The quarter's results reveal a troubling deterioration in operational efficiency despite relatively stable revenue. Net sales of ₹114.59 crores in Q2 FY26 declined marginally by 0.79% year-on-year and 0.64% sequentially, indicating stagnant top-line growth. More concerning is the dramatic compression in operating margins, which fell from 15.01% in Q2 FY25 to just 10.56% in Q2 FY26, a contraction of 445 basis points. This margin erosion translated directly to the bottom line, with PAT margins shrinking from 11.39% to 6.77% year-on-year.
Financial Performance: Margin Compression Drives Profit Decline
A detailed examination of Matrimony.com's quarterly performance reveals that the profit decline stems primarily from deteriorating operational efficiency rather than revenue weakness. In Q2 FY26, the company generated revenue of ₹114.59 crores, remaining essentially flat compared to ₹115.50 crores in Q2 FY25. However, operating profit before depreciation, interest, tax, and other income (PBDIT excluding OI) plummeted to ₹12.10 crores from ₹17.34 crores a year ago, representing a 30.22% year-on-year decline.
| Quarter | Net Sales (₹ Cr) | QoQ Change | Net Profit (₹ Cr) | QoQ Change | Operating Margin | PAT Margin |
|---|---|---|---|---|---|---|
| Sep'25 | 114.59 | -0.64% | 7.76 | -7.62% | 10.56% | 6.77% |
| Jun'25 | 115.33 | +6.47% | 8.40 | +2.69% | 10.94% | 7.28% |
| Mar'25 | 108.32 | -2.79% | 8.18 | -17.95% | 6.53% | 7.55% |
| Dec'24 | 111.43 | -3.52% | 9.97 | -24.24% | 12.29% | 8.95% |
| Sep'24 | 115.50 | -4.22% | 13.16 | -5.80% | 15.01% | 11.39% |
| Jun'24 | 120.59 | +1.14% | 13.97 | +19.10% | 16.72% | 11.58% |
| Mar'24 | 119.23 | — | 11.73 | — | 14.11% | 9.84% |
The margin compression appears to be driven by rising employee costs, which increased to ₹39.11 crores in Q2 FY26 from ₹35.86 crores in Q2 FY25, representing a 9.06% year-on-year increase despite flat revenue growth. Employee costs as a percentage of revenue rose from 31.04% to 34.13%, indicating deteriorating operating leverage. The company's gross profit margin contracted from 21.39% in Q2 FY25 to 14.86% in Q2 FY26, a decline of 653 basis points.
On a half-yearly basis for H1 FY26, consolidated net profit stood at ₹16.16 crores, down 40.43% from ₹27.13 crores in H1 FY25. This consistent decline across both quarterly and half-yearly periods underscores the structural nature of the profitability challenges facing the company. The deterioration is particularly stark when compared to the company's peak performance in Q2 FY24, when operating margins stood at 16.72% and PAT margins at 11.58%.
Operational Challenges: Rising Costs Erode Profitability
Matrimony.com's operational performance reveals a company struggling to maintain profitability despite a stable revenue base. The company's return on equity (ROE) stands at 18.74% for the latest period, which whilst above the sector average, has declined from historical peaks. More concerning is the return on capital employed (ROCE) of 21.69% for the latest period, significantly below the five-year average of 140.88%, indicating deteriorating capital efficiency.
Critical Concern: Other Income Dependency
In Q2 FY26, other income of ₹6.13 crores represented 61.67% of profit before tax, highlighting the company's heavy reliance on non-operating income to support profitability. Core operating profit before other income stood at just ₹3.81 crores, having fallen 55.49% from recent quarters. This dependency on treasury income masks the underlying weakness in the core matchmaking business and raises questions about the sustainability of reported profits.
The company's balance sheet remains healthy with zero long-term debt and shareholder funds of ₹241.59 crores as of March 2025. However, shareholder funds declined from ₹291.50 crores in March 2024, primarily due to dividend distributions and share buybacks. The company maintains a net cash position with investments of ₹25.11 crores and current assets of ₹298.41 crores, providing financial flexibility despite operational headwinds.
