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Rising Investor    


Mumbai, India

A bottom up investor primarily focused on small and mid caps listed on Indian stock markets. Following a growth at a reasonable price philosophy.

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MATRIMONY

Comments: 0 | Likes: 0 | Current Price: ₹ 573.65


Matrimony.com: An Ignored Platform

Matrimony is a new age consumer tech company that no one seems to care about. Matrimony has charted a profitable journey in an industry where it is competing with VC backed money guzzling platforms. Its next bet is the Marriage Services segment.


Matrimony.com is the market leader in the Indian online matchmaking space. Its flagship offering BharatMatrimony was launched in 2000. The business of the company is to help its customers in finding their life partners through its mobile and web-based platforms. Customers create their profile on the company’s platform for free and can signal their interest to their prospective matches however, the ability to access contact information of the matches and certain other features and functionalities are only reserved for paid members. The company has also forayed into the ‘Marriage Services’ segment where it acts as an Aggregator of services.

The Matchmaking Industry

More than 1 crore weddings happen in India every year and ~90% of these weddings are sourced by the bride’s/groom’s very own immediate family members, relatives and friends, community elders and pundits/maulvis/priests. The rest 10% of the weddings include love marriages and weddings facilitated by the matchmaking companies like Matrimony.com, Shaadi.com and others.

Indians tend to get married with people from their communities with similar background in terms of caste, religion, linguistic and regional features. Though inter-community marriages do happen, they constitute a miniscule percentage of the total weddings in India. One of the primary drivers of online matchmaking sites initially was the non-resident Indian segment, where potential non-resident Indian bridegrooms started using these online services extensively in search of Indian brides.

As the prospective brides and grooms started to exercise greater control over their most important life decision, the matchmaking industry also witnessed a tailwind and the online service providers saw registrations on their websites increasing.

The Indian wedding industry is estimated to be worth $50 billion (Business Standard report). The industry includes a slew of service provides like Catering Service, Venue, Photography Service, Decorations etc. The expenditure on catering, decoration and venue together account for ~50% of total expenditure in an Indian wedding. Add to that the pain of selecting the appropriate service provider after consulting each and every one of them. This is where an aggregator of these service providers enters and simplifies the whole process for the customers. But what has Matrimony got to do with this? Because Matrimony has a business segment of “Marriage Services” through which it is aiming to simplify these bookings and success in adequately scaling and monetizing this segment can be a real game changer for the company. But first, the Matchmaking Business.

Online Matchmaking

Matchmaking is the core business offering of the company. The purpose is simple – connect two people who are looking for their life partners. To look for a potential life partner, the customer registers on Matrimony.com for free. The more detailed the profile is, the better the prospects of finding a partner. To create a complete profile, customers can add more details and certain features to their profiles such as photographs, horoscope and “Trust Badges” which may result in better responses from prospects. In addition, members may add on an “AstroMatch” option which matches their horoscope with other members' horoscopes and generates instant online reports.

To establish even more credibility, various types of badges can be earned by verifying employment, education, address etc. The company’s real time recommendation system (developed in-house) provides the members with best fit matches. While expressing interest to a potential match is free, the ability to access contact details and other info requires members to have a paid subscription.

Monetization

Matrimony.com works on a subscription-based model where members can purchase a subscription for lengths ranging from 3 months to 1 year. The various types of subscriptions offered include:

Classic, Classic Advantage and Classic Premium - Allows members to send personalized messages to other members, view member horoscopes, chat with prospects etc. Pricing from 4200 to 9900 and max duration offered is 6 months.

Till-U-Marry – This is the annual subscription that comes with a “Regular” and an “Advantage” option.

Assisted Service – This package involves matchmaking services supported by relationship managers who provide personalized assistance to subscribed users. The pricing for these services ranges from 17,000 to 32,000.

There are other features that one can avail to augment their profile like Profile Highlighter and Astromatch.

Earlier, the company followed singular pricing but it has now done away with one-size-fits-all pricing mechanism, bringing in separate pricing based on a host of factors, including the socio-economic background of the users. The new pricing strategy will allow the company to monetize better with time.

Micro Market Strategy

As majority of people get married into their own community, it is important to target specific preferences of people. For this, the company operates with a micro market strategy. Matrimony offers a range of targeted products and services that are tailored to meet the requirements of customers based on their linguistic, religious, and community preferences for which it has 17 regional portals and 300+community websites. It also caters to the NRI community through its operations in USA and Dubai where it has a strong active user base.

During FY21, Matrimony launched various new services like RajasthaniMatrimony.com, BihariMatrimony.com and BhojpuriMatrimony.com as exclusive matrimony services for the respective communities and also specialized platforms like DoctorsMatrimony.com, and IIMIITMatrimony.com.

Targeting people from each and every background is important as the company loses members on an ongoing basis and more members from different backgrounds need to be added continuously. Those who find a partner leave and thus there is a significant churn in subscribers every period.

Network Effects

The online matchmaking business has network effects built into it courtesy of operating a platform model. The network effect is the benefit that existing users derive when more people join the platform. This is because the chances of connecting with the prospective match increases as the number of active users increases. Further, someone new looking to join a platform will benefit the most out of the platform which has the highest number of users as the chances of finding the relevant matches increases.

