Client monetisation a key challenge for Matrimony.com IPO

Growth in total profiles has been volatile in recent years

Matrimony.com, which owns matrimonial classifieds portals bharatmatrimony.com, elitematrimony.com, communitymatrimony.com, assistedmatrimony.com, among others, is set to launch an initial public offering (IPO) of equity to raise Rs 500 crore. While BharatMatrimony.com's leadership position in the online matrimonial space lends comfort, there are concerns, too. 

First, its total number of profiles (or members) has been rather volatile in recent years (see table). Second, the proportion of paid members has remained in the narrow band of 23 to 24 per cent in recent years. In FY16, this shot up to 27 per cent as the total number of active profiles declined. Third, its operating margins have swayed between three and 20 per cent in the past three years. All these restrict scalability of the business, reducing earnings visibility. While low penetration of the online matrimony business is a positive, pulling customers into the paid-service has not been easy. The fact that this business largely sees a one-time transaction where the consumer does not come back, also makes sustained monetisation difficult. There are also the risks of fake profiles and/or misuse of these websites, which could shift customers away from the online medium, believe analysts. 

The company remains confident expanding its paid members. "We believe our on-the-ground network of retail centres and service team helps in the customer education process, builds trust and drives monetisation of existing free members," says Murugavel Janakiraman, founder and chief executive officer at Matrimony.com. Investors should monitor the progress on this. 

About Rs 130 crore of the issue proceeds will flow into the company, the rest being an Offer for Sale. The company plans to use this money to repay loans (Rs 44 crore), buy land for a corporate office in Chennai (Rs 41 crore) and for advertising and business promotion (Rs 20 crore). While debt repayment will aid its overall profits, higher advertising spending could enable Matrimony to further protect or even gain share from peers Shaadi.com (number two player), JeevanSathi.com (number three), among others. JeevanSathi.com is owned by Info Edge (which also owns naukri.com and 99acres.com, among others), a listed company. However, given the segment's small contribution to revenue (seven per cent), it is unlikely to have any meaningful impact on the Info Edge stock, believe analysts. 

Overall, while Matrimony.com is a play on the under-penetrated online matrimony segment, monetisation of its members has not been easy. Given the high competitive intensity, it would need to continuously invest in brand building activities, which could keep a lid on margins. Strong brand value, its large database of profiles and a micro-market strategy are among its strengths. As there are multiple pain points, how the company prices its IPO will be crucial.