From an efficiency standpoint, the company generated operating cash flow of ₹56.86 crores in FY25, which represents the lowest level in recent years and indicates deteriorating cash generation capability. The sales to capital employed ratio of 1.32x suggests moderate asset efficiency, but this has been declining alongside the broader operational challenges. The company's dividend payout ratio of 47.61% remains healthy, though investors should monitor whether this can be sustained if profitability continues to decline.
E-Commerce Sector Context: Underperforming in a Challenging Market
Matrimony.com operates in the highly competitive e-retail and e-commerce sector, where customer acquisition costs continue to rise and competition intensifies. The company's 25.10% decline over the past year significantly underperforms the broader e-retail sector, which fell 17.53% during the same period, indicating company-specific challenges beyond sectoral headwinds. The stock's underperformance of 7.57 percentage points versus its sector peers reflects investor concerns about the company's ability to navigate the current operating environment.
The online matchmaking segment faces unique challenges, including changing consumer preferences, increased competition from new-age dating apps, and the need for continuous technology investments to maintain relevance. Matrimony.com's stagnant revenue growth of just 0.79% year-on-year suggests the company is struggling to expand its user base or increase monetisation per user. The five-year sales growth of 4.41% annually and EBIT growth of negative 2.63% annually highlight the structural challenges in scaling the business profitably.
Market Position Under Pressure
With a market capitalisation of ₹1,082 crores, Matrimony.com ranks sixth among its peer group in the e-retail sector. The company's modest scale compared to larger e-commerce platforms limits its ability to achieve economies of scale and negotiate favourable terms with marketing platforms and technology vendors. This size disadvantage becomes more pronounced as customer acquisition costs rise across digital channels.
Peer Comparison: Valuation Appears Reasonable, But Quality Concerns Persist
Comparing Matrimony.com to its peers in the e-retail and e-commerce sector reveals a mixed picture. The company trades at a price-to-earnings ratio of 27.29x, below the peer group average of approximately 42x, suggesting relative valuation attractiveness. However, this valuation discount appears justified given the company's deteriorating financial trends and negative earnings growth.
| Company | P/E (TTM) | Dividend Yield | ROE % | Debt/Equity | Price/Book |
|---|---|---|---|---|---|
| Matrimony.com | 27.29 | 1.99% | 17.39% | -0.45 | 4.49 |
| Brainbees Solut. | NA (Loss Making) | — | 0.00% | -0.03 | 3.78 |
| Cartrade Tech | 81.39 | — | 4.97% | -0.30 | 6.53 |
| Indiamart Inter. | 27.62 | 2.02% | 19.90% | -1.28 | 6.95 |
| RattanIndia Ent | NA (Loss Making) | — | 30.53% | -0.21 | 6.38 |
| Just Dial | 17.47 | — | 10.72% | -1.13 | 1.58 |
Matrimony.com's ROE of 17.39% positions it favourably within the peer group, outperforming most competitors except RattanIndia Entertainment and Indiamart. However, the declining trend in ROE from historical levels of over 140% raises concerns about sustainability. The company's price-to-book ratio of 4.49x sits in the middle of the peer range, neither particularly cheap nor expensive on a book value basis.
The company's debt-free status, reflected in a negative debt-to-equity ratio of -0.45, represents a significant strength compared to peers. This net cash position provides financial flexibility and reduces financial risk, though it also suggests the company may not be deploying capital aggressively enough to drive growth. The dividend yield of 1.99% matches closely with Indiamart's 2.02%, providing modest income support for investors in an otherwise challenging growth environment.
Valuation Analysis: Attractive Multiples Offset by Deteriorating Fundamentals
At the current price of ₹502.00, Matrimony.com trades at 27.29x trailing twelve-month earnings, which appears reasonable compared to its historical valuation range and sector peers. The company's price-to-book ratio of 4.49x and EV/EBITDA multiple of 19.24x suggest moderate valuation levels. However, these seemingly attractive multiples must be viewed in the context of sharply declining profitability and negative earnings momentum.