To keep the network effects alive and to make the platform valuable, Matrimony has to keep investing to improve user experience by continuously improving on existing products and services and creating more relevant new products and services, improving the quality of user profiles and developing better matchmaking algorithms. New features added by the company recently include live video-calling and home weddings feature apart from women safety feature SecureConnect. SecureConnect enables women to take control of their privacy and safety while searching for a life partner, a first of its kind for matrimony sites. With ‘Who Can See Me’, profile is seen and contacted only by matches who meet preferences.

Why has growth been so slow?

A company operating in an industry that looks so ripe for disruption is growing topline at low double digits. One would think that companies here would be hyperscalers yet the industry in terms of size (revenues) is hardly 800 crores of which Matrimony is the leader with >50% market share. The other two players, Shaadi.com and Jeevansaathi.com are the next two in line with combined market share of 30% however both are losing money and Matrimony is the only profitable venture here. The reason for low growth of the industry has been the inherent difficulty of monetizing a service that every relative of a prospective bride or groom offers. This should change with time however, only gradually, as more control is exercised by those for whom the decision is actually about i.e, the bride and groom.

Marriage Services Segment

This is where the hyperscaling can potentially occur.

The marriage services segment of Matrimony is an asset light vendor platform for venue bookings, photography, catering, decorations, etc. It can be considered a forward integration measure to pick up a slice from the $50 billion marriage services industry. It is a natural (?) extension to the matchmaking services – you get matched to your prospective partner on Matrimony.com so might as well start looking for the service providers for your wedding instantly.

Matrimony ventured into the Marriage Services segment in 2015 with the launch of “Mandap.com” which offers one of the largest wedding venues booking platform with over 10,000 wedding venues and “Wedding Bazaar”, which is India’s largest wedding planning marketplace offering over 10,000 wedding services providers in 36+ cities across the country. It has successfully planned over 18000 weddings.

The majority of the categories of marriage services in India are unorganized and highly fragmented, presenting a potential opportunity for an organized aggregator to provide these services. This provides an opportunity for Matrimony.com to leverage its brands, user activity on its platforms and its online matchmaking client base to diversify into marriage services to take advantage of the lack of organized services in this fragmented market.

Change in Monetization Model

The revenue from the Marriage Services segment was earlier derived from listing fees from vendors, commission income and transaction fees for photography and videography services. The revenue model was revamped recently and the company has now moved to a subscription-based model for vendors from lead/transaction based. From a predominantly South India based offering, the company has now enhanced its presence in North and West India.

The Marriage Services segment has not yet scaled up properly and is losing money currently however, this is one area where we can see the J-curve like growth happening.

Acquisition of ShaadiSaga

In July 2021, Matrimony acquired 100% stake in Boatman Tech Private Limited, promoters of ShaadiSaga.com. Founded in 2015, ShaadiSaga is a leading player in the Wedding Services industry, with over 40,000 vendors across multiple services and catering to customers across 15 major cities in the country. Through a robust digital presence built with strong social media and content marketing capabilities, ShaadiSaga has garnered consistent demand (over 1 million MAU). It enables wedding vendors, from freelancers to established brands, to showcase their work, build online presence, reach customers and grow their business.

Marketing Expenditure is a Necessity

The matchmaking industry is one of the heavier spenders on business promotions and advertisements. Matrimony, has over the last three years, spent >20% of its sales on marketing. Majority of the spends on marketing is on TV promotions while digital spends are less comparatively. This makes it difficult to measure the ROI the company is deriving on the marketing spends. The spends on the marketing will move to the digital side in coming years however, only gradually. This should also reduce the quantum of spends as digital promotions can be better targeted and measured.

Matrimony’s marketing spends depends a lot on how its competitors are moving thus any increase in marketing thrust by its competitors has to be matched by Matrimony. Here is an excerpt from the company’s concall – “the marketing continues to be at a higher level because in this category there is no stopping or no decrease in the ad spend of the competitor. Since there will be marketing spend by the competitor who is spending at a certain level, we also need to step up our marketing efforts in some of the area so that we set to the marketing spend at a better level.”

Financials

Matrimony has grown topline at a CAGR of 7% between FY17 and FY21. Major slowdown occurred in FY21 where sales were almost flat due to lockdowns and ensuing deferrals of weddings.

EBITDA has grown at a CAGR of 4% over the last 4 years. EBITDA margin had been >20% between FY17 and FY19 while it dipped down to 15% in FY20 and 18.6% in FY21. ROE/ROCE have been in mid-teens range.

The bottomline turned around in FY17 and has fluctuated wildly over the years. A major contribution to the fluctuation is from the Wedding Services segment which has been losing money. Overall, PAT has degrown at a CAGR of -1% between FY17 and FY21.

The balance sheet is light owing to the less requirements of debt as well as working capital. The company mostly receives money upfront from the subscribers so there is no problem of receivables. The business also spills out a lot of cash with superior cash conversion. CFO/PAT has been >150% in the last 3 years. The cash balance as of Q3FY22 was 318 crores.

Employee cost is one of the largest outflows for the company with average employee benefit expense as a percentage of sales being ~40%.

Disclosure:

I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure:

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.

Disclosure legality:

I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.

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