Matrimony.com IPO..... Should you Invest?

This week is very special because it’s not just one or two but there are 3 IPOs lined up together. I am sure you all are very much trilled to find out which is a thumps up and which is a thumps down. 

Don’t worry. Richerinvestor.com brings you updates on all three of them.

In this article we will be talking about Matrimony.com Ltd.

For update on ICICI Lombard General Insurance Company Ltd please click here.

For update on Capacit’e InfraProjects Ltd please click here.

Now let’s get down to business and see if you can marry Matrimony.com ltd or not. Shall we?

The issue opens on 11^th Sep 2017 and closes on 13^th Sep 2017. The price band of this issue is Rs 983 to 985 with a provision for a discount of Rs 98 for retail investor. Total issue size is for around Rs 500 Crs of which Rs 130 Crs shall be a fresh issue and the rest shall be OFS by the investors and promoters. The total no. of shares available for sale should be around 50.87 lakhs which is very low. Minimum no. of shares per lot is 15. Face value of the share is Rs 5.

About the Company!!!

As you all know it’s a .com company or what we can say a website company very much similar to Just Dial. Matrimony.com’s business comprises three segments – matchmaking services, marriage services and related sale of products and other services which include a mobile-only relationship app, “Matchify”.

Now I did go through a lot of statistics on the popularity of the website and reports from different sites and agencies and can say that the site is quite popular. These statistics involve a lot on the high rate of arrange marriages in India and so I am not sure on the sample size of these surveys. We all agree that not all match making in India happens online.

Promoters!!!

The prompter of the company is Mr Murugavel Janakiraman (age 45).

Other people forming part of the promoter group are all relatives of Mr Murugavel Janakiraman.

There are other entities as well that form a part of the promoter group.

Utilization of Funds!!!

As stated above, total issue size is for around Rs 500 Crs of which Rs 130 Crs shall be a fresh issue and the rest shall be OFS by the investors and promoters.

The fresh issue is proposed to be utilized for the following:

1. Advertising and business promotion activities;                                              Rs 20 Crs

2. Purchase of land for construction of office premises in Chennai;                  Rs 41.4 Crs

3. Repayment of overdraft facilities; and                                                            Rs 44.38 Crs

4. General corporate purposes.                                                                            Balance

The company is intending to have a new office space which looks like more expenses. Further this amount seems only for the purchase of land. Not sure how they are going to manage funds for building the office premises. That 20 Crs for advertising expenses are gonna be written off sooner or later. The only useful objective seems to be repayment of their overdraft facilities which would result in saving of cash outflow.

In such a situation the company should try to have more fresh issues and not offer for sales.

Well now let’s look into the financials to know if it’s worth considering this marriage?

Financials!!!

1)      The company’s consolidated networth is negative at Rs (31.132) Crs as on 31.03.2017. Previous year it was at Rs (76.091) Crs. Even though the company has managed to make profit in the current year, the company has constantly had negative networth for the past 4 years now.

2)      The company’s long term liability doesn’t really seem much with Rs 2.2 Crs as on 31.03.2017 which was at Rs 22.73 Crs as on 31.03.2016. However its short term borrowings have increased from Rs 25.49 Crs in 31.03.2013 to Rs 44.38 Crs in 31.03.2017.

3)      Looking at Current ratio it is very much clear that the company is using as much as it can on the current liabilities front to finance its noncurrent assets. This is a very bad sign for any company as it shows that the company is not able to finance its assets and is facing difficulties in managing its working capital.

4)      Looking into the Profit and Loss Account, revenue for the company has grown from Rs 188.78 Crs in the year 2012-13 to Rs 292.93 Crs in the year 2016-17. Not that great.

5)      For three years from 2013-14 to 2015-16 the company has had huge expenses or losses in the name of Exceptional Items. Not really sure what this is but very much sure that these expenses are the reason for the loss.

6)      The company has made a profit of Rs 43.78 Crs in 2016-17, however in the preceding 3 years taken together the total loss is Rs 87.16 which has wiped off the networth.

Valuations!!!

The company’s basic EPS for 2016-17 is Rs 11.9 and diluted EPS is Rs 10.5. Using the basic EPS the PE at Rs 985 is 82.77 and with the discount for retail investors the PE comes to 74.54. I can understand overvaluation but this is over the roof.

Overall the company is very much not doing well as of now. Unless the company is able to generate more revenue organically, it’s not going to be able to sustain. Further the proceeds of the issue is also not really planned to be utilised well. It’s better to let go of this marriage proposal.

Man marriage really is an expensive venture. With this I would say that Matrimony.com Ltd is a “avoid”.

Thanks for joining us. Have a nice day.

-RicherInvestor

Written by Roger Vins (CA, MCom)

Disclosures:

The author or any person at RicherInvestor doesn't have any financial interest in the Company.