The stock currently trades 29.06% below its 52-week high of ₹707.60, reached earlier in the year, and 24.78% above its 52-week low of ₹402.30. This positioning suggests the market has already priced in significant concerns about the company's near-term prospects. The valuation grade of "Attractive" assigned by proprietary models reflects the statistical cheapness of the stock, though this must be balanced against the "Negative" financial trend classification.
From a discounted cash flow perspective, the company's declining operating cash flows and deteriorating margins suggest limited upside to intrinsic value at current levels. The negative five-year EBIT growth rate of 2.63% annually indicates the business is contracting on an operating profit basis, making it difficult to justify valuation expansion. Fair value estimates suggest the stock is trading close to its fundamental worth, with limited margin of safety given the execution risks.
Shareholding Dynamics: Promoter Exit Raises Red Flags
The most alarming development in recent quarters has been the dramatic change in promoter shareholding. In Q2 FY26 (September 2025), promoter holding plummeted to just 9.40% from 53.26% in the previous quarter, representing a massive 43.86 percentage point decline. This substantial reduction in promoter stake raises serious questions about the promoters' confidence in the company's future prospects and should serve as a warning signal for investors.
| Category | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|
| Promoter | 9.40% | 53.26% | 53.26% | -43.86% |
| FII | 22.23% | 22.33% | 22.18% | -0.10% |
| Mutual Funds | 3.02% | 4.03% | 4.03% | -1.01% |
| Other DII | 4.48% | 4.68% | 4.60% | -0.20% |
| Non-Institutional | 16.01% | 15.69% | 15.92% | +0.32% |
Institutional investors have also shown limited conviction, with mutual fund holdings declining from 4.03% to 3.02% in Q2 FY26, and other domestic institutional investors reducing exposure from 4.68% to 4.48%. Foreign institutional investors maintained relatively stable holdings at 22.23%, down marginally from 22.33%, suggesting some international investors view the valuation as reasonable despite operational challenges. Overall institutional holdings stand at 29.73%, which is moderate for a company of this size.
The sharp decline in promoter holding from majority control to less than 10% represents a fundamental shift in the company's ownership structure. Whilst the specific mechanism of this reduction is not detailed in the available data, such a dramatic change typically occurs through open market sales, block deals, or other structured transactions. This exodus by the founding promoter should be viewed as a significant negative signal about the company's growth prospects and competitive positioning.
Stock Performance: Persistent Underperformance Across All Timeframes
Matrimony.com's stock performance has been dismal across virtually all timeframes, with the stock consistently underperforming both the benchmark Sensex and its sector peers. Over the past year, the stock declined 25.10% whilst the Sensex gained 8.53%, resulting in negative alpha of 33.63 percentage points. This underperformance extends across shorter timeframes as well, with the stock down 1.71% over one month versus a 2.64% gain in the Sensex.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -2.22% | +1.18% | -3.40% |
| 1 Month | -1.71% | +2.64% | -4.35% |
| 3 Months | -1.44% | +4.47% | -5.91% |
| 6 Months | -2.01% | +3.52% | -5.53% |
| YTD | -24.44% | +7.75% | -32.19% |
| 1 Year | -25.10% | +8.53% | -33.63% |
| 2 Years | -11.84% | +29.67% | -41.51% |
| 3 Years | -16.64% | +36.63% | -53.27% |
The technical picture reinforces the negative fundamental outlook. The stock currently trades below all key moving averages, including the 5-day (₹513.66), 20-day (₹510.74), 50-day (₹513.72), 100-day (₹518.79), and 200-day (₹522.97) moving averages. This alignment of the stock below all major moving averages indicates a strong downtrend with no immediate technical support. The overall technical trend is classified as "Mildly Bearish," with most technical indicators showing bearish signals.
The stock's beta of 1.50 indicates high volatility relative to the market, with the stock tending to amplify market movements in both directions. With annualised volatility of 29.36% compared to the Sensex's 12.26%, the stock carries significantly higher risk. The risk-adjusted return of -0.85 over the past year reflects negative returns combined with high volatility, placing the stock in the "Medium Risk Low Return" category—an unattractive risk-reward profile for investors.
