Matrimony.com IPO opens today: Should you invest? 


Matrimony.com Ltd (Matrimony) is one of the leading providers of online matchmaking services in India. It has two business segments – matchmaking services (96% of FY17 revenue) and marriage services (4%).The company has one of the largest databases (3.08 million active profiles as of Jun’17) on its portal. It owns brands like Bharatmatrimony.com, EliteMatrimony.com, AssistedMatrimony.com and CommunityMatrimony.com.

The offer (price band: Rs 983 – 985) consists of an offer for sale (OFS) and fresh issue. OFS is from private equity (Rs 325 crore) and promoters (Rs 46 crore). The fresh issue of Rs 130 crore, will be used for repayment of debt (around Rs43 crore), purchase of land for office (around Rs 43 crore) and advertising (Rs 20 crore).

Although there could be fancy on the street for such a kind of consumer focused internet services company, but owing to weak financials (net losses in the past and erosion of net worth) we are not comfortable recommending the IPO. At the higher price band of Rs985, the offer is valued at 46.2x P/E on FY17 basis (post dilution). Although consumer internet services companies trade at premium valuation on account of their fancy on the street but in comparison to peers matrimony valuation looks stretched on account of weaker financials.Even if money raised at such valuations was flowing into the company, it would have ultimately belonged to shareholders. However, in this case it may be noted that 74% of the money raised is going to the selling shareholder (PE investor & Promoters) and not into the company. We recommend avoiding the IPO.

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 stock is available at ~51x FY17 P/E with a 10% discount to retail investors. It may be noted that the nature of the Matrimony.com business is not comparable to that of Just Dial and Info Edge.We recommend Subscribing for listing gains.

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