887.63 11.68 Negative 0.00 7.30 131.31 10.00 957.95 11626.27 Just Dial 718.61 121.36 12.12 31.74 2.96 130.14 10.00 384.75 2676.58 Matrimony.com 292.82 43.78 19.39 50.80 19.54 50.41 5.00 985.00 2224.09 *Matrimony.com Limited ratios (expected) post issue on FY17 basis Valuation Considering the P/E valuation on the upper end of the price band of Rs.985, the stock is priced at pre issue P/E of 47.83x on its FY17 EPS of Rs. 20.59. Post issue, the stock is priced at a P/E of 50.80 x on its EPS of Rs. 19.39. Looking at the P/B ratio at Rs. 985 the stock having negative book value on pre issue basis and on the post issue book value of Rs. 50.41 the P/B comes out to 19.54x. On the lower end of the price band of Rs.983 the stock is priced at pre issue P/E of 47.73x on its FY17 EPS of Rs. 20.59.Post issue, the stock is priced at a P/E of 50.70x on its EPS of Rs. 19.39. Looking at the P/B ratio at Rs. 983, the stock having negative book value on the pre issue basis and on the post issue book value of Rs. 50.41, the P/B comes out to 19.50x. Industry outlook India is one of the world s most populous countries with an estimated population of approximately 1.27 billion as of July 2016, which equates to 17.30% of the world population, according to the CIA Factbook. Based on the KPMG Report, it is also estimated that approximately 65.00% of the Indian population is under 35 years. The young base will get married in the next two decades and result in an average of 11 to 13 million weddings per year until 2021. Matchmaking has traditionally been a very 3
fragmented and unorganized industry in India, with friends and family being the predominant channel of matchmaking. Other offline channels of matchmaking include traditional matchmakers/brokers, community marriage bureaus, pundits/maulvis/priests and classifieds (prints). According to the KPMG Report, the marriage services industry in India is estimated to be worth approximately ` 3,681 billion in fiscal 2016, with catering, decoration, venue, gifts and photography accounting for approximately 61.00% of marriage services spends in fiscal 2016. Outlook: Matrimony is the leading provider of online matchmaking services in India in terms of the average number of website pages viewed by unique visitors in June 2017 (Matrimony.com data does not include data from all sites under Matrimony.com). However, the company has incured losses for 3 out of 5 financial years. An Indicative timetable in respect of the Issue is set out below: EVENT INDICATIVE DATE (On or before) Bid Closing Date September 13, 2017 Finalisation of Basis of Allotment with the Designated Stock September 19, 2017 Exchange Initiation of refunds September 20, 2017 Credit of the Equity Shares to depository accounts of Allottees September 20, 2017 Commencement of trading of the Equity Shares on the Stock September 21, 2017 Exchanges Annexure Consolidated Financials Profit & Loss Rs. in Cr. Particulars Period ended Period ended Period ended 30-Jun-17 31-Mar-17 31-Mar-16 Total Operating Income 83.84 292.82 254.82 Total expenditure 64.30 233.73 248.20 Operating Profit 19.54 59.09 6.62 OPM% 23.31 20.18 2.60 Other Income 0.95 3.89 4.83 PBDIT 20.49 62.98 11.46 Depreciation 2.47 10.38 9.754 PBIT 18.02 52.60 1.70 Interest 0.674 4.43 2.986 PBT 17.35 48.17-1.29 Tax 2.732 0.01 0.00 Exception Item 0 4.37 73.77 Profit before minority interest 14.62 43.78-75.06 Minority interest 0 0.00 0.014 PAT 14.62 43.78-75.07 Balance sheet is on next page 4
Balance Sheet Rs. in Cr. Particulars As on 30-Jun-17 As on 31-Mar-17 As on 31-Mar-16 Non-current assets Goodwill & others 0.00 0.00 0.04 Fixed assets 0.00 0.00 0.00 Property plant and equipment 18.42 17.77 19.20 Tangible asset 5.98 6.47 9.20 Long-term loans and advances 17.73 19.04 11.17 Total Non- Current Assets 42.13 43.28 39.61 Current assets Current Investment 0.00 0.00 0.00 Inventories 0.00 0.00 0.00 Trade Receivables 3.04 2.16 1.90 Cash and Bank balances 65.23 58.01 58.38 Short-term loans and advances 4.65 3.91 10.97 Other current assets 14.29 12.01 12.98 Total current assets 87.20 76.08 84.23 Total Assets 129.33 119.36 123.85 Non-current liabilities Long-term borrowings 0.00 0.00 0.16 Deferred tax liabilities (net) 0.00 0.00 0.00 Other long-term liabilities 0.26 0.25 20.95 Long-term provisions 2.19 1.95 1.63 Total non-current liabilities 2.44 2.20 22.74 Minority interest 0.26 Current liabilities Short-term borrowings 43.34 44.38 48.19 Other current liabilities 78.38 81.74 88.31 Short-term provisions 6.09 5.81 5.23 Trade payables 15.24 16.37 35.22 Total current liabilities 143.05 148.29 177.20 Total 145.49 150.49 199.94 NET Worth -16.17-31.13-76.09 Net worth represented by: Share capital 10.63 10.62 9.19 Reserves and surplus -26.80-41.75-85.28 Net Worth -16.17-31.13-76.09 5
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