Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
7 September 2017
DAILY
Pre-IPO Note
Matrimony.com (NOT RATED)
Tied up in knots!
(Click here for detailed note)
Updates
Staffing (POSITIVE)
The fewer laws, the more justice
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
allambit@ambit.co
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
Please refer to the Disclaimers at the end of this Report.
Matrimony.com
NOT RATED
PRE-IPO NOTE September 07, 2017
Internet classifieds
Tied up in knots! IPO Information
Matrimony.com’s metrics betray the penetration argument as 6% active Mar’17 data ` mn
subscriber CAGR over FY13-17 significantly undershot mobile internet
Post-Issue Net worth 989
user growth (18%). Incubated in the pre-smartphone era of the
noughties, Indian online matrimonial players couldn’t keep pace with Pre-Issue # of shares (mn) 21.3
rapid mobile-led internet adoption. Could the answer lie in alternate Issue size 5,000
models? Match Inc’s multi-brand market segmentation and mobile-only O/w: Offer for sale 3,700
Tinder app drove 18% subscriber CAGR (2012-16) as it attracted new
O/w: Fresh issue 1,300
audiences. Matrimony's strong on-ground presence (141 stores) made no
Post-issue # of shares (mn) 22.6
difference as revenue growth (12% CAGR, FY13-17) trailed 3rd ranked
Jeevansathi (16%, 1.3x of Matrimony). Sluggish growth and Likely issue price (`/share) 985
unpredictable operating margins (3% to 20% over FY13-17) make us Enterprise value* 21,661
wary of ascribing 37x FY17 EV/EBITDA, a multiple that fast-growing, FY17 EBITDA 591
successful vertical-focused web businesses deserve. Key risk: Success in
EV/EBITDA (FY17)* 37.4
non-matrimony businesses.
P/E (FY17)* 50.8
Unique matrimonial services market as arranged marriages dominate P/S (FY17)* 7.6
Since arranged marriages (88% of total marriages) dominate the Indian market, Promoter’s Stake 50.6%
matchmaking has parental/familial involvement. Matrimony.com was among the
Canaan (PE investor) 14.9%
first matchmaking sites and is the market leader. The company's active users
Mayfield (PE Investor) 10.5%
account for 50% of total online active users for matrimonial purposes.
Public stake post-IPO 23.9%
Mature category; proliferation of Facebook/Whatsapp also hurt growth
Source: Ambit Capital research, RHP *post-money; Note:
Active subscriber growth (6% CAGR, FY13-17) trailed profile growth of 14% due Lock-ins of various stakeholders (a) 20% stake for 3
to loss of married members. Weak growth points to a mature category. High years from allotment date by Promoters (b) excluding
20% stake locked in by promoters for 3 years, the entire
pricing (>`4,200) and onerous registration requirements imply reduced pre-offer equity share capital (excluding that held by
addressable market comprising educated, high-income people seeking partners. Mayfield and Bessemer) is locked in for a year (c) equity
shares allotted to anchor investors for 30 days
Penetration among the redefined addressable market could be as high as 25-
30%. Horizontal players’ success (Facebook) with rapid mobile internet
proliferation also contributed to sluggish growth. Online matrimonial services'
market size (`5-6bn) reflects shift of newspaper classified advertising as free
horizontal web giants satiated other communication needs.
Only one person barring the promoter has skin in the game!
In 2016-2017, the company lost several key management personnel - CFO,
chief HR officer, chief strategy officer and head of data sciences. Remuneration of
key employees ranges from `3-7mn p.a. and, barring the promoter, there is only
one employee that has ESOPs worth over `10mn. Tepid compensation implies
that the interests of other employees aren’t aligned with that of the company.
Doesn't deserve multiples of successful vertical-focused web businesses
Non-existent network effects, weak growth and disruption risks from upstarts like
Match Inc (Tinder) lead us to believe that growth for Matrimony.com will be
gradual and sustenance questionable; and all this despite a large addressable
market. Dependence on a model driven by headcount and retail centres is
uncharacteristic of highly scalable and non-linear internet businesses.
