Company Overview

Incorporated in 2001, Matrimony.com Ltd (MCL) is engaged in providing online matchmaking and marriage services through internet and mobile platforms in India and internationally. Currently, MCL has a database comprising of 3.3 million active profiles (as of December 31, 2017) and 140 retail centers distributed across India. Its flagship brand, BharatMatrimony, has 15 language based domains under its umbrella.

According to the comScore Report for June 2017, Matrimony.com is the leader for online matchmaking services in India in terms of the average number of website pages viewed by unique visitors (Matrimony.com 9,91,000, Shaadi.com - 4,20,000, Jeevansathi.com-3,48,000), time spend (Matrimony.com – 149million minutes, Shaadi.com – 26million minutes million, Jeevansathi.com – 33million minutes) and total pages viewed (Matrimony.com – 459million, Shaadi.com – 46million, Jeevansathi.com –48million) mainly due to MCL’s large database of profiles.

The company has also recently entered into the marriage services industry.

Industry Overview

As per KPMG report on ‘Market Study of Online Matrimony & Marriage Services in India’, it is estimated that there were approximately 373 million individuals in India within the marriageable age of which 107 million were unmarried, out of which active seekers were 63 million. However, active users of the online matrimony segment were only 6 million in 2016, according to KPMG report.

59% of the current unmarried population falls between 18 and 24 years, which is when Indians typically get married. As of 2016, 88.4% of Indian marriages were arranged, where parents tend to be the primary decision makers.

 

Finally, internet penetration is expected to grow from 462 million in July, 2016 to 730 million in FY20. This number can be pushed further with the recent expansion in internet usage among Indians.

 

Currently, MCL has 3.08 million active profiles on Matrimony.com. Hence, there is a huge untapped market opportunity for the company. This industry is also virtually recession proof, as no matter what the condition of the economy is, people are going to get married.

 

Additionally, according to the KPMG Report, the marriage services industry in India is estimated to be worth approximately Rs 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.

 

However, the majority of the categories of marriage services in India are unorganized andhighly fragmented, presenting a potential opportunity for an organized aggregator to provide these services.

 

Financial Analysis

(Rs. in Crores)

Years	2018	2017	2016
Net Profit Margin	22.02%	14.67%	-29.39%
EBITDA Margin	28.87%	20.13%	-24.39%
ROCE	51.85%	-177.80%	142.75%
ROE	44.06%	-145.56%	102.53%
Current Ratio	1.77	0.53	0.49
Interest Coverage	56.97	8.69	-24.13
Debt to Equity	0.04	-1.50	-0.66
Cash from Operating Activity	76.67	29.49	NA
Cash from Investing Activity	-149.98	-65.39	NA
Fixed Assets Purchased	-53.94	-10.12	NA
Investments in Mutual Funds	-72.52	0.00	NA
Cash from Financing Activity	84.39	-7.72	NA
Operating Cash Flow to Sales	0.23	0.10	NA

 

2015-16

 

1. Not much information about this year is available, except the fact that MCL had a net loss in this financial year.
2. The only questionable thing about this year is that the company has negative equity, due a large amount of negative Securities Premium Reserve (SPR).

 

2016-17

 

1. The company generated net cash flow from operations of around Rs.29.49 crores which is less than the Net profit at Rs.42.97 crores.
2. MCL had net cash outflow from investing activities of around Rs.65.39 crores and from financing activities of about Rs.7.72 crores.
   1. Purchased fixed assets worth Rs.10.12 crores, and made interest payments of Rs.4.36 crores. The company also sold fixed assets worth Rs.11.04 lakhs.
3. The operating cash flow to sales is on the lower side at 0.10.
4. MCL paid Rs.3.71 crores to the Key Managerial Personnel (KMP) as remuneration in FY17.
5. The company has stated that there were no material related party transactions.
6. This year also, MCL had negative equity due to huge negative SPR.