"With promoters slashing their stake from 53% to just 9% in a single quarter, the message to investors could not be clearer: those closest to the business have lost confidence in its prospects."
Investment Thesis: Quality Business Facing Execution Challenges
Matrimony.com's investment thesis presents a complex picture of a company with historical quality credentials now facing significant operational and strategic challenges. The company maintains a "Good" quality grade based on long-term financial performance, supported by zero debt, high institutional holdings of 29.73%, and an exceptional historical ROCE averaging 140.88%. However, the current financial trend is classified as "Negative," driven by declining profitability, falling margins, and heavy dependence on non-operating income.
The company's proprietary Mojo Score stands at 36 out of 100, firmly in the "Sell" category (scores between 30-50). This rating reflects the confluence of negative factors: deteriorating financial trends, bearish technical setup, and massive promoter stake reduction. Whilst the valuation appears statistically attractive at 27x earnings, this cheapness is offset by the negative earnings trajectory and lack of near-term catalysts for improvement.
The five-year sales growth of just 4.41% annually and negative EBIT growth of 2.63% annually highlight the structural challenges in scaling the matchmaking business profitably. The company's average EBIT to interest coverage of 8.00x and debt-to-EBITDA of 0.90 remain healthy, but these metrics provide little comfort given the declining absolute profitability. The dividend payout ratio of 47.61% may come under pressure if earnings continue to decline, potentially forcing a cut that would further disappoint income-focused investors.
Key Strengths & Risk Factors
Key Strengths
- Zero debt with net cash position providing financial flexibility and stability
- High institutional holdings of 29.73% indicating some continued investor confidence
- Attractive valuation at 27x P/E, below sector average of 28x
- Consistent dividend payer with 1.99% yield and 47.61% payout ratio
- Strong historical ROCE averaging 140.88% over five years
- Established brand in the online matchmaking segment with multi-year operating history
Key Concerns
- Promoter stake crashed from 53.26% to 9.40% in Q2 FY26, signalling lack of confidence
- Net profit declined 41.03% YoY to ₹7.76 crores in Q2 FY26
- Operating margins compressed 445 bps YoY from 15.01% to 10.56%
- Heavy reliance on other income (61.67% of PBT), masking core business weakness
- Negative five-year EBIT growth of 2.63% annually indicates shrinking core profitability
- Stagnant revenue growth of just 0.79% YoY in Q2 FY26
- Stock down 25.10% over past year, underperforming Sensex by 33.63 percentage points
- Rising employee costs (34.13% of revenue) despite flat sales
- Operating cash flow at five-year low of ₹56.86 crores in FY25
Outlook: What to Watch
Positive Catalysts
- Margin recovery through cost optimisation and operating leverage improvements
- Revenue acceleration from new product launches or geographical expansion
- Reduction in dependency on other income with core business profitability improvement
- Strategic initiatives to improve customer acquisition efficiency and reduce costs
- Stabilisation of promoter holding or clarity on ownership structure changes
Red Flags
- Further decline in operating margins below 10% in coming quarters
- Continued stagnation or decline in revenue growth rates
- Additional reduction in promoter or institutional shareholding
- Inability to reduce employee cost ratio below 32% of revenue
- Dividend cut due to sustained earnings pressure
- Deterioration in cash flows requiring use of balance sheet cash
The Verdict: Exit on Rallies
Score: 36/100
For Fresh Investors: Avoid initiating positions. The dramatic reduction in promoter stake from 53% to 9% in a single quarter represents a massive red flag that should not be ignored. Combined with deteriorating margins, negative earnings momentum, and heavy reliance on treasury income, the risk-reward profile is highly unfavourable despite seemingly attractive valuation multiples.
For Existing Holders: Consider exiting positions on any technical bounce towards the ₹520-530 zone. The confluence of negative factors—plunging profits, margin compression, promoter exit, and persistent underperformance—suggests limited upside and significant downside risk. The 41% year-on-year profit decline and negative financial trend indicate the business is facing structural challenges that may take considerable time to resolve.
Fair Value Estimate: ₹450-480 (10-15% downside from current levels)
Note- ROCE= (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions.
