Matrimony.com IPO Review – What are the hidden factors?
Matrimony.com would open for subscription on 11th September, 2017. Matrimony.com Ltd is one of the leading Online Matchmaking Services provider in India. Its consolidated revenues grew at 12% CAGR in last 5 years. It incurred losses for 3 out of 5 financial years. There are several negative factors in this IPO. What are the hidden factors in Matrimony.com IPO? Are there any positive factors in this IPO? Since the facevalue of the share is Rs 5 per share, is Matrimony.com IPO price is high? In this article, I would provide some interesting insights and do Matrimony.com Limited IPO Review.
About Matrimony.com Ltd
Matrimony.com Ltd is incorporated in 2001. Company business currently comprises two segments – (i) matchmaking services and (ii) marriage services and related sale of products. In fiscal 2017 and the three months ended June 30, 2017, matchmaking services and marriage services accounted for all of company revenue and there was no revenue from the related sale of products. According to the comScore Report, they are 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). They deliver matchmaking services to company users in India and the Indian diaspora through company websites, mobile sites and mobile apps complemented by company on-theground network in India. company 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 they believe that company other matchmaking brands such as CommunityMatrimony.com and EliteMatrimony.com are theyll-established in India.
Matrimony.com Issue details
- IPO open date: 11-September-2017
- IPO close date: 13-September-2017
- Face Value: Rs 5 per share
- Issue price band: Rs 983 to Rs 985 per share
- Issue size: Rs 130 Crores + Offer for Sale Shares of Rs 364 Crores aggregating to Rs 494 Crores
- Matrimony.com Lot size: 15 shares and in multiples of 15 shares there-of
- Minimum investment: Rs 14,775 on higher price band
- Leading Managers: Axis Capital and ICICI Securities
- Listing: BSE / NSE
- Download Matrimony.com RHP Prospectus at this link.
Objects of the Matrimony.com Ltd IPO issue
The Offer consists of a Fresh Issue by our Company and an Offer for Sale by the Selling Shareholders.
a) Offer for Sale
Company will not receive any proceeds from the Offer for Sale.
b) Objects of the Fresh Issue
1) Advertising and business promotion activities;
2) Purchase of land for construction of office premises in Chennai;
3) Repayment of its overdraft facilities and
4) General corporate purposes.
Company Financials (Consolidated reinstated)
1) The company generated revenue of Rs 188.7 Crores for the year ended Mar-13 and Rs 292.9 Crores for the year ended Mar-17.
2) The company posted a profit of Rs 10.4 Crores for the year ended Mar-13 and profit of Rs 43.7 Crores for the year ended Mar-17.
3 Its FY17 EPS is Rs 23.1 and last 3 years average EPS is minus Rs 5.7.
Company Financials (Standalone reinstated)
1) The company generated revenue of Rs 188.6 Crores for the year ended Mar-13 and Rs 267.6 Crores for the year ended Mar-17.
2) The company posted a profit of Rs 9.4 Crores for the year ended Mar-13 and profit of Rs 22.5 Crores for the year ended Mar-17.
3) Its FY17 EPS is Rs 11.9 and last 3 years average EPS is Rs 0.23.
Reasons to invest in Matrimony.com
1) It posted good revenue growth in the last 5 years. Its consolidated revenues grew at 12% CAGR in last 5 years. Its standalone revenues grew at 9% CAGR in last 5 years.
2) Good brand value in India.
3) Retail Investors would get 10% discount on issue price for Rs 98 per share (985 x 10%).
Risk Factors / Reasons not to invest in a Matrimony.com Ltd IPO
1) Company incurred losses for 3 out of 5 financial years. Investors should invest in profit making companies so that they are rewarded with dividends and share price appreciation. Share price appreciation would be less in case of loss making companies.
2) They rely on telecommunications and information technology systems, networks and infrastructure to operate company business and any interruption or breakdown in such systems, networks or infrastructure or company technical systems could impair company ability to effectively provide company products and services.
3) If third parties, including company current or future competitors, or company employees are able to circumvent company protection measures which are put in place for the protection of company database or systematically copy company online content or misappropriate confidential information, company business and reputation would be adversely affected.
4) They face significant competition in company online matchmaking business from Indian companies, and they may be unsuccessful in competing against current and future competitors, which could have an adverse impact on the pricing of company services as theyll as increase the costs associated with growing company customer base.
5) They may fail to convert free members to paid members or fail to retain company existing base of paid members.
6) Company Restated Consolidated Summary Statements reflect that they had a negative net worth as of March 31, 2014, 2015, 2016 and 2017 and June 30, 2016 and 2017.
7) 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 company Promoter to comply with the terms of the Inter Se Agreement may materially and adversely affect company business prospects, financial condition, results of operations and cash flows.
8) Company business could be adversely affected if they fail to keep pace with changing technology and evolving industry standards and norms or fail to develop and introduce new products and services in a timely manner.
9) They continue to explore the diversification of company business and the implementation of new products and services, such as marriage services. This diversification and company other strategic initiatives may not be successful, such as in the case of company Tambulya.com and “Matchify” businesses which theyre introduced in 2015 but the operations of which they have decided in 2016 to reduce in a phased manner without any further investment, which may adversely affect company business, prospects, financial condition and results of operations.
10) Some of company products or services have only been recently introduced and, as a result, it may be difficult to evaluate their performance and prospects.
11) Company Promoter, Subsidiaries and Directors are party to certain legal proceedings that, if decided against it or company Promoter, Subsidiaries and Directors could have a material adverse effect on company reputation, business, prospects, financial condition and results of operations.
12) Other risk factors (Internal and external) can be viewed in the DRH prospectus.
Recommendation / Investment strategy – Matrimony.com
1) Company is asking for an issue price band of Rs 983 to Rs 985 for a face value of Rs 5 per share. On higher price band of Rs 985 compared to its FY17 EPS of Rs 11.9 the P/E works out to 82.7x. There is no listed peers in similar line of business. However if we compare with any other Online Internet based business like Just Dial which is trading at P/E ratio of 30 the asking price of this IPO for P/E Ratio of 82.7x is very very high. Let us check on other angle. If we check highest issue price band of Rs 985 which is for Rs 5 face value per share and if we attribute to Rs 10 face value per share the asking price would be Rs 1,970 per share which is very high.
2) Company standalone revenues grew at 9% CAGR in last 5 years. However it incurred losses for 3 years out of 5 years. Company issue is highly priced. Investors may or may not get listing gains. Investors should stay away from such high priced IPOs. If such IPO’s are available at discounted price after listing, one can purchase them in secondary market. As of now you can stay away from such IPOs.
Disclaimer: I do not have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
If you enjoyed this article, share it with your friends and colleagues through Face book and Twitter.
Matrimony.com IPO Review – What are the hidden factors