High volatility of operating profit and weak growth
Year to March FY13 FY14 FY15 FY16 FY17
Net Revenues (` mn) 1,886 2,054 2,414 2,548 2,928
Operating Profits (` mn) 160 112 164 66 591
Paid members (mn) 0.57 0.57 0.65 0.68 0.70 Research Analyst
Active users (mn) 2.42 2.40 2.65 2.55 3.03
Vivekanand Subbaraman, CFA
ATV (`) 3,325 3,551 3,655 3,827 4,065
+91 22 3043 3261
RoCE (pre-tax) 12.2% 6.4% 8.8% -2.8% 40.1%
vivekanand.s@ambit.co
EV/EBITDA at `985/sh* 138 197 134 334 37
Source: Company, Ambit Capital research; ATV = Average Transaction Value, *post-money
allambit@ambit.co
Ambit Capital and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, investors should be aware that Ambit Capital
may have a conflict of interest that could affect the objectivity of this report. Investors should not consider this report as the only factor in making their investment decision.
AMBIT INSIGHTS
Staffing POSITIVE
The fewer laws, the more justice
Quick Insight
The Indian labour market is characterised by numerous redundant, non-
uniform and draconian laws. Originally intended to safeguard employee Analysis
rights, they ended up increasing compliance cost and informal workforce.
Wage code 2017 recently tabled in the Lok Sabha is the first significant Meeting Note
labour law reform by any government post-independence. We expect the News Impact
wage code to unify multiple existing regulations and reduce compliance costs
for firms. Contrary to street expectations, the draft confirmed that the Central
Government won’t enforce a ‘single’ National Minimum Wage (NMW). Our
concerns of NMW inhibiting workforce formalisation in the long term are
alleviated by the robust wage-setting mechanism. Despite expecting a one-
time sharp spike in minimum wages in the short term, we remain positive on
the staffing sector. Given multiple moving parts of value creation, looking at
headline multiples alone will be misleading. Reverse DCF on CMP indicates
valuations of Teamlease don’t fully factor in headcount growth potential in
the long term (~5% over FY17-37E vs 20% over FY11-17 and 9% of Adecco
over CY94-16).
The draft also proposes an advisory board to advise the Central Government in setting
and resetting NMW from time to time. Equal representation to both employers and
employees on this board provides enough checks and balances. This gives us the
comfort that there would not be undue wage hikes driven by political pressures from
employee / labour unions over the long term.
Currently, employees earning wages less than Rs7k/month are entitled to payment of
bonus to the tune of 8.3-20.0% of their wage. Though the proposed wage code
retains the bonus range, it empowers the state governments to decide the ceiling for
the purposes of: (1) determining eligibility of bonus payment and (2) calculation of
bonus. This places another arrow in the quiver of state governments to check
minimum wage growth and remain competitive to the industry.
We do not expect NMW to inhibit formalisation of workforce
We were concerned that a ‘single’ NMW may result in unsustainable wage inflation
over the long term, which would subsequently inhibit formalisation of the work force.
However, our concerns are now alleviated by the robust wage setting mechanism. We
now estimate a one-time sharp spike in minimum wages driven by implementation of
NMW in the short term. However, this will eventually normalise because of the
interplay between (1) frequency and quantum of wage reset, and (2) ability of state
governments to tweak ceiling for bonus eligibility.
allambit@ambit.co
Ambit Capital Pvt Ltd 7 September 2017
AMBIT INSIGHTS
allambit@ambit.co
Ambit Capital Pvt Ltd 7 September 2017
AMBIT INSIGHTS
Disclaimer
1. AMBIT Capital Private Limited (“AMBIT Capital”) and its affiliates are a full service, integrated investment banking, investment advisory and brokerage group. AMBIT Capital is a Stock Broker, Portfolio
Manager, Merchant Banker and Depository Participant registered with Securities and Exchange Board of India Limited (SEBI) and is regulated by SEBI.
2. AMBIT Capital makes best endeavours to ensure that the research analyst(s) use current, reliable, comprehensive information and obtain such information from sources which the analyst(s) believes to
be reliable. However, such information has not been independently verified by AMBIT Capital and/or the analyst(s) and no representation or warranty, express or implied, is made as to the accuracy
or completeness of any information obtained from third parties. The information, opinions, views expressed in this Research Report are those of the research analyst as at the date of this Research
Report which are subject to change and do not represent to be an authority on the subject. AMBIT Capital may or may not subscribe to any and/ or all the views expressed herein.