 

 

2017-18

 

1. The company generated net cash flow from operations of around Rs.76.67 crores which is more than the Net Profit.
2. The company had net cash outflow from investing activities of around Rs.149.98 crores and from cash inflow from financing activities of about Rs.84.39 crores due to IPO.
   1. Purchased fixed assets worth Rs.53.94 crores, made interest payments of Rs.1.22 crores and invested in Mutual Funds worth Rs.72.52 crores. The company also sold fixed assets worth Rs.5.98 crores and received interest on its loans worth Rs.5.43 crores.
3. The operating cash flow to sales is much higher at 0.29.
4. The company paid Rs.4 crores to the Key Managerial Personnel (KMP) as remuneration in FY17.
5. MCL has stated that there were no material related party transactions in FY18.

 

Overview

 

1. Overall the company has shown impressive growth in the past 2 years. Sales have grown at a healthy 14.6% p.a. but profit margins have improved drastically with the Net profit Margin going from negative to 22%.
2. The quality of profit can be brought into question as the CFO is either less than or only slightly more than the PAT:

(Rs. in Crores) 

Years	2018	2017
Cash from Operations	76.67	29.49
Net Profit	73.86	42.97

 

3. As at 31^st March 2018, the promoters have 50.32% shareholding.

 

Future Prospects

 

Positive

 

1. Matrimony.com has high degree of brand recall and trust in India, as evidenced by the average number of website pages viewed by unique visitors in June 2017 (comScore Report). BharatMatrimony.com has been ranked as India’s most trusted online matrimony brand by The Brand Trust Report India Study 2014. MCL spends 17-18% (% of sales) on ad spends every year. This will surely help the company to grow its customer base.
2. Additionally, with the recent boost in people accessing the internet, the company can now reach out to a much wider audience than before.
3. The company’s key strategy for driving monetization is to increase the length of relationship with customers and increase the amount of revenue earned from customers by offering additional wedding related services such as photography & videography, wedding apparel, venue, stage decorations, make- up, catering and honeymoon packages from various vendors to meet customers’ wedding needs. To effect this, MCL recently launched ‘MatrimonyMandaps’, ‘MatrimonyPhotography’,MatrimonyBazaar’ etc., consolidated online platforms for members seeking services related to weddings.
4. The company has recently launched in the UAE with an office in Dubai, which is sure to contribute to growth, what with the more than 2 million Indians that live in the Middle East, a majority of them from South India where BharatMatrimony is a well-known brand.

Negative

1. The settlement of of litigation with with Rajan Desai and Real Soft Inc. over the last 4 years had severely dented the networth of the company which has gone into negative. Even though the IPO has helped the situation, it might be a while before the company fully recovers from this.
2. Existing infrastructure may not be able to support a growth in users and traffic in India, and the increasing number of users, bandwidth requirements, problems caused by computer viruses and bugs may affect the performance of the Internet, leading to a variety of outages and other delays. These outages and delays could reduce the level of Internet usage generally. Any slowdown or negative deviation in the anticipated increase in Internet penetration in India may adversely affect their business and prospects and may result in slower than expected growth for them.
3. Markets for MCL products and services are characterized by rapidly changing technology, evolving industry standards and norms, new product and service introductions and evolving website presentations and features. Results of operations and financial condition depend on their ability to develop and introduce new products and services, as well as their ability to modify and upgrade their existing products and services. Failure to respond successfully to any of these challenges will significantly harm their results of operations and financial condition.

Conclusion

MCL has a high degree of brand recall and trust in India, as evidenced by the various comparative data with its peers mentioned above. In addition to this, the company has 140 retail centres distributed across India where potential or existing customers can walk in and seek the assistance of retail executives to register on websites and/or make payment for the matchmaking product or service of their choice. MCL’s business model is efficient and tailored for the Indian market. Members who subscribe for its paid online matchmaking packages are required to make payments in advance before they are able to access certain features and functionalities on its websites, mobile sites and mobile apps that are not available to free members, which results in low credit risk in its matchmaking business.  Since the company is in an essentially recession free industry, the company is likely to grow fast in the near future, as long as it can avoid future lawsuits that cause a drain on company finances and manage its cash flow well.

 

CA.Binoy J.Kattadiyil