Thinking of investing in Bharat Matrimony's IPO? Well, the high priests of the markets (stockbrokers and analysts) are chanting a loud Shubha Mangala, Saavdhaan! The chant is synonymous with most Indian weddings, more importantly Maharashtrian ones.
Bharat Matrimony's IPO has thrown up a mixed bunch of reactions. A few select analysts call this a great opportunity, but wait there are a few concerns too.
The first online matchmaking service on the exchange houses, will aim to raise Rs 130 crore in fresh issues and 3,767,254 equity shares towards an OFS (offer for sale).
From the proceeds nearly Rs 20 crore will be used in advertising and business promotion activities, while 42.5 crore would be spent in construction of an office premise in Chennai. Also, Rs 43.34 crore would be spent on repayment of overdraft facilities and general corporate purposes. The remainder would be used for other general purposes.
The IPO would help the company raise nearly Rs 500.3 crore as an offer for sale. The company will not receive any proceeds from the offer for sale.
From the OFS, the highest (44.67% or 1683207) shares are held by CMDB II. JP Morgan Asset Management company owns shares in Matrimony through CMDB, which was bought from Canaan Partners. JP Morgan will be selling one-thirds of its stake.
Bessemer India Capital, that owns nearly 7% is the other investor, only that OFS of its shares will be a complete exit from the business. Bessemer India Capital Holdings will be making 1.46 million shares available.
Besides these, 155760 shares held by Mayfield XII (Mauritius), 384447 shares from Murugavel Janakiraman and 82834 shares of Indrani Janakiraman will also be available. The OFS will also involve a reservation worth Rs 50 lakh for select employees.
Murugavel Janakiraman, the promoter, is also the founder and Managing Director holding 55.6% stakes (pre-issue).
The matchmaker had a capital-raiser on September 8, where Rs 225 crore was raised from investors. Nearly ten anchor investors such as Goldman Sachs, Small Cap World Fund, HDFC Trustee Company, DB International, Baring Private Equity India AIF, etc have been allotted shares at a price higher than the IPO.
On Monday, an hour and half before the end of trading hours on Monday, the IPO was already subscribed 11%.
Oportunities (Shubha Mangala)
1. The company has a database of 3.08 million active profiles, and operates the services in 15 language based domains. Earns 95% revenues in services. A ComScore report for June 2017 suggests that it is a leader in online matchmaking services in terms of average number of website pages viewed by unique visitors, time spent and total pages viewed vis-a-vis peers, mainly on the back of the large database of profiles.
2. Besides online, Matrimony.com also has 140 retail centers where potential or existing customers can walk in and seek assistance.
3. There exists a huge potential in the sector. A KPMG report suggests that unmarried population in CY2016 was 107 million in which active seekers were 63 million and of which 6 million were active users of online matrimony. With more digital coming in and smartphone penetration increasing, newer prospects are only expected to increase.
Matrimony.com does not have a formal dividend policy nor has it declared any dividends for equity shares in the last five years.
Competition from other dating websites/Apps and other matrimonial websites/Apps.
There is a thought that the company may fail in converting free members to paid members or fail to retain existing base of paid members.
Reputation of the company could get hampered, if its service platforms are misused by any of its users. Also, with a large number of registered domains, there is a concern on rising legal costs to protect brand rights.
Angel Broking recommends subscribing to the IPO suggesting that at the upper end of the price-band the pre issue P/E multiple works out to 35.7x of 1QFY18. "Annualized EPS, which is lower compared to peers (Info Edge is trading at 46.4x of its 1QFY2018 Annualized EPS).
Analysts from Arihant Capital suggested that Matrimony would utilize IPO proceeds to increase its revenue with increased brand awareness and lower rental and interest expense. But they also suggested that any breakdown or interruption in telecommunication or IT related system would lead to business disruption. The analysts recommended a 3 star rating for the issue.
HDFC Securities in its note did not mention whether to subscribe or not to, but it majorly illustrated the pros and cons from the IPO. The brokerage house added that the online matchmaking industry is still at a nascent stage and accounts for approximately 6.00% of marriages in India. The online matchmaking industry in India is also a very fragmented market with over 2,600 wedding portals, only a handful of players of which have some scale and 700 of which are an extension of the community bodies which traditionally played a major role in alliance and matchmaking.
How to subscribe?
The minimum order quantity is 15 shares or in multiples. The floor price is 196.60 times and the cap price is 197 times that of the face value. Each equity share is the face value of Rs 5. Axis Capital Limited and ICICI Securities Limited are the official Book Running Lead Managers (BRLM) for the issue.
The IPO is available from Monday through Wednesday, and don't forget that retail investors including individual bidders would get a discount of Rs 87 on the price band of Rs 983- 985 per share. The discount has also been extended to select employees.