3. This Research Report should be read and relied upon at the sole discretion and risk of the recipient. If you are dissatisfied with the contents of this complimentary Research Report or with the terms of
this Disclaimer, your sole and exclusive remedy is to stop using this Research Report and AMBIT Capital or its affiliates shall not be responsible and/ or liable for any direct/consequential loss
howsoever directly or indirectly, from any use of this Research Report.
4. If this Research Report is received by any client of AMBIT Capital or its affiliate, the relationship of AMBIT Capital/its affiliate with such client will continue to be governed by the terms and conditions in
place between AMBIT Capital/ such affiliate and the client.
5. This Research Report is issued for information only and the 'Buy', 'Sell', or ‘Other Recommendation’ made in this Research Report such should not be construed as an investment advice to any recipient
to acquire, subscribe, purchase, sell, dispose of, retain any securities and should not be intended or treated as a substitute for necessary review or validation or any professional advice. Recipients
should consider this Research Report as only a single factor in making any investment decisions. This Research Report is not an offer to sell or the solicitation of an offer to purchase or subscribe for
any investment or as an official endorsement of any investment.
6. This Research Report is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied in
whole or in part, for any purpose. Neither this Research Report nor any copy of it may be taken or transmitted or distributed, directly or indirectly within India or into any other country including United
States (to US Persons), Canada or Japan or to any resident thereof. The distribution of this Research Report in other jurisdictions may be strictly restricted and/ or prohibited by law or contract, and
persons into whose possession this Research Report comes should inform themselves about such restriction and/ or prohibition, and observe any such restrictions and/ or prohibition.
7. Ambit Capital Private Limited is registered as a Research Entity under the SEBI (Research Analysts) Regulations, 2014. SEBI Reg.No.- INH000000313.
Conflict of Interests
8. In the normal course of AMBIT Capital’s business circumstances may arise that could result in the interests of AMBIT Capital conflicting with the interests of clients or one client’s interests conflicting
with the interest of another client. AMBIT Capital makes best efforts to ensure that conflicts are identified and managed and that clients’ interests are protected. AMBIT Capital has policies and
procedures in place to control the flow and use of non-public, price sensitive information and employees’ personal account trading. Where appropriate and reasonably achievable, AMBIT Capital
segregates the activities of staff working in areas where conflicts of interest may arise. However, clients/potential clients of AMBIT Capital should be aware of these possible conflicts of interests and
should make informed decisions in relation to AMBIT Capital’s services.
9. AMBIT Capital and/or its affiliates may from time to time have or solicit investment banking, investment advisory and other business relationships with companies covered in this Research Report and
may receive compensation for the same.
25. The value of any investment made at your discretion based on this Report, or income therefrom, maybe affected by changes in economic, financial and/or political factors and may go down as well as
go up and you may not get back the original amount invested. Some securities and/or investments involve substantial risk and are not suitable for all investors.
26. Ambit and its affiliates and their respective officers directors and employees may hold positions in any securities mentioned in this Report (or in any related investment) and may from time to time add
to or dispose of any such securities (or investment). Ambit and ACUK may from time to time render advisory and other services to companies referred to in this Report and may receive compensation
for the same.
27. Ambit and its affiliates may act as a market maker or risk arbitrator or liquidity provider or may have assumed an underwriting commitment in the securities of companies discussed in this Report (or
in related investments) or may sell them or buy them from clients on a principal to principal basis or may be involved in proprietary trading and may also perform or seek to perform investment
banking or underwriting services for or relating to those companies.
28. Ambit and ACUK may sell or buy any securities or make any investment which may be contrary to or inconsistent with this Report and are not subject to any prohibition on dealing. By accepting this
report you agree to be bound by the foregoing limitations. In the normal course of Ambit and its affiliates’ business, circumstances may arise that could result in the interests of Ambit conflicting with
the interests of clients or one client’s interests conflicting with the interest of another client. Ambit makes best efforts to ensure that conflicts are identified, managed and clients’ interests are
protected. However, clients/potential clients of Ambit should be aware of these possible conflicts of interests and should make informed decisions in relation to Ambit services.
Analyst Certification
Each of the analysts identified in this report certifies, with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report reflect his or her personal views about
all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly dependent on the specific recommendations or views expressed in this report.
allambit@ambit.co
Ambit Capital Pvt Ltd 7 